MUFG; The Equator Principles | Mitsubishi UFJ Financial Group

MUFG Bank supports its clients' environmental and social risk management and contributes toward a sustainable world by adoption of and adherence to the Equator Principles, a risk management framework for determining, assessing and managing environmental and social risks and impacts for large-scale projects.

Environmental and social impact assessment and risk management through the Equator Principles

MUFG Bank (the Bank) recognizes that large-scale infrastructure and natural resources development projects may have adverse impacts on local environment and surrounding communities.
The Bank, as a financier and/or a financial advisor, works in partnership with its clients to determine, assess and manage environmental and social risks and impacts related to the projects.
The Bank adopted the Equator Principles in 2005 to ensure that the projects it finances and advises on are developed in a socially responsible manner and establish good environmental management practices to minimize, mitigate, and/or offset environmental and social risks and impacts.
The Bank supports its clients' environmental and social risk management and contributes toward a sustainable world through implementation of the Equator Principles, a risk management framework for determining, assessing and managing environmental and social risks and impacts for large-scale projects.

About the Equator Principles

Environmental and Social Risk Assessment

MUFG Bank confirms that environmental and social considerations have been taken into account by clients according to “Implementation Guidelines for the Equator Principles”.

Implementation Guidelines for the Equator Principles（PDF / 369KB）

Confirmation of Environmental and Social Considerations by Environmental and Social Assessment Department, Sustainability Office, Corporate Planning Division

At MUFG Bank, Environmental and Social Assessment Department, Sustainability Office, Corporate Planning Division is responsible for review and approval of project environmental and social considerations and other relevant activities.

＜Environmental and Social Risk and Impact review structure＞

Process for Confirmation of Environmental and Social Considerations

Principle 1 of The Equator Principles requires EPFIs to categorize projects proposed for financing based on the magnitude of their potential environmental and social risks and impacts. The Bank confirms whether the projects meet the environmental and social requirements in accordance with the assigned categories.

Principle 1	Definition of the Categories
Category A	Projects with potential significant adverse environmental and social risks and/or impacts that are diverse, irreversible or unprecedented
Category B	Projects with potential limited adverse environmental and social risks and/or impacts that are few in number, generally site-specific, largely reversible and readily addressed through mitigation measures
Category C	Projects with minimal or no adverse environmental and social risks and/or impacts

For example, a Category A project requires us to confirm whether the client complies with all the requirements stipulated in Equator Principles 2 through 10.

e.g. Requirements for Category A projects
Principle 2^（*1）	Conduct an Environmental and Social Assessment, as appropriate, which includes assessments of potential adverse Human Rights impacts and climate change risks
Principle 3^（*2）	Confirmation of the compliance status of applicable environmental and social standards
Principle 4	Develop or maintain an Environmental and Social Management System(ESMS)
Principle 4	Prepare an Environmental and Social Management Plan (ESMP) and, where necessary, an Equator Principles Action Plan(EPAP)
Principle 5^（*3）	Demonstrate effective stakeholder engagement with affected communities, workers and, where relevant, other stakeholders
Principle 6	Establish a grievance mechanism designed to receive and facilitate resolution of concerns and grievances from Affected Communities
Principle 7	Engage an Independent Environmental and Social Consultant to carry out an independent review of the Assessment Documentation
Principle 8	Incorporate covenants linked to compliance with the Equator Principles
Principle 9	Engage an Independent Environmental and Social Consultant to verify monitoring information to ensure ongoing monitoring and reporting after Financial Close and over the life of the loan
Principle 10	Recommended online disclosure of environmental and social impacts assessments, including a summary of human rights and climate change risks and impacts where deemed appropriate
Principle 10	Publicly report GHG emission levels (combined Scope 1 and Scope 2 Emissions, and, if appropriate, the GHG efficiency ratio) during the operational phase for projects emitting over 100,000 tonnes of CO₂ equivalent annually Encourage clients to share commercially non-sensitive project-specific biodiversity data with the Global Biodiversity Information Facility (GBIF) and other relevant national and global data repositories

(*1)
Principle 2 of the Equator Principles requires that a client refer to the United Nations Guiding Principles on Business and Human Rights (UNGPs) when assessing human rights risks and impacts. Also, the Climate Change Risk Assessment is aligned with Climate Physical Risk and Climate Transition Risk categories of the Financial Stability Board Task Force on Climate-related Financial Disclosures (TCFD).

