Dialogue FY2012

Stakeholder Dialogue 2012 Environmental Business Initiatives

In confronting global environmental problems, which are a critical concern for all humanity, Mizuho is actively undertaking environmental business initiatives, like finance and consulting activities that will lead to lower environmental burden.

In this dialogue, participants included experts and employees engaged in environmental business activities, and they assessed Mizuho's environmental business efforts to date and talked about their expectations for the future.

Stakeholder Dialogue

Participating Experts

Participants from Mizuho

At the beginning of the dialogue, Katsunori Tomita, the General Manager of MHFG's Corporate Communication Division, explained to the invited experts Mizuho's basic ideas on environmental business. Afterward, Daisuke Yamada, the General Manager of MHBK/MHCB's Industry Research Division, and Atsushi Sugao, the General Manager of MHBK/MHCB's Corporate Banking Coordination Division, described specific Mizuho environmental business initiatives.

Mizuho's Basic Ideas on Environmental Business

Environmental problems are critical concerns for all of humanity and sustainable development requires that society as a whole take action to reduce the burden on the environment.

Mizuho, of course, works to reduce the environmental burden of its own business activities. However, as a financial institution in contact with a large number of companies, Mizuho believes it has an important social role to play in contributing to the lowering of the environmental burden of society as a whole by supporting customers' environmentally conscious management through its business activity of providing products and services that help to protect the environment. Mizuho also believes that it has an important duty in applying its high–level industry, environment, resource, and energy expertise and know–how to making recommendations on environmentally friendly energy policies and supporting customers through business development consulting.

As a Financial Institution Dealing with Large Numbers of Companies, Emphasizing an Environment–based Approach

Sugao	Financial institutions are expected to make use of the fact that they do business with large numbers of companies, and adopt environment–based business approaches that help customers expand or improve their environmentally conscious business practices. MHBK began in fiscal 2007 to offer "Mizuho Eco–Assist" environmentally conscious financing products that respond to the capital needs of customers pursuing environmentally conscious management and capital investment.
Goto	You mentioned that Mizuho does business with a large number of companies, and I think that is a very important point. Last year, the Ministry of the Environment's "Exploratory Committee on Promoting the Use of Environmental Information," which I chaired, discussed the promotion of initiatives targeting middle–market and small– and medium–size enterprises. Since there are no middle–market and small– and medium–size enterprises that do not deal with banks, it was concluded that there are great expectations for financial institutions in terms of not only the provision of funds for capital investments that would protect the environment but also initiatives supporting the environmentally conscious management of these companies in an overall sense. While it is extremely important to create standards for environmentally conscious financing, it would seem that financial institutions are currently limited in their abilities to assess environmental management. Within the committee, we also discussed what should be done to enhance these abilities.
Sugao	Assessment capabilities are essential for accurately responding to customer needs for objective assessments of their environmental initiatives. Mizuho, therefore, uses the "Mizuho Eco Grade" environmental rating system developed by MHIR, which has a solid track record in consulting and other environment–related work. The rating system assigns ratings based on assessments of environmentally conscious management at customer companies. We also offer "Mizuho Eco–Assist Plus," a service in which we set financing terms based on a customer's assigned rating. As of March 31, 2012, approximately 700 of these environmentally conscious financings, totaling around 100 billion yen, had been completed.
Goto	In the committee I chaired, we talked about the creation of procurement guidelines that would lead to socially responsible procurement throughout supply chains, thereby, promoting another form of environmentally conscious management among middle–market and small– and medium–size enterprises.
Sugao	Mizuho applies its "Environmental Handbook" in which we have included both general environmental information and information on Mizuho's environment–related products and services. The "Environmental Handbook" serves as both a tool for making recommendations to customers and as learning material for employees serving customers. Our hope is that through the use of tools like this and the steady pursuit of recommendation–based sales efforts, we can gradually get middle–market and small– and medium–size enterprises to understand the need for environmentally conscious management.
Sueyoshi	I have long thought that "green" financial institutions should encourage their customers to be "green," and that "green" customers should choose to work with "green" financial institutions. I think it is the companies that can build such a relationship that should survive. In that sense, I would like to see Mizuho apply its analytical methods to as many of its customers as possible.
Sugao	Since the Great East Japan Earthquake, there has been growing interest in energy saving even among middle–market and small and medium–size enterprises, and I would like to proactively respond to their energy–saving financing needs. To expand the ring of green relationships, Mizuho is pursuing environmental business matching to introduce customers to companies that can meet their environmental improvement needs. Among the companies with which we do business, approximately 60 companies have entered into business matching agreements and formed a consortium that responds to customers' environmental improvement needs. These consortium members include environmental equipment manufacturers with advanced solutions that help to improve the environment.
Sueyoshi	Financial institutions are uniquely well–suited for pursuing that kind of initiative. In addition, however, I think it is extremely important for Mizuho to decide how it is going to position that kind of environmentally conscious financing within its overall loan portfolio going forward. That may seem like a difficult demand, but changes in individual loans can have implications for an entire portfolio. That kind of development can lead to significant, positive changes for Mizuho as a whole and society, as well.
Tomita	As you point out, financial institutions have the role of changing society into a sustainable arrangement through financial flows, and I think that kind of self–awareness is required of the group as a whole.
Goto	In a major achievement on that point about the self–awareness of financial and market–wide impacts, the "Principles for Financial Action towards a Sustainable Society," which originated from an idea by Mr. Sueyoshi, was signed by Mizuho and over 180 other financial institutions last year.
Sueyoshi	Mizuho was one of member institutions of the drafting committee.
Goto	The principles address regional development and environmental consciousness on the part of small– and medium–size enterprises. Mizuho has taken the lead in acting on these principles and I would like to see it move forward in these two areas.

