Sustainability Policies

SMBC Group Statement on Sustainability

Throughout its 400-year history, SMBC Group has continuously upheld its commitment to sustainability. We hereby declare that we will drive forward our efforts to make sustainability a reality.

SMBC Group defines sustainability as “creating a society in which today’s generation can enjoy economic prosperity and well-being, and pass it on to future generations.”

Priority Issues (Materiality) and Background

For more than 400 years, we have consistently regarded sustainability as a cause fundamental to our business operations, and to this day it remains the foundation of our management.

The predecessor to Mitsui began as a kimono merchant in Edo (present-day Tokyo) in 1673, bringing innovation to the conventional business practices of that time and establishing a new business model which took root in the communities of the townspeople of Edo. Mitsui entered the currency exchange business in 1683 and became one of the industry leaders in the Edo period. As a bank since the Meiji era, Mitsui has been an important player in the financial infrastructure which has underpinned economic activity in Japan and the world for over many generations.

The predecessor to Sumitomo developed a highly advanced copper refining method for its time around 1600. As a result of this technological innovation, Japan was one of the world's leading copper producing countries for over many generations. Sumitomo also noted environmental issues from early on. When a manager visited a company copper mine in 1894 and witnessed the devastation that was being inflicted on the mountains, he grieved and said that doing nothing about this would be unethical. Seeking to remedy the situation, the company resolved to undertake reforestation and provided abundant greenery for future generations and a safe and secure life for local communities.

Looking back across our history, we have been consistently dedicated to the realization of sustainability. Today, we set “Environment,” “DE&I/Human Rights,” “Poverty & Inequality,” “Declining Birthrate & Aging Population,” and “Japan’s Regrowth” as our priority issues. SMBC Group is an enterprise that has always taken social sustainability into account when managing its business.

Understanding of the Present Situation and Our Role

SMBC Group recognizes that society is presently facing immense challenges, and that urgent and bold actions and transformation are required to transition to a sustainable and resilient world. Based on this understanding, SMBC Group aims to realize Sustainable Development Goals (“SDGs”) as set forth by the United Nations for sustainable development and to resolve social issues. As a financial institution, we will engage and act together with customers and other stakeholders to contribute to the global transformation into a better society.

We hereby declare that we remain fully committed in our efforts to make sustainability a reality.

400 years of sustainability practice

For more than 400 years, we have consistently regarded sustainability as a cause fundamental to our business operations, and to this day it remains the foundation of our management.

SMBC Group Environmental and Social Framework

SMBC Group has established the “SMBC Group Environmental and Social Framework” in order to articulate its comprehensive stance to the environment and society and contributing to the realization of a sustainable society.

The framework unifies the Group's internal policies and rules regarding the environment and society, and was established and announced after deliberation by the Management Committee. It will be proactively reviewed on an ongoing basis in light of the revision or abolition of specific policies, rules, or procedures, deliberations by the Sustainability Committee or other bodies, changes in the external environment surrounding the Group's business activities, and the results of regular reviews conducted (once a year, in principle) as part of internal audit.

Stances/approaches expressed in this framework are those of the Group as a whole, and group companies implement this framework in line with each of their businesses.



Governance Structure and Approach to ESG Risks

Governance Structure

SMBC Group has established the Sustainability Committee, an internal committee of the Board of Directors, as a supervisory body and the Sustainability Promotion Committee as an executive body to manage our sustainability initiatives and to deliberate on responses to environmental and social issues. The Sustainability Committee deliberates on matters related to the progress of the Group's sustainability promotion measures, matters related to domestic and overseas trends surrounding sustainability, and other important matters related to sustainability. It reports and provides advices to the Board of Directors on a regular basis. The Sustainability Promotion Committee, meanwhile, deliberates and decides on plans to realize sustainability. These plans are put together in a groupwide basis by the Corporate Sustainability Department of SMFG.

In addition, the Risk Committee, which is an internal committee of the Board of Directors, acknowledges the environment and risks surrounding the Group, and discusses matters related to the handling of risk appetite, matters related to the implementation structure for risk management, and other important matters related to risk management, as well as giving advices to the Board of Directors. Regarding climate change issues, the Sustainability Committee deliberates on the formulation and progress of overall climate change countermeasures. At the Risk Committee, meanwhile, the Group CRO (Chief Risk Officer) regularly reports on the awareness of environment and risks, risk appetite in connection with climate change issues, and the execution of risk management measures related to climate change countermeasures. The Risk Committee deliberates on these matters and provides advices to the Board of Directors.

For specific transactions with substantial environmental and social risks that would likely impact enterprise value adversely or result in a loss of trust in SMBC Group, a body in which Management Committee officers participate, from the perspective of complex risk management, discusses whether to proceed with the transaction as necessary.

Due Diligence

In SMBC Group’s Group Credit Policy, which contains overall financing policy, guidelines and rules, the Group declares not to extend any credit considered problematic in terms of public responsibility, or which may have a negative impact on the environment.