A Climate Change Risk Assessment is required:

For all Category A and, as appropriate, Category B Projects4, and will include consideration of relevant physical risks.
For all Projects, when combined Scope 1 and Scope 2 Emissions are expected to be more than 100,000 tonnes of CO2 equivalent annually, consideration must be given to relevant Climate Transition Risks and an alternatives analysis completed which evaluates lower Greenhouse Gas (GHG) intensive alternatives

(*2)

Principle 3 of the Equator Principles introduces two groups of project host countries: “Designated Countries” and “Non-Designated Countries”. The applicable environmental and social standards differ according to the group the project host country belongs to.

For Designated Countries, the assessment process evaluates compliance with relevant host country laws, regulations, and permits that pertain to environmental and social issues. In addition to the host country laws, The bank may evaluate the specific risks of the project to determine whether one or more of the IFC Performance Standards could be used as guidance to address those risks.
For Non-Designated Countries, the assessment process evaluates compliance with the applicable IFC Performance Standards and the World Bank Group Environmental, Health, and Safety Guidelines (EHS Guidelines).

The standards mentioned above are the minimum standards that clients are expected to comply with, and the Bank may require customers to comply with additional standards.

(*3)
Principle 5 of the Equator Principles requires projects with the special circumstances defined in IFC Performance Standard 7 paragraphs 13-17 to engage a qualified independent consultant to evaluate the consultation process with Indigenous Peoples, and the outcomes of that process, against the requirements of host country laws and IFC Performance Standard 7.

Special circumstances defined in the IFC Performance Standard are;

Projects with impacts on lands and natural resources subject to traditional ownership or under the customary use of Indigenous Peoples,
Projects requiring the relocation of Indigenous Peoples from lands and natural resources subject to traditional ownership or under customary use,
Projects with significant impacts on critical cultural heritage essential to the identity of Indigenous Peoples, or
Projects using their cultural heritage for commercial purposes.

Please refer to IFC website for information on the IFC Performance Standards and the World Bank EHS Guidelines.

Site Visits

Environmental and Social Assessment Department, Sustainability Office, Corporate Planning Division conducts site visits as needed to assess the implementation of environmental and social considerations of project sites around the world which we finance, helping us monitor our client’s practices.

Site Visit 1

Site Visit 2

Financial Advisory Service Support

When MUFG Bank provides financial advisory services to clients considering project finance, the Environmental and Social Assessment Department, Sustainability Office, Corporate Planning Division works with clients, as appropriate, on the application of EP requirements from an early stage of the transaction.

Education and Training

MUFG Bank conducts training for its employees with the objective of deepening their understanding of environmental and social considerations and promoting the philosophy and practices of EP.

The training is primarily targeted at employees in charge of project finance and credit. The Bank also utilizes internal communication measures to promote better understanding of social and environmental considerations by all employees. Additionally, to new appointees, the Bank will give training on internal procedures on implementation of the Equator Principles and case studies that illustrate projects’ environmental and social considerations.

The Bank also provides training for customers at their request.

Education and Training 1

Education and Training 2

Environmental and Social Consideration and Categorization Report

MUFG Bank (the “Bank”) discloses the numbers of the project finance transactions and the project-related corporate loans that achieved financial close during each fiscal year, and the number of the project finance advisory services where the Bank was mandated during the same period around September-end every year in “Environmental and social consideration and categorization report” in accordance with the Equator Principles and the Bank’s Implementation Guidelines for the Equator Principles.

The Bank categorizes the projects proposed for financing based on the magnitude of their potential environmental and social risks and impacts in accordance with the Bank’s Implementation Guidelines for the Equator Principles, referring to the International Finance Corporation (IFC)’s Performance Standards and World Bank Group Environmental, Health, and Safety Guidelines. Especially when assigning Category A to a project, the Bank categorizes the project in accordance with the definition of a Category A project in the Equator Principles referring as appropriate to other guidelines including OECD’s Common Approaches and relevant public institution’s guidelines.

Environmental and Social Consideration and Categorization Report and Assurance Report FY2020 （PDF / 2.34MB）

Selected information assured by Deloitte Tohmatsu Sustainability Co., Ltd. is marked with (✓).

Environmental and Social Consideration and Categorization Report and Assurance Report FY2021 （PDF / 2.45MB）

Selected information assured by Deloitte Tohmatsu Sustainability Co., Ltd. is marked with (✓).

Environmental and Social Consideration and Categorization Report and Assurance Report FY2022 （PDF / 2.74MB）

Selected information assured by Deloitte Tohmatsu Sustainability Co., Ltd. is marked with (✓).

Glossary of Terms

(Reference: THE EQUATOR PRINCIPLES JULY 2020, EXHIBITS: SUPPORTING INFORMATION, Exhibit I:
Glossary of Terms)

Environmental and Social Assessment

An Environmental and Social Assessment (Assessment) is a process that determines the potential environmental and social risks and impacts (including labor, health, and safety) of a proposed Project in its area of influence. Examples of Assessment Documentation are: an Environmental and Social Impact Assessment (ESIA), Environmental and Social Management Plan (ESMP), or documents more limited in scale (such as an audit, risk assessment, hazard assessment, and relevant project-specific environmental permits). Non-technical environmental summaries can also be used to enhance the Assessment Documentation when these are disclosed to the public as part a broader stakeholder engagement process.

Environmental and Social Impact Assessment (ESIA)

An Environmental and Social Impact Assessment (ESIA) is a comprehensive document of a Project's potential environmental and social risks and impacts. An ESIA is usually prepared for greenfield developments or large expansions with specifically identified physical elements, aspects, and facilities that are likely to generate significant environmental or social impacts. Exhibit II provides an overview of the potential environmental and social issues addressed in the ESIA.

Environmental and Social Management Plan

An Environmental and Social Management Plan (ESMP) summarizes the client's commitments to address and mitigate risks and impacts identified as part of the Assessment, through avoidance, minimization, and compensation/offset. This may range from a brief description of routine mitigation measures to a series of more comprehensive management plans (e.g. water management plan, waste management plan, resettlement action plan, indigenous peoples plan, emergency preparedness and response plan, and decommissioning plan). The level of detail and complexity of the ESMP and the priority of the identified measures and actions will be commensurate with the Project's potential risks and impacts. The ESMP definition and characteristics are broadly similar to those of the “Management Programs” referred to in IFC Performance Standard 1.

Environmental and Social Management System

An Environmental and Social Management System (ESMS) is the overarching environmental, social, health and safety management system which may be applicable at a corporate or Project level. The system is designed to identify, assess and manage risks and impacts in respect to the Project on an ongoing basis. The system consists of manuals and related source documents, including policies, management programs and plans, procedures, requirements, performance indicators, responsibilities, training and periodic audits and inspections with respect to environmental or social issues, including stakeholder engagement and grievance mechanisms. It is the overriding framework by which an ESMP and/or Equator Principles Action Plan is implemented. The term may refer to the system for the construction phase or the operational phase of the Project, or to both as the context may require.

TCFD Recommendations

TCFD Recommendations are the recommendations of the Task Force on Climate-related Financial Disclosures published on 15 June 2017. For more information see https://www.fsb-tcfd.org/.

Climate Physical Risks

Climate physical risks are those risks resulting from climate change, which involve event-drive (acute) or longer-term shifts (chronic) in climate patterns. Acute physical risks refer to those that are event-driven, including increased severity of extreme weather events such as cyclones, hurricanes, or floods. Chronic physical risks refer to longer-term shifts in climate patterns (e.g., sustained higher temperatures) that may cause sea level rise or chronic heat waves (source: TCFD Recommendations, June 2017).

Climate Transition Risks

Climate Transition Risk are risks which can arise from the process of adjusting to a lower-carbon economy. These include policy and legal risks, such as policy constraints on emissions, imposition of carbon tax and other applicable policies, water or land use restrictions or incentives; shifts in demand and supply due to technology and market changes; reputation risks reflecting changing customer or community perceptions of an organisation’s impact on the transition to a low carbon and climate-resilient economy (source: TCFD Recommendations, June 2017).

United Nations Guiding Principles on Business and Human Rights (UNGPs)

Available as Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework United Nations, New York and Geneva, 2011 reference HR/PUB/11/04.

Designated Countries

Designated Countries are those countries deemed to have robust environmental and social governance, legislation systems and institutional capacity designed to protect their people and the natural environment. The list of Designated Countries can be found on the Equator Principles Association website (www.equator-principles.com).

Equator Principles Action Plan

An Equator Principles Action Plan (AP) , or Environmental and Social Action Plan(ESAP), is prepared, as a result of the EPFI's due diligence process, to describe and prioritize the actions needed to address any gaps in the Assessment Documentation, ESMPs, the ESMS, or stakeholder engagement process documentation to bring the Project into compliance.

