Addressing Climate Change (Initiatives based on TCFD Recommendations)

The TCFD Recommendations call for disclosures on corporate governance, strategy, risk management, and indicators and targets relevant to climate change–related risks and opportunities.

At Mizuho, we have supported the intent and aims of the TCFD Recommendations since December 2017, and we are working to engage in initiatives and enhance disclosures in accordance with the recommendations. The current status of our response to the TCFD Recommendations is as follows.

TCFD Report (PDF/4,908KB)

Governance

  • Clarified Mizuho’s stance on climate change, our aims and actions, and our medium– to long–term strategy and initiatives through our Environmental Policy, Mizuho’s Approach to Achieving Net Zero by 2050, and Net Zero Transition Plan, which were approved by the Board of Directors.
  • We built a supervision and business execution governance framework that centers on the Board of Directors. 
    Supervision: The Board of Directors and Risk Committee conduct oversight regarding information that is reported to them and deliberated following discussions at the business execution line.
    Business execution: The Sustainability Promotion Committee (established in FY2021), Risk Management Committee, and Executive Management Committee regularly deliberate and discuss, then report to the Board of Directors. The Group Chief Sustainability Officer and Group Chief Risk Officer move forward initiatives in each field under the management of the Group CEO.
  • We have established a Climate Change Response Taskforce and five working groups (new in FY2022) to enhance our promotion structure.
  • Remuneration for corporate officers reflects the status of sustainability initiatives (including initiatives addressing climate change). In FY2022, we began utilizing external evaluations from ESG evaluation agencies.

Strategy

  • We have formulated the Net Zero Transition Plan, which clarifies our medium– to long–term strategy and initiatives (April 2022).
    1. Net–zero greenhouse gas emissions: Become carbon neutral for Scope 1 and 2 (emissions from our own business activities) by FY2030, achieve net zero by 2050 for Scope 3 (emissions from financing and investment), and begin setting mid–term targets for Scope 3.
    2. Strengthening low–carbon business: Strengthen our support for the transition to a low–carbon society by engaging with clients and providing financial and non–financial solutions.
    3. Improving climate–related risk management: Continually enhance risk management frameworks and policies that aim to create a business base resilient to climate change impacts.
    4. Strengthening our stance: Strengthen our stance on achieving net zero group–wide, focus on participating in international initiatives and coordinating with stakeholders.
  • Risks and opportunities / responses:
    • We see client investment in technological and business model development that leads to decarbonization as an opportunity for Mizuho.
      With engagement (constructive dialogue) as a starting point, we are supporting our clients’ transition to a low–carbon society and their climate change countermeasures.
      • Engagement with clients: Engaged with approx. 1,000 companies from the perspective of responsible financing and investment and with approx. 1,300 companies to promote clients’ sustainability initiatives.
      • Provision of sustainable finance: FY2019 to FY2021 total of JPY 13.1 trillion (of which JPY 4.6 trillion in environmental finance).
      • Development and provision of new solutions meeting clients’ diversifying needs.
  • Risks:
    • In terms of climate–related risks, we are taking into account both transition risks1 and physical risks2  arising from climate change.
    • Transition risks: Credit risk related to financing and investment clients who are impacted by more stringent carbon taxes, fuel efficiency regulations, or other policies or by delays in shifting to low–carbon and other environmental technologies. Operational risk related to reputational damage from financing fossil fuel projects.
    • Physical risks: Acute risk in the form of damage to our assets (such as data centers) and to customer assets (such as real estate collateral), caused by extreme weather increasing the incidence of wind– and water–related damages. Chronic risk in the form of credit risk arising from deterioration in the macro economy due to increased instances of infectious disease, heatstroke, and similar.
  • Scenario analysis:
    • Transition risk
      Scenario Network of Central Banks and Supervisors for Greening the Financial System (NGFS)3 
      Net Zero 2050 (1.5°C) / Below 2°C / Delayed Transition / Current Policies scenarios
      Analysis method We specify a parameter for evaluating the impact of risks and opportunities faced by clients in the sector subject to analysis. We then analyze changes in Mizuho's credit costs by formulating an outlook for the impact on clients’ financial results, based on changes to the parameter under the scenario.
      Targeted sectors Electric utilities, oil, gas, coal, steel, and automobile sectors (worldwide)
      Period 2050
      Credit costs Cumulative increase in the above sectors through 2050 (difference with Current Policies scenario)
      Net Zero 2050: JPY 1.2 trillion
      Below 2°C: JPY 60 billion
      Delayed Transition: JPY 1.1 trillion 
      Implications and necessary actions
      • The increase in credit costs is the total through 2050, and the impact on the Mizuho group's finances is limited.
      • We confirmed the importance of moving forward a rapid and smooth transition (orderly transition) towards a low–carbon society.
      • We will further enhance our engagement with clients to support their progress on responding to climate change in an orderly fashion.
      • We will conduct scenario analysis accounting for clients’ transition plans and apply it to more in–depth engagement.
    • Physical risk
      Types of risk Acute risks Chronic risks
      Scenario NGFS Current Policies and Net Zero 2050 (1.5°C) scenarios Intergovernmental Panel on Climate Change (IPCC)4 Representative Concentration Pathway (RCP) 8.5 scenario (4°C scenario) / RCP 2.6 scenario (2°C scenario)
      Analysis method We used a Monte Carlo simulation to calculate the impacts of wind– and water–related damages from typhoons and other storms. 
      For direct impacts (impacts on asset value), we analyzed damage to Mizuho group assets (buildings, equipment) and credit costs from loss or damage of mortgaged real estate. 
      For indirect impacts (impacts of business stagnation), we analyzed credit costs from business stagnation among our clients due to wind– and water–related damage.
      We analyzed the impacts on credit costs from changes in the macroeconomic environment brought about by increases in infectious disease (e.g. malaria, dengue) and heatstroke as well as by heatstroke prevention practices causing concomitant decreases in summer working hours among outdoor laborers.
      Targets of analysis Japan only, for impact of business stagnation this is based on the location of the company’s headquarters (this analysis targeted middle market firms and SMEs). Japan only
      Damage costs / credit costs Current Policies: Asset value impact of JPY 70 billion, business stagnation impact of JPY 130 billion, both total figures through 2100. RCP 8.5: Up to a total of JPY 4 billion through 2100.
      Implications The analysis confirmed that there will not be a significant impact compared to our income during the period.

 

Risk management

  • Identification of climate–related risk and its integration into our risk appetite framework and comprehensive risk management
    • We are identifying transition and physical risks resulting from climate change and integrating them into our risk appetite framework and our comprehensive risk management framework for credit, operational, and other types of risk.
  • Our management of top risks
    • Under our management of "top risks", which are risks recognized by management as having major potential impact on Mizuho, we position increasing severity of climate change impacts as a "top risk". When we have selected a top risk, we consider additional risk control measures and report on the status of our response to the Board of Directors and other committees.
  • Risk control in carbon–related sectors
    • We are establishing a structure to assess risk in carbon–related sectors (electric utilities, oil, gas, coal, steel, and cement sectors) along two axes—our clients’ sectors, and our clients’ measures to address transition risk—in order to identify and monitor high–risk areas.
    • We control risk in high–risk areas under the following exposure control policy.
      • We are more thoroughly engaging with clients to support them in formulating effective strategies for transition risks, in disclosing their progress, and in embarking on business structure transformation towards a lower risk sector at an early stage.
      • With the aim of facilitating business structure transformation, we provide any necessary support when we have been able to confirm that the client has set valid targets and planned an appropriate transition strategy in line with international standards.
      • We carefully consider whether or not to continue our business with a client in the event that the client is not willing to address transition risk and has not formulated a transition strategy even one year after the initial engagement.
      • In this way, we are reducing our exposure over the medium to long term.
  • Environmental and Social Management Policy for Financing and Investment Activity
    • We have established and implemented a management policy for financing and investment that specifies projects and sectors with a particularly high likelihood of leading to adverse impacts on the environment and society (transition risk sectors, coal–fired power generation, thermal coal mining, oil and gas, etc.).

The business execution and supervisory lines periodically review changes in the external business environment and the outcomes of the implementation of the policy. Following this review, they revise the policy and improve its implementation.

Metrics and targets

Main monitoring indicators Targets Recent results
Scope 1 and 2 emissions4 Carbon neutral by FY2030
(Carbon neutrality to be maintained thereafter)
FY2020: 169,237 tCO2
Scope 3 (emissions from financing and investment) Net zero by 2050 N/A
– Electric power sector FY2030: 138 to 232 kgCO2/MWh FY2020: 388 kgCO2/MWh
Sustainable finance and environmental finance Total for FY2019 to FY2030:
JPY 25 trillion 
(of which the target for environmental finance is JPY 12 trillion)
Total for FY2019 to FY2021:
JPY 13.1 trillion 
(of which the results for environmental finance is JPY 4.6 trillion)
Target to reduce the outstanding credit balance for coal–fired power generation facilities based on our Environmental and Social Management Policy for Financing and Investment Activity Reduce the FY2019 amount by 50% by FY2030, and achieve an outstanding credit balance of zero by FY2040 March 31, 2022: JPY 248.6 billion
(–17.0% compared to the end of FY2019)
Exposure to high–risk areas within transition risk sectors Reduce over the medium to long term March 31, 2022: JPY 1.6 trillion

Items for disclosure aside from monitoring indicators:

  • Sector–by–sector credit exposure in line with the TCFD Recommendations
  • Greenhouse gas emissions from financing and investment ("financed emissions") based on PCAF methodology

 

  1. Transition risk: Risks stemming from widespread policy, legal, technological, and market changes which occur as the result of transitioning to a low–carbon economy.
  2. Physical risk: Risks such as the loss or damage of assets as a direct result of climate change itself, as well as supply chain disruptions and other impacts as an indirect result of climate change.
  3. A network of central banks and financial supervisors addressing issues such as climate change risk. Used the second iteration of the NGFS scenarios.
  4. Targets of analysis / scope of data collection: Seven group companies (Mizuho Financial Group, Mizuho Bank, Mizuho Trust & Banking, Mizuho Securities, Mizuho Research & Technologies, Asset Management One, and Mizuho Americas).
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