Sumitomo Mitsui Banking Corporation, which handles the Group's core credit operations, obtains non-financial information from customers and utilizes it qualitatively in credit operation, as explained below. Moreover, by conducting environmental and social risk assessments on specific transactions, it properly identifies environmental and social risks and manages them through periodic monitoring.

Understanding non-financial information

At Sumitomo Mitsui Banking Corporation, we recognize our customers' environmental and social impacts from their business activities by understanding not only their financial information, but also non-financial information represented by ESG, by engaging in dialogues with them. With respect to businesses and sectors that are likely to have an impact on environmental and social risks, we find out about their GHG emissions and what they are doing to address environmental and social risks such as climate change risks, and employ this information as a qualitative factor in credit operation. This non-financial information is updated regularly through monitoring.

In parallel to this, environmental and social risk assessments are also conducted, making our due diligence even more sophisticated and broad reaching.

By gathering non-financial information, we will deepen the quality of engagements with customers concerning ESG risks, actively support their environmental and social efforts, and work together to address risks that are a cause for concern.

Environmental and social risk assessment

For large-scale projects which may potentially exert a major impact on the environment and society, Sumitomo Mitsui Banking Corporation will conduct appropriate environmental and social risk assessments by performing due diligence in the Corporate Sustainability Department.

Through this, we expect project companies to conduct activities for environmental and social consideration, including climate change and human rights, such as addressing the TCFD Recommendations and respecting the FPIC (free, prior and informed consent) of local residents.

For further details about Environmental and Social Responsibility for Large-scale Developemt Projects, please refer to the following link.


Environmental and Social Responsibility for Large-scale Development Projects 

Prohibited Credits

At Sumitomo Mitsui Banking Corporation, which handles the Group's core credit operations, the Credit Policy, which contains our overall financing policy, guidelines and rules, clearly states that credits must not be extended to the following cases:

  • Credits which may breach social norms such as laws and regulations
  • Credits considered problematic in terms of public responsibility, such as credits in conflict with public order and morals and credits which may have negative impacts on the environment*
  • Including large-scale development or construction projects which sites are subject to Ramsar wetlands or UNESCO World Natural Heritage Sites or that may have significant negative environmental impacts, and large-scale development or construction projects for which no appropriate environmental impact assessment have been conducted or no environmental management plan formulated even though such projects may significantly destroy the habitats of endangered species.

Policies for Specific Businesses and Sectors

SMBC Group is introducing policies for businesses and sectors which are likely to have significant impacts on the environment and society. These policies are rolled out to SMBC Group companies, including Sumitomo Mitsui Banking Corporation, SMBC Trust Bank, Sumitomo Mitsui Finance and Leasing Company and SMBC Nikko Securities, in line with their businesses, and to enhance their risk management system continuously.

1. Coal-Fired Power Generation

(Policy)
Support for newly planned coal-fired power plants and the expansion of existing plants are not provided.
In addition, among companies whose main businesses are coal-fired power generation, we will not provide support for those that do not have any existing transactions, including but not limited to lending, with SMBC Group.
(Understanding of the Business/Sector)
SMBC Group expects our customers to establish and publicly announce long-term strategies aimed at realizing a carbon neutral business model and other initiatives to address climate change. Moreover, SMBC Group will support the activities of our clients contributing to the transition toward and realization of a decarbonized society.

2. Hydroelectric Power Generation

(Policy)
For those cases in which financing is used for hydroelectric power generation projects, SMBC Group carefully monitors whether appropriate mitigation measures against the impact on biodiversity and local communities caused by resettlement have been implemented and conducts environmental and social risk assessments when we consider lending.
(Understanding of the Business/Sector)
As the transition to a decarbonized society progresses, hydroelectric power generation will play a greater role in power supply. However, when constructing a hydroelectric power plant, it is important to consider the impact on biodiversity associated with dam construction and also on local communities caused by resettlement.

3. Oil and Gas

(Policy)
We conduct environmental and social risk assessments when we consider lending. After identifying and evaluating environmental and social risks, appropriate measures are considered.
(1)Oil Sand
Oil sand (tar sand) has relatively high carbon intensity and large environmental impacts are associated with its development. As such, SMBC Group conducts environmental and social risk assessments, paying close attention to soil and water pollution caused by wastewater, deforestation, and efforts to protect biodiversity and indigenous communities, when we consider lending.
(2)Shale Oil and Shale Gas
During shale oil and shale gas development, the use of hydraulic fracturing methods is assumed to cause groundwater contamination and induce earthquakes. SMBC Group carefully monitors whether appropriate mitigation measures have been implemented for these issues, and then we conduct environmental and social risk assessments when we consider lending.
(3)Oil and Gas Mining Projects in the Arctic
The Arctic Circle (an area north of the 66º33' latitude) is home to rare ecosystems and indigenous people with a unique culture. For mining projects in this region, SMBC Group conducts environmental and social risk assessments, playing close attention not only to environmental considerations but also to measures to protect biodiversity and indigenous communities, when we consider lending.
(4)Oil and Gas Pipelines
Pipelines are expected to have a wide range of environmental impacts due to oil spills and deforestation, as well as social impacts on indigenous communities, not only at the time of construction but also when completed. SMBC Group carefully monitors whether appropriate mitigation measures have been implemented for these issues, and then we conduct environmental and social risk assessments when we consider lending.
(Understanding of the Business/Sector)
Oil and gas will continue to be an important source of energy, and we actively consider measures that contribute to the transition to a decarbonized society. On the other hand, as the transition to a decarbonized society progresses, it is important to consider the risk of stranded assets that will cause the value of the assets owned to decline in the future, measures to reduce the environmental impact associated with development, and give proper consideration to the residents of the development area.

