On 18 September 2018, Market Forces filed three identical specific instances against Sumitomo Mitsui Banking Corporation (SMBC), Mitsubishi UFJ Financial Group (MUFG) and Mizuho Financial Group (Mizuho) at the Japanese NCP. The complaints concerns activities of SMBC, MUFG, and Mizuho in Vietnam related to their financing of several Vietnamese coal power plants.
The complainants allege that SMBC, MUFG and Mizuho have breached the OECD Guidelines by failing to:
- Exercise their leverage on the project sponsors to ensure communities impacted by coal-fired power stations were adequately consulted and had their views taken into account during project development;
- Require project sponsors to provide – or themselves provide – environmental and social impact assessments (ESIAs) and other information on the environmental, livelihood, or health impacts of the projects to enable project-affected communities to make informed decisions about the projects; and,
- Urge project sponsor to assess, prevent or minimise environmental damage and impacts to human rights such as the right to a livelihood or the right to a healthy environment.
Complainants are seeking mediation, failing which, recommendations from the NCP that the financial institutions:
- Provide stakeholders with key project information such as ESIAs or, in the alternative, use their leverage to urge the sponsor to disclose ESIAs for the projects;
- Use their leverage to ensure that the project sponsors consult with rights holders and stakeholders in respect of the projects;
- Conduct an independent review of human rights and other environmental impacts in respect of Nghi Son 2 power plant;
- Review their lending to Nghi Son 2 power plan in light of the above impacts;
- Confirm which projects the banks’ policies exclude; and,
- Consider changing their policies to exclude lending to any coal-fired power projects in Vietnam, given coal’s serious environmental impacts and the availability of renewable alternatives to coal.
Relevant OECD Guidelines
- Chapter II
- Chapter II Paragraph A14
- Chapter II Paragraph B2
- Chapter III
- Chapter III Paragraph 3
- Chapter IV
- Chapter IV Paragraph 2
- Chapter IV Paragraph 3
- Chapter VI
- Chapter VI Paragraph 2
- Chapter VI Paragraph 4
On 21 February 2021, NCP Japan published its initial assessment in which it considered the complaint to merit further examination. Both parties subsequently accepted the NCP’s offer of mediation.
The parties engaged in dialogue but did not reach agreement on the issues raised in the complaint. The companies refused to disclose specific project information on the basis of client confidentiality and stated that they conducted due diligence for their loan approval process, which also complied with the Equator Principles (a framework for financial institutions to identify, manage and assess their environmental and social risks). The companies emphasised that they were engaged in the projects as lenders and did not have direct involvement with the projects. They also emphasised that they had limited leverage as their loan amount comprised less than half of the total loan amount. The companies stated they were also unable to disclose their due diligence reports.
In its final statement, NCP Japan noted that the companies would respect the OECD Guidelines, conduct due diligence in accordance with the Equator Principles, and continue their policy of engagement towards future Equator Principles’ provisions. The complaint was closed.