Sumitomo Mitsui Financial : Strengthening Efforts against Climate Change (1,918KB) (28pages)

Strengthening Efforts against Climate Change

May 15, 2024

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Summary (Major Updates Over the Past Year)

Contributing to Decarbonization of	P.5～
the Real Economy

• Established Transition Finance Playbook（Power, Oil & Gas, Steel, Automobile）
• Expanding support for energy transition such as early retirement of coal-fired power plants, introduction of renewable energy, etc.
• Support for customers' initiatives by non-financial methods such as visualization of non-financial data and development of business

Governance

P.19～

• Established the Sustainability Division for Fulfilled Growth as a dedicated organization aimed at further promoting social value creation
• Held study sessions and roundtable discussions for the Group executives lectured by experts
• Expanded and enhanced training programs for employees

Achieving Net Zero within	P.12～
SMBC Group

Policy

• Revised Policies for Specific Businesses and Sectors（Coal-Fired Power Generation, Thermal Coal Mining, Biomass Power Generation）

Portfolio

Management

• Established new reduction targets for the automobile, steel, and real estate sectors, with the completion of setting mid-term targets in accordance with the NZBA guidelines
• Reduced GHG in investment and loan portfolios for sectors with established mid-term targets (Power, Oil & Gas, Coal)

Customer/Project

Management

• Introduced environmental and social due diligence

Operations

Emissions

• Advanced group-based initiatives to reduce our own GHG emissions towards net zero by 2030

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Approach to Net Zero

Current Medium-Term Management Plan

				New
	2021	2022	2023	2024	2025	2030	2040	2050
Scope1,2	2030	Switch to renewable energy	Mid-term
SMBC	Self-owned		Target
Net Zero	Data centers	Net Zero
(Operational GHG)	40% reduction
head office	buildings
	Commitment		from FY21
Scope3	2050	Set mid-term	Set mid-term	Set mid-term		Achieve
Net Zero	target	target	target		mid-term		Net Zero
(Portfolio GHG)	Power, Coal,	Steel,		targets
Commitment	Real estate
	Oil & Gas	Automobile		6 sectors
Loan balance for		Established		Tightening policies		Project finance	Zero Balance for
coal-fired power		phase-out		for specific		50% reduction	Project finance and
generation		strategy		businesses and		from FY20	Corporate finance
		sectors		tied to facilities
Coal
Loan balance for			Established	Tightening policies		Zero Balance	Zero Balance
thermal coal			phase-out	for specific		OECD	non-OECD
		businesses and
mining sector			strategy		countries	countries
		sectors
Sustainable						JPY 50 tn
Finance						Cumulatively
Transition Finance			TF	TF
		Playbook
		Playbook
（TF）			Steel,
		Power, Energy
			Automobile
Assessment of	ESG Risk		Company-Specific	Introduction of
customers'		Transition Strategy	Environmental
Summary Tool		Assessment	and Social Due
transition plans
		Framework Pilot	Diligence

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Towards Achieving Net Zero

Maximizing contributions to the decarbonization of the real economy while achieving net zero within SMBC Group

Contributing to Decarbonization	Achieving Net Zero within
of the Real Economy	SMBC Group

Coexist

1

2

3

4

5

Risk-taking in new energy and new technologies

Supporting Transition in the world, including Japan/Asia

Visualization of ESG related challenges within the whole supply chain

Co-creation of businesses with our customers towards decarbonization

Offering diverse and group-based solutions

Considerations		Main Items
		Policies for Specific
Policy		Businesses and Sectors
		Phase-out Strategy
Portfolio		Climate-related RAF
Management
		Environment/Social Risk
Customer/Project		Assessment
Management		Environmental and
		Social Due Diligence

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Decarbonization	Net Zero	Governance
of the Real Economy	within SMBC Group

Contributing to Decarbonization of the Real Economy

As a global solution provider, firmly support our customers' initiatives towards transition and technological innovation by leveraging our strengths

Customers' needs

High investment risks in R＆D of new energy and

technologies

Challenges in adopting currently costly

decarbonization technologies

SMBC Group's strengths

1 Risk-taking in new energy and new technologies

• Establishing a market leader position in the field of new energy and new technologies as a pioneer in project finance

Still high dependence on fossil fuels in energy

consumption in Japan and Asia

A lack of resources and know-how about

understanding the GHG emissions from both the

company and the entire supply chain

Finding partners to transform fuel procurement and

business structures for decarbonization

2 SupportingJapan/Asia Transition in the world, including

• In pursuit of decarbonization in Asia, which is essential for achieving the Paris Agreement goals, accelerating initiatives, disclosure, and dialogue to support transition finance

3	Visualization of ESG related challenges within the
whole supply chain

• Utilizing Sustana/Asuene ESG as a lever to visualize non-financial data in the supply chain and using it for the dialogue with customers and providing solutions

4	Co-creation of businesses with our customers
towards decarbonization

• Leveraging a global customer base and deep insights into the decarbonization field to connect companies and create businesses aimed at decarbonization

5 Offering diverse and group-based solutions

One-stop and speedy response to various phases and

challenges towards decarbonization⚫ Supporting our customers' efforts towards decarbonization with a diverse range of solutions from the entire SMBC Group

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Decarbonization	Net Zero	Governance
of the Real Economy	within SMBC Group

Risk-taking in New Energy and New Technologies

Establishing a market leader position in the field of new energy and new technologies as a pioneer in project finance

1980s～2000s～

Foundation of socio-economic development

Power	Natural	Theme Parks
Resources
Infrastructure	PFI	Chemical

2020s～

New Energy and New Technology

Green		Onshore/		Hydrogen
Data Center		Offshore Wind		Reduced Iron
	Storage Battery		Green Hydrogen
Solar Power

Americas

Data Center deal 国内外の太陽光案件

Global

国Renewable内外の陸上Energy・洋上風Projects力案件

Global Ranking

＃3

(IJ Global)

Australia

Appointed as a FA for a グリーン水素の製造・液化

green hydrogen project

ファイナンシャルアドバイザー就任

Europe

World's 1st large scale

green steel Project

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Decarbonization	Net Zero	Governance
of the Real Economy	within SMBC Group

Transition Finance

Accelerating initiatives, disclosure, and dialogue to support transition finance based on the challenges that have become apparent through actual deals

Transition Finance Playbook		Challenges

Summary

Goals

Shows SMBC Group's definition and criteria of Transition Finance and its decision-making process

• Develop an objective and rational criteria

• Ensure accountability towards stakeholders

• Utilize the Playbook within customer engagement

• Engaged： 100 meetings

1	Increase in short and mid-term portfolio GHG emissions
		Transition Finance (TF)		Divestment
			TF
Portfolio						Divestment
			Net Zero
	GHG	Increase		Decrease
		Pre-investment	Post-	・・・	2050	Pre-investment	Post-
		investment	divestment
2	Addressing companies currently having difficulties with
alignment with the 1.5°C scenario
•	Net zero targets of their governments are not aligned with the 1.5°C scenario
•	Industrial structural transformation is necessary,	etc.
3	Cost Burden

Results

	Approved: 21 deals		Pass on transition	Balancing economy		No price
•		efficiency, stable supply,
	costs！		increase！
Companies	Govt. and decarbonization...	Citizens

Goals for FY3/25

FY24 first half

Playbook

Progress

Report

• Summary of FY2023's initiatives
• Challenges from operational perspective
• Recommendations towards customers, financial institutions, and governments to promote transition finance, etc.

Continue engagement to resolve issues

Customers Govt. Engage

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Decarbonization	Net Zero	Governance
of the Real Economy	within SMBC Group

Contributing to Decarbonization in Asia

In pursuit of decarbonization in Asia, which is essential for achieving the Paris Agreement goals, strengthening financing and industry-academia-government collaboration, considering the circumstances of the region.

Examples of transition finance

Early retirement of coal-fired power plant in Australia

• Transition finance to a major Australian electricity and gas supply company in establishing new energy storage facilities, which will contribute to the early retirement/decommissioning of coal fired power plants

Completion of retirement

10 years earlier than initially planned

Reduction in GHG emissions equivalent to 16MT/year

Industry-academia-government collaboration

	Participating in	Supported one of Asia's
	largest sustainability
	WG of various
Supported drafting	events organized by
countries
Temasek
GFANZ report

Industry

Financing plenty of projects for energy transition

India

2,000MW Solar

Australia

Wind・Solar

Taiwan

1,000MW Offshore

Wind

India

300MW Wind・Solar

India

380MW Solar

India

Solar gigafactory

AcademiaGovernment

Accumulating knowledge	Considering the creation of
through collaboration with	credits from early retirement
universities and authorities	of coal-fired power plants
in Singapore

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Decarbonization	Net Zero	Governance
of the Real Economy	within SMBC Group

Visualization/Co-creation of Business

Thoroughly supporting our customers' pain points in decarbonization from non-financial aspects through data visualization and creation of new businesses, etc.

Data visualization

Sustana GHG emission calculation/reduction support cloud tool developed by SMBC Group

Linking data with other companies

		Number of users
		(cumulative)
		more than
E	Insights derived from data	1,800
Companies

			Identify priority	May 2024
Carbon productivity
	analysis	issues

Supporting tool for identification/solution of

ASUENE ESG ESG issues in supply chains

S

In October 2023

Started business alliance

with Asuene Inc.

G

Co-creation of business

Companies with		Companies with
technology for		decarbonization
decarbonization	Connect	needs
Global customer	Deep insights in	In-house sector
base	decarbonization	experts

Examples of business co-creation

Installation of renewable energy in SCSK's data center

• First corporate PPA with the issuance

of I-REC in Japan

Installation of renewable energy in DHL Group's logistics facility

• An agricultural solar power project that contributes to regional revitalization and sustainable farm management

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Decarbonization	Net Zero	Governance
of the Real Economy	within SMBC Group

Various Solutions Across SMBC Group

SMBC Group offers a range of solutions to support our customers' efforts towards decarbonization, leveraging the collective capabilities of the entire group.

Major solutions for decarbonization

Banking	•	Project finance
	•	Sustainable finance, etc.
Trust banking	•	Green ABL Trust
	•	Sustainability related
		real estate
Leasing	•	Solar power PPA
	• EV adoption support, etc
Securities	•	Green bond
	•	Transition bond, etc.
Card payments	•	CO2 emissions calculation
		based on card payment data
Consulting	•	Target/strategy setting,
		disclosure support
	•	Decarbonization consulting
Asset	•	ESG investments
management
•	Impact investments

Examples of solutions

Grid-scale battery storage project

• Japan's first project finance structuring and equity
  participation ～Renewable Energy Deal of the Year in IJ Global Awards 2023 APAC

	Solar power
Renewable energy project	generation capacity(MW)
• Expanding primarily in	6 times	1,200
solar power generation
FY3/20		FY3/26

Carbon credits

• Intermediate J-Credit creation support, buying and selling services with BYWILL

Collaborating with stakeholders

With companies

• Joint study with Boeing and Mitsubishi Heavy Industries to scale up SAF in Japan

With academia

• Established consortium with Kyoto University and others, with the aim of the implementation of the carbon cycle

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