Rising to the Challenge of Building a New Business Model that Brings Smart Cities Closer to Reality

Yamada	Moving on to the topic of smart–city demonstration projects, Mizuho is participating in the planning of smart–city projects in Hawaii, India, and China. The project in Hawaii is located on the island of Maui and is being advanced in cooperation with a major electrical equipment manufacturer. In this demonstration project, Mizuho, as a non–technical participant, is working in a consortium with various other companies to build a sustainable business model.
Goto	The key point is that the consortium includes a non–technical member. Japanese companies have loads of patents for individual technologies, but have seen their market shares gradually dwindle over the past 20 years. That's because individual companies market individual elemental technologies, rather than integrated projects, and have on numerous occasions lost to foreign companies in bidding for major projects. I would like to see Mizuho contribute its perspective as a financial institution to various types of environmental consortiums and create business models that excel in practicality and implementability.
Sueyoshi	I mentioned the concepts of "individual" and "overall" in discussing environmental financing, but I think they are relevant for this kind of project, as well. Even as individual manufacturers think of ways to sell individual products and services, it is also necessary to think of ways to optimize entire systems to make cities smart. In that sense, I am hopeful that Mizuho's participation will result in the emergence of an "overall optimization" perspective. In advancing smart–city projects, it is important to have a global perspective. So, even if Japanese advanced technology lies at the heart of a project, international viewpoints can contribute new, different input.
Yamada	As you rightly point out, addressing energy, water, waste, transportation, and other social issues on an individual basis will cause urban infrastructure management to converge toward the smart city paradigm. And it is necessary to have a coordinator to address these issues on an overall, rather than an individual basis. I think there are many roles we can play in that regard. To respond appropriately to local needs, consortiums need to be organized from a global perspective and must include members other than Japanese companies. And, in fact, we are working with companies from outside Japan. I think it will not be easy to build highly practical business models that secure a certain amount of benefit for each project stakeholder, but Mizuho is up for the challenge of using Japanese environmental technology to build a "smart" world.

Offshore Wind Power Drawing Attention for Industrial Development and Employment Creation

Yamada	I would like to introduce one more consortium–related initiative. Right now, we are participating in a consortium that aims to demonstrate the post–disaster industrial development and employment creation possibilities of mainly renewable energy in Fukushima Prefecture. Wind turbines are similar to automobiles in that they require many parts, so we believe that setting up a final assembly plant in Fukushima will attract numerous parts manufacturers, making it reasonable to expect sustainable employment and other benefits. We believe this industry can contribute to the realization of a self–sustaining environmentally conscious society that achieves Mizuho's dual objectives of benefiting the environment and promoting the development of the local community.
Goto	Local employment and industrial development are priorities in many parts of the world. The U.K. is another place where a project integrating the construction of a wind turbine plant is under way.
Sueyoshi	In the U.K., a 10 trillion yen project has been launched for the construction of the 6,000–7,000 wind turbines that will be necessary to provide electricity from offshore wind farms to every U.K. household. Similar projects are underway in France and Denmark. Japan, in contrast, as only between 10 and 20 offshore wind turbines in operation. The project off the coast of Fukushima is about to begin, but it is a fact that Japan lags Europe in offshore wind power.
Yamada	When Japan turned its attention to energy diversification as a result of its experience with oil shocks, wind power was still technologically immature, so efforts focused on solar power. The development of wind power later moved forward in many parts of the world, but since the stable supply of electricity had already been achieved in Japan, the adoption of wind power here has lagged.
Goto	There is also the problem of fishing rights. I think dialogue with concerned parties has become even more important, and new technologies offer solutions. It has been suggested, for example, that wind turbine foundations be made with steel slag that would serve as a fish reef, and the effectiveness of steel slag in the making of fish reefs has already been shown.
Yamada	As you are indicating, progress cannot be achieved overnight, but I think it is necessary to consider the suggested new technologies and policy approaches.
Sueyoshi	Mizuho has accumulated a considerable amount of expertise on the issues discussed and on the questions of why Japan has been late to adopt offshore wind power and what, given overseas developments, should be done going forward. I, therefore, would like to see Mizuho not only make the project succeed, but also share information with the local and national governments to solve the problems mentioned and provide effective policy recommendations.

