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Climate Change

Ditch Vietnam coal-fired plant, investors tell Mitsubishi and banks

European asset managers note project counters Paris Agreement

Twenty-one investors have demanded companies such as Mitsubishi Corp. withdraw from the Vung Ang 2 coal-fired power plant project in central Vietnam.

TOKYO -- A group of mostly European asset managers have urged trading house Mitsubishi Corp. and seven other Japanese companies to withdraw from a coal-fired power plant in Vietnam, which they say is inconsistent with the goals and timelines of the Paris Agreement on climate change.

"We respectfully urge you to declare your decision not to be associated with or involved in Vung Ang 2, as we find the project to suffer from high climate-related, financial and reputational risks," an open letter from the group said.

The group comprises 21 institutional investors which together manage $5.6 trillion in assets. The letter was written by Eric Pedersen, head of responsible investments at Helsinki-based Nordea Asset Management, and is co-signed by asset managers including Amundi of France, Storebrand Asset Management of Norway, Church Commissioners for England, Church of Sweden and Luxemburg-based Soderberg & Partners Asset Management.

It represents a new wave of pressure Japan Inc. faces from global investors to exit coal, following the Japanese government's decision last month to achieve net zero emissions by 2050.

These investors are paying more attention to how businesses are contributing to society, the environment and corporate governance, demanding concrete and specific action from the companies they invest in.

The Vung Ang 2 coal-fired power plant is located in central Vietnam.

The letter from Nordea and its partners was sent to 12 companies involved in the coal power project, eight of them Japanese, which include Mitsubishi Corp., Chugoku Electric Power and Japan's three biggest banks Mizuho Financial Group, Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group.

South Korea's Korea Electric Power and Samsung C&T Corporation, China's Energy China GPEC, along with American conglomerate General Electric also received the letter.

The group is demanding that these companies not only withdraw from the project, which is backed by the Japanese government, but also no longer be involved in new coal-related projects.

The Vietnam project has already seen companies such as Hong Kong power supplier CLP and Standard Chartered Bank withdraw.

Mitsubishi says that it intends to go ahead with the Vung Ang 2 project, adding the project is fully supported by the Vietnamese government and will contribute to the economy. Neither other participants nor the Japanese government have signaled an intent to leave the project.

But investors are unlikely to relent in their demand and are expected to seek greater accountability for the project.

Investors could simply divest in the Japanese companies if they do not get their way.

For instance, Dutch asset manager Robeco said in September that it has decided not to own shares of companies that are involved in businesses related to fossil fuel and stopped investing in some Japanese companies such as Hokkaido Electric Power and Hokuriku Electric Power.

In August, Storebrand Asset Management stopped investing in five Japanese companies including trading house Mitsui & Co. and Kansai Electric Power. CEO Jan Erik Saugestad has complained that Japanese companies are too slow to move away from coal energy.

Some investors believe that the Japanese government's shift to zero emissions is an opportunity for Japan Inc. to quit coal energy. They are now shifting their focus to Japanese businesses from those in Europe.

"Japanese companies have the opportunity to switch in the very short term fully away from coal," said Jeanett Bergan, head of responsible investments at Norwegian pension fund KLP, warning that the speed at which global investors are divesting from the coal industry should be "a red flashing light" for Japanese companies.

The positive flip-side, Bergan added, "is that risky coal investments can be safely replaced with renewable energy, particularly solar and wind power industries which are strengthening in size and competitiveness globally. Accelerating a carbon neutral strategy makes sense and the first movers that seize the opportunities around renewables will more rapidly reduce risk within the overall portfolio, and secure steady and high returns," she said.

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