Mitsubishi drops Vietnam coal plant as investors face pressure for environmental, social risks

Photo: Michael Gaida / Pixabