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Risk Management

Risk Management

Disclose how the organization identif­ies, assesses, and manages climate-related risks.

 

a．Describe the organization's processes for identifying and assessing climate-related risks.

b．Describe the organization's processes for managing climate-related risks.

c．Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization's overall risk management.

Climate Change Risk Management

MUFG recognizes the importance of identifying and assessing climate change-related risks and information disclosure. We have positioned risks arising from climate change as top risk in our Top Risk Management. MUFG acknowledges that transition risks and physical risks arising from climate change can become risk drivers that could impact major risk categories in the medium to long term via transmission channels. Considering the nature of climate change risks, MUFG manages these risks at the credit portfolio, sector, client, and transaction levels within its risk management framework.
Risk Appetite Framework and Top risk Management

Environmental and Social Risk Management in Finance

We implemented MUFG Environmental and Social Policy Framework to manage environmental and social risks associated with our financing(note). Concerning coal-fired power generation, mining (coal), oil and gas, and other specific sectors in which concerns are raised over environmental and social impacts, including climate change, we have established our finance policy and a due diligence process to identify and assess the environmental and social risks or impacts associated with transactions.
  1. Credit, bond and equity underwriting for corporate clients of MUFG's main subsidiaries, the Bank, the Trust Bank and the Securities HD.

MUFG Environmental and Social Policy Framework

MUFG Environmental and Social Policy Framework

The Process of Identifying and Assessing the Environmental and Social Risks or Impacts of a Business to be Financed

The Process of Identifying and Assessing the Environmental and Social Risks or Impacts of a Business to be Financed
Policies on the Sectors Related to the Environment, Including Climate Change
Since its establishment in May 2018, the MUFG Environmental and Social Policy Framework has been periodically reviewed in response to changes in business activities and the business environment. In April 2025, we revised the MUFG Environmental and Social Policy Framework, adding fisheries and aquaculture to the sectors that involve transactions of high caution and revising mining, forestry, and biomass power generation. This framework is applied in compliance with local laws and regulations.

Response to Climate Change-Related Risks Based on the Equator Principles

The Equator Principles is an international framework developed to identify, assess, and manage the potential environmental and social risks and impacts of large-scale projects, including infrastructure and natural resource development. The Bank conducts environmental and social risk assessments based on the Principles prior to loan decisions.

Regarding climate change risks, in addition to examining technically and economically feasible options that contribute to reducing GHG emissions, the Bank evaluates the status of project developers' measures to identify and manage physical and transition risks in line with the TCFD recommendations.

In April 2025, we released the initial Equator Principles Progress Report which illustrates MUFG Bank’s initiatives and activities related to the Equator Principles. For details, please refer to the first edition of the Equator Principles Progress Report.
Climate Change-Related Responses Required under the Equator Principles
Applicable projects Responses required under the Equator Principles

Among the risk categories used in the Equator Principles, all Category A projects, and as appropriate, Category B(note) projects

・Identification of physical risks and measures to manage those risks
Projects with GHG emissions (Scope 1 and Scope 2), during its operational phase, of more than 100,000 tons of carbon dioxide equivalent per year

・Alternatives Analysis

・Assessment of transition risks and countermeasures

・Annual public reporting of GHG emission levels
  1. Category A refers to projects with potential significant adverse environmental and social risks and/or impacts that are diverse, irreversible, or unprecedented. Category B refers to projects with potential limited environmental and social risks and/or impacts that are few in number, generally site-specific, largely reversible, and readily addressed through mitigation measures.

Examples of Climate Change Risk Assessment

In environmental and social risk assessments prior to a loan decision, the Bank evaluates the project proponent’s countermeasures on climate change and confirms that they meet the requirements for climate change risk assessment in accordance with the Equator Principles. The following are examples of physical and transition risk assessments of individual projects for which the Bank conducted environmental and social risk assessments.
Physical risk (arterial road expansion project)
In order to expand an arterial road located in an urban area, the project’s physical risks were assessed as part of the environmental assessment submitted to host-country authorities. Increased flooding associated with extreme rainfall and increased frequency of bushfires were identified as key physical risks. We have ensured that the project proponent commits to management and mitigation of these risks.

Physical risks identified in the assessment

 

・Increase in flooding and landslides associated with extreme rainfall causing damage to road facilities

・Increased frequency of bushfires (associated with increase in average temperatures) resulting in damage to motorway corridor and/or associated infrastructures

Key actions taken by the project proponent

 

・Communication to contractors on increased likelihood of extreme rainfall and wind events occurring during construction; incorporation of extreme weather events in construction planning

・Adoption of a drainage design able to withstand projected extreme rainfall and flooding

・Augmented routine maintenance and inspections of structural components
Transition risks (refinery expansion project)
The refinery expansion project intends to increase the facility’s processing capacity to meet market demands. A climate change risk assessment report, which included an assessment of transition risks, was prepared in line with TCFD recommendations. In the report, policy, regulatory, and market risks were identified as key transition risks.

Transition risks identified in the assessment

 

・New costs associated with GHG emissions e.g., introduction of carbon tax

・Increasing obligations against measuring and reporting GHG emissions

・Decline in demands for oil manufacturing services

Key actions taken by the project proponent

 

・Evaluation of project economics with carbon tax (when introduced)

・Disclosure of climate-related risks and impacts on business and project’s initiatives to support low carbon transition

・Monitoring of global and emerging issues on the perceptions on oil and gas industry
(As of October 2025)

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