4. Coal Mining

(Policy)
Support for newly planned and the expansion of thermal coal mining projects, as well as those using the Mountain Top Removal (MTR) method are not provided. Support for newly planned and the expansion of infrastructure developments that are dedicated to above-mentioned projects are not provided either. When considering lending for coal mining projects other than the above, environmental and social risk assessment is conducted, and environmental and social risks are identified and evaluated.
In addition, among companies whose main businesses are thermal coal mining or linked infrastructure development, we will not provide support for those that do not have any existing transactions, including but not limited to lending, with SMBC Group.
(Understanding of the Business/Sector)
In addition to the risks of stranded assets associated with the transition to a decarbonized society, it is important to consider human rights with respect to the elimination of illegal labor and child labor in coal mines and biodiversity issues associated with mining.
SMBC Group expects our customers to establish and publicly announce long-term strategies aimed at realizing a carbon neutral business model and other initiatives to address climate change. Moreover, SMBC Group will support the activities of our customers contributing to the transition toward and realization of a decarbonized society.

5. Tobacco Manufacturing

(Policy)
With regard for support for tobacco manufacturers, Sumitomo Mitsui Banking Corporation has confirmed that particular issues including health hazards and considering of human rights to eliminate illegal labor and child labor are being addressed.
(Understanding of the Business/Sector)
Smoking can cause health hazards, such as lung cancer and respiratory dysfunction. In addition, with the cultivation of leaf tobacco (a raw material of cigarettes), it is important to consider human rights to eliminate illegal labor and child labor.

6. Nature Conservation Areas

(Policy)
SMBC Group does not provide support for new projects that are perceived to have a significant negative impact on wetlands specified in the Ramsar Convention and UNESCO-designated World Natural Heritage sites.

7. Palm Oil Plantation Development

(Policy)
For palm oil plantation development projects, whether they have been certified by the Roundtable on Sustainable Palm Oil (RSPO), which is given for palm oil produced with environmental and social consideration, is confirmed. Support is only provided after confirming that forest resources and biodiversity are protected when new plantations are developed and that there are no human rights violations, such as child labor. For those customers that have not yet been certified, obtaining certification is encouraged and supported, and submission of a plan to acquire certification is required.
For customers who have no plans to acquire RSPO certification, we encourage their acquirement, and require actions according to the same standard as RSPO certification.
In addition, we will require our business partners to publicly declare their compliance with NDPE (No Deforestation, No Peat, No Exploitation). We also encourage them to enhance their supply chain management and improve traceability to obtain RSPO certification and comply with NDPE through their supply chain.

8. Deforestation

(Policy)
For any business involving deforestation, we provide them with support only after having confirmed as per the laws and regulations of respective country that there is no illegal deforestation, burning, nor illegal labor.
Among them, especially regarding large-scale farm (*1) development projects, we will require them to publicly declare their compliance with NDPE.
  1. *1  Farm of 10,000 ha or more (e. g. business aimed at cultivating soybeans, natural rubber, coffee, etc., or using it as a grazing land for livestock)
When supporting forest management projects (*2) in countries other than high-income OECD member countries, we will require them to obtain FSC (Forest Stewardship Council) certification or PEFC (Programme for the Endorsement of Forest Certification Scheme) certification, and to declare NDPE compliance. If certification is yet to be acquired, we encourage and support their acquirement, and request them to submit a plan to acquire certification. We also encourage them to enhance their supply chain management and improve traceability to obtain such certification and comply with NDPE through their supply chain.
  1. *2  A forest management business refers to business that nurtures and manages forests, which involves cutting down forest trees for the purpose of harvesting and selling them. This policy does not apply to businesses that only cut trees (thinning) for the purpose of forest conservation without the purpose of harvesting and selling them.
In addition, when considering financing for any large-scale project not limited to the above projects, we will surely conduct environmental and social risk assessments, while closely monitoring the applicant’s stance on the following points: impact on virgin forests and ecosystems; mitigation measures for the foregoing; inclusion of peatland development; considerations for workers and local residents, etc.

9. Manufacturing of Cluster Bombs and Other Weapons of Destruction

(Policy)
Cluster bombs are considered inhumane, therefore SMBC Group prohibits credit to those manufacturers. In addition, it is confirmed that loans are not used for manufacturing of other weapons of destruction.