Global Biodiversity Information Facility

The Global Biodiversity Information Facility (GBIF) is an international network and research infrastructure funded by governments providing open access to data about all types of life on Earth. It utilises an evolving community-developed standard which enables compiling of biodiversity data from a variety of sources, and aims to produce economic and social benefits and enable sustainable development sound scientific evidence on biodiversity.

Independent Environmental and Social Consultant

An Independent Environmental and Social Consultant is a qualified independent firm or consultant (not directly tied to the client) acceptable to the EPFI. Independent Review is a review of the Assessment Documentation including the ESMPs, ESMS and stakeholder engagement process documentation carried out by an Independent Environmental and Social Consultant.

Acquisition Finance

Acquisition finance is provision of financing for the acquisition of a Project or a Project company which exclusively owns, or has a majority shareholding in a Project, and over which the client has Effective Operational Control.

Bridge Loan

A Bridge loan is an interim loan given to a business until longer term financing can be obtained.

A Project

A Project is a development in any sector at an identified location (the location does not need to be contiguous – a Project may be located over one or more geographic areas). It includes an expansion or upgrade of an existing operation that results in a material change in output or function. Examples of Projects that trigger the Equator Principles include, but are not limited to a power plant, mine, oil and gas projects, chemical plant, infrastructure development, manufacturing plant, or large-scale real estate developments, real estate development in a Sensitive Area, or any other Project that creates significant environmental and/or social risks and impacts. Projects can include new developments, expansions, or upgrades both in greenfield areas or previously developed areas. In the case of Export Credit Agency supported transactions, the new commercial, infrastructure or industrial undertaking to which the export is intended will be considered the Project.

Project Finance

Project Finance is a method of financing in which the lender looks primarily to the revenues generated by a single Project, both as the source of repayment and as security for the exposure. This type of financing is usually for large, complex and expensive installations that might include, for example, power plants, chemical processing plants, mines, transportation infrastructure, environment, and telecommunications infrastructure. Project Finance may take the form of financing of the construction of a new capital installation, or refinancing of an existing installation, with or without improvements. In such transactions, the lender is usually paid solely or almost exclusively out of the money generated by the contracts for the Project's output, such as the electricity sold by a power plant. The client is usually a Special Purpose Entity that is not permitted to perform any function other than developing, owning, and operating the installation. The consequence is that repayment depends primarily on the Project's cash flow and on the collateral value of the Project's assets. For reference go to: “
Basel Committee on Banking Supervision, International Convergence of Capital Measurement and Capital Standards (“Basel II”)”, November 2005. Reserve-Based Financing in extractive sectors that is non-recourse and where the proceeds are used to develop one particular reserve (e.g. an oil field or a mine) is considered to be a Project Finance transaction covered under the Equator Principles.

Project Finance Advisory Services

Project Finance Advisory Services is the provision of advice on the potential financing of a development where one of the options may be Project Finance.

Project-Related Corporate Loans

Project-Related Corporate Loans are corporate loans, made to business entities (either privately, publicly, or state-owned or controlled) related to a Project, either a new development or expansion (e.g. where there is an expanded footprint), where the Known Use of Proceeds is related to a Project in one of the following ways:

The lender looks primarily to the revenues generated by the Project as the source of repayment (as in Project Finance) and where security exists in the form of a corporate or parent company guarantee;
Documentation for the loan indicates that the majority of the proceeds of the total loan are directed to the Project. Such documentation may include the term sheet, information memorandum, credit agreement, or other representations provided by the client into its intended use of proceeds for the loan.

It includes loans to government-owned corporations and other legal entities created by a government to undertake commercial activities on behalf of the government. For all Category A and, as appropriate, Category B Projects, Project-Related Corporate Loans shall include loans to national, regional or local governments, governmental ministries and agencies.

Project-Related Corporate Loans shall include Export Finance in the form of Buyer Credit, but exclude Export Finance in the form of Supplier Credit (as the client has no Effective Operational Control). Furthermore, Project-Related Corporate Loans exclude other financial instruments that do not finance an underlying Project, such as Asset Finance, hedging, leasing, letters of credit, general corporate purposes loans, and general working capital expenditures loans used to maintain a company’s operations.

Refinance

Refinance is the process of replacing an existing loan with a new loan, where the new loan will be used to pay out (retire) an existing loan that is not close to or in default.

(As of April 2024)

Leveraging Our Financing Function

Promotion of Consulting Services Related to Climate Change Measures

Products and Services for Reducing Environmental Impacts

Reducing the Environmental Impacts of Our Business Activities

Environmental Education and Preservation

For Environment