Natural Capital and Biodiversity (Disclosure based on the TNFD framework)

Following the release of the IPBES (Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services) report, the G7 Nature Positive Declaration, and COP15, international discussions on addressing natural capital have progressed and international targets for 2030 have been established. In addition, the TNFD disclosure framework has been published, and in Japan, the Transition Strategies toward Nature Positive Economy has been formulated and various companies are making progress in their initiatives. In line with these movements, MUFG has also been promoting its own initiatives.

The MUFG Group Code of Conduct established under the MUFG Way states “Commitment to the Environment” and “Contribute to Communities.” The MUFG Environmental Policy Statement sets out guidelines for environmental awareness and behavior to implement these practices. Specifically, the policy is to support projects that conserve natural capital and biodiversity, while striving to identify risks and take appropriate measures to avoid negative impacts on natural capital and biodiversity.

We have started the medium-term business plan, which covers a three-year period starting in fiscal 2024. MUFG will integrate its contribution to solving social issues into its business strategies, positioning it as one of the three pillars of its medium-term business plan, and further strengthen its initiatives. MUFG has set prioritized sustainability issues for achieving a sustainable environment and society. As one of these initiatives, we have newly selected “Natural Capital and Biodiversity Restoration.” Click here for details of “Priority Issues”.

MUFG has established a governance structure in which the Board of Directors oversees initiatives related to sustainability promotion, including natural capital. The contents deliberated and reported by the Sustainability Committee under the Executive Committee are also discussed and reported by the Board of Directors.

At the Sustainability Committee held in January this year, we discussed ways to strengthen our commitment to natural capital. In addition, through the exchange　of opinions with external advisors with expertise in environmental and social issues, we received recommendations for improving policies and initiatives for environmental and social issues, including natural capital.

MUFG believes that it is important to ensure that there is no negative impact on natural capital through its business activities and to give consideration to stakeholders such as indigenous peoples and local communities closely related to natural capital. In addition to our commitment to respect human rights based on our Human Rights Policy Statement, when considering financing, MUFG conducts due diligence based on the Environmental and Social Policy Framework and the Equator Principles to confirm the environmental and social considerations of our clients.

Please refer to Human Rights Report for details of our efforts to respect human rights.

The business activities of companies (clients) depend on and impact natural capital and influence the entire value chain, from procurement of raw materials to transportation, manufacturing, sales, consumption, and disposal. Financial institutions, including MUFG, depend on and impact natural capital through their own business activities. They are also connected with the activities of clients and their supply chains through investments and loans. For this reason, financial institutions need to understand clients’ dependence and impact on natural capital in order to manage risks appropriately. In addition, providing financial products and services related to natural capital can lead to the acquisition of business opportunities.

Among the various business opportunities related to natural capital, MUFG supports clients' efforts in natural capital through activities in the following five areas in which the Group can leverage its strengths. We will promote collaboration with a wide range of stakeholders.

Food-related businesses are built on the blessings of nature throughout the supply chain, and ecosystem services created by natural capital are indispensable to our daily lives. On the other hand, the loss of natural capital is progressing around the world, and it is important not only to reduce the negative impact on natural capital while continuing operations, but also to conserve, restore, and rehabilitate natural capital.

MUFG has launched the internal Food-X Project Team to help solve social issues related to food. In addition to the food sector, which is heavily dependent on and affected by natural capital, we are also working with a wide range of clients related with food, including production, distribution, retail, and food service, as well as with government agencies, academia, and other stakeholders to build sustainable food value chains and create international frameworks.

MUFG aims to contribute to the building of an ecosystem that contributes to solving food issues by connecting various food stakeholders, including a wide range of clients, startups, and academia.

In order to ensure a stable food supply for Japan, it is important to promote sustainable agriculture by reducing environmental impact while improving productivity. In collaboration with clients, MUFG is considering a business model that provides farmers with a package of methods to promote sustainable agriculture. Through this initiative, MUFG hopes to contribute to sustainable agriculture in Japan. In March 2024, we signed an MoU (Memorandum of Understanding) with AEON AGRI CREATE Co., Ltd. to utilize our respective networks to explore, accumulate, and apply promising technologies for the purpose of promoting sustainable agriculture.

In addition to the sustainable use of natural capital, there is also the issue of nutrition in the field of food. In fact, as a trend originating in Europe, there is an active movement to evaluate food-related companies by scoring each product based on the nutritional content of foodstuffs for the purpose of preventing diseases and promoting health among consumers. In collaboration with the Ministry of Health, Labour and Welfare, the National Institute of Health and Nutrition, and other organizations, MUFG is working to prepare Japan’s Nutritional Profile based on the actual situation in Japan (❶). In order to reflect this nutrition profile in our global nutrition profile, we will develop a framework through collaboration with clients (❷) and engagement with international initiatives (❸).

MUFG has conducted an analysis of contact with high importance areas, such as protected areas for biodiversity based on information from its own domestic and overseas sites. We will continue to study the analysis of the dependence and impact on natural capital by our own operations.

In Addition, MUFG is promoting initiatives such as the effective use of water and paper resources, recycling of waste, and reduction of GHG emissions in order to reduce　the dependence and impact of its own business activities on natural capital. Click here for details of ”Net zero GHG Emissions from Our Own Operations”.

As a framework to understand and manage the environmental and social risks in consideration of Finance^(note1), the MUFG Environmental and Social Policy Framework has been established. This framework is applied in compliance with local laws and regulations.

In addition, when financing large-scale projects such as infrastructure and resource development, an environmental and social risk due diligence based on the Equator Principle^(note2) is carried out.

When providing funding support, including financing, to clients, a due diligence process to specify risk and impact on the environment and society, including natural capital, is implemented. When a business corresponds to a prohibited project as regulated in the MUFG Environmental and Social Policy Framework, finance is not implemented. In addition, when a business falls under Transactions of High Caution in the Equator Principles, additional due diligence is implemented by the responsible department, and the environmental and social considerations of the client are considered insufficient relative to the level of the potential risk or impact, financing will not be provided.

The project is construction and operation of multiple offshore wind power facilities. The route for the underwater transmission lines, which extend from wind turbines to the onshore area, overlaps with waters known as the habitat of marine mammals. In addition, the proposed site is located within the flight path of migratory birds, and it has been confirmed that important species arrive to the coastal areas during winter months. Furthermore, the route of the underwater transmission lines also overlaps with the fishing area of local fishermen. However, since maritime traffic will be restricted while the transmission lines are being laid, which may lead to a loss of livelihood for fishermen in the area.

In this manner, we have implemented a due diligence process to identify risks and impacts on the environment and society, including natural capital, and to take appropriate actions as MUFG.

In investments and loans, we aim to expand client support based on dependency and impact analysis and to create solutions in the field of food, in addition to quantitative targets for sustainable finance. In MUFG’s business activities, metrics and targets regarding waste, plastic waste, paper resources, and GHG emissions have been set. We will continue to consider setting additional targets by referring to the international targets for 2030 in the Kunming-Montreal Global Biodiversity Framework adopted at the 2022 COP15, strategies developed by national governments, and discussion of target-setting methods in financial institutions.

While actively promoting business opportunities in five focus areas that utilize our strengths, MUFG will promote initiatives to create opportunities in sectors outside the field of food. In addition, In addition, MUFG will refine opportunities and risk analysis while progressing with the preparation of global data related to natural capital and analysis methods.