Residential CO₂ Reduction

Yamada	Next, I would like to discuss Mizuho's ideas on reducing residential CO2 from an environmental policy recommendation perspective. Measures to fight global warming are moving forward in the industrial sector, but many believe much more could be done to reduce household CO2 emissions. Housing manufacturers have developed and built energy–efficient houses equipped with insulation and other energy–saving technologies, and solar panels. But there are also cases in which the implementation of ideas is stopped by regulations. For example, a house built like a Thermos bottle would require dramatically less energy to cool and heat than do houses built to date, but under present laws and regulations, building that kind of house is impractical. Deregulation is needed. On the other hand, though, there are also cases in which stronger regulation can reduce CO2 emissions. For instance, a mechanism for encouraging reconstruction could be created by establishing regulations that raise energy–efficiency standards and require compliance for houses and other buildings that have reached a certain age. CO2 reduction impacts could be further increased by creating regulatory benefits for those who create a Thermos–bottle like energy–efficient structure when reconstructing a house or other building. Based on ideas like these, we in the Industry Research Division make recommendations for policies that could speed up and further reduce CO2 emissions through a combination of loosening and tightening of regulations affecting the upgrading of housing and other social infrastructure.
Goto	The policy recommendations you have explained are quite right. I made similar recommendations when I served as a governmental council member. At the time, environmental awareness was not as high as it is today and they were not adopted. Now, though, it is necessary to deal with environmental problems at the national level, so I would definitely like to see Mizuho amplify its policy recommendation activities.
Sueyoshi	At present, there are over 40 million houses in Japan, and if all of them were reconstructed over, say, 30 years, that would give rise to an enormous boost for industries serving domestic demand. Deft application of regulatory tightening and loosening could significantly invigorate the economy.
Yamada	You couldn't be more right. One of our aims is to create domestic demand while benefiting the environment in a new unified growth strategy for Japan. I would be pleased if we can continue to make such policy recommendations going forward.
Sueyoshi	Earlier, we talked about how Japan lags the world in terms of awareness and action on offshore wind power. From the perspective of an individual and a whole, which I mentioned today, we have been discussing how to achieve compatibility between Mizuho's business in Japanese government policy. If I may go further, it is necessary for Mizuho to achieve compatibility of energy policies between Japan and the world, with Japanese policy being one element. I feel a great sense of urgency, especially because the world is rapidly changing. And I would like to say again that, given global developments, I have great expectations for the policy recommendation capabilities of Mizuho, which has developed a wealth of expertise on the industrial world and conditions abroad through its business with domestic and overseas companies. Moreover, I would like to see the world's leading financial institutions follow Mizuho's lead – in other words, be "green" in their business activities and encourage the companies they deal with to be "green," too – this from a "self" perspective – but also take action from an overall perspective that considers what Japan, Asia, and the world should do. I am convinced that that kind of information dissemination will change the world for the better.
Sako	I would like to thank everyone for the valuable points and opinions they have expressed today. We will be very pleased if we can apply them in our activities going forward. Thank you very much for today.

Issues Raised and Main Initiatives of the FY2012 Dialogue

Issues	Main initiatives of FY2012	Web
Expanding environmentally conscious financing	Year–on–year increases in number and balance of environmentally conscious finance transactions Support for companies seeking to participate in renewable energy–based electric power generation business Consideration of announcing commitment to updated Equator Principles*	Environemntal Finance Initiatives for the Equator Principles
Building business models for the Smart City Project based on financial institution perspectives	Sustained efforts to build highly feasible business models	Initiatives for Creating Framework
Presentation of policy recommendations	Preparation and presentation of diverse information in the form of reports, etc.	Industry Report Events and publications
Exercising leadership in promoting environmental consciousness	Participation in diverse task forces created to consider revisions of each theme of the Equator Principles and contributions to the confirmation of materials Strengthened consideration given to biodiversity	Mizuho and the Equator Principles
Promoting regional reconstruction efforts	Efforts centered on support for reconstruction of regions impacted by the Great East Japan Earthquake disaster	Revitalizing regional economies

^*   On June 5, 2013, MHBK (formerly MHCB) announced commitment to updated Equator Principles.

Mizuho Announces Commitment to Updated Equator Principles(PDF/15KB)