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Market Forces v. SMBC, MUFG and Mizuho

Jurisdiction: National Point of Contact for OECD Guidelines

Side A: Market Forces (Ngo)

Side B: Mizuho (Corporation)

Side B: MUFG (Corporation)

Side B: SMBC (Corporation)

Core objectives: Complaint against funding of coal mines in Vietnam by Japanese Banks

On September 19, 2018, Market Forces filed a complaint with the Japanese National Contact Point (NCP), based on the OECD Guidelines for Multinational Enterprises, alleging that Mizuho Financial Group, Inc. (Mizuho), Sumitomo Mitsui Banking Corporation (SMBC) and Mitsubishi UFJ Financial Group, Inc. (MUFG) breached the Guidelines with regard to their financing of coal power plants in Vietnam. The complaints allege that SMBC, MUFG and Mizuho are in breach of OECD guidelines because they failed to provide environmental and social impact assessments and consequently failed to urge project sponsors to assess and prevent or minimize environmental damage. They claim that the project’s emissions intensity (estimated at 860-880g CO2/kWh) is of an unacceptably high level by international standards, and would generate twice as much CO2 per unit of power generated as the average electricity generating plant in Vietnam. In addition they allege that banks were made aware about the environmental impacts of the project, but there is no evidence that they took any steps to influence their client to disclose additional environmental information or to implement additional mitigation measures that would reduce the project’s emissions. Further, they failed to adequately consult communities that were affected by the coal-fired power stations. 

On February 21, 2020, the NCP carried out an initial assessment and decided to further examine the issues raised by Market Forces, except for the issues concerning Vung Ang 2 and the Nam Dinh 1 projects, for which no loan agreements by the enterprises Involved were substantiated. Subsequently, the NCP conducted interviews and decided to hold a dialogue through mediation with the consent of both parties. On July 15, 2020, a dialogue was held online. Regarding Nghi Son 2 coal-fired power project and the Van Phong 1 coal-fired power project, issues related to stakeholder engagement, disclosure obligations, environment, and human rights were discussed. Market Forces requested the enterprises to conduct an independent review on human rights and environment, reinvestigate the process towards the loan agreement, and shift their financing policy in Vietnam to exclude coal-fired projects and help to increase the renewable energy capacity. In response, the enterprises said that they were not directly involved with the projects as they were lenders rather than sponsors or shareholders. Further, they claimed that they were encouraging the project sponsors to honor the environmental and social consideration and stakeholder engagement. While the parties mutually recognized the importance of complying with the Equator Principles and conducting appropriate due diligence, they still had a gap in their position concerning disclosure. During the mediation, the parties did not reach an agreement concerning the issues yet decided to proceed with the final statement without holding a second dialogue.

On January 15, 2021, the NCP issued a final statement concluding the process as there was no agreement of the parties to solve issues.

Case documents

from the Grantham Research Institute
from the Grantham Research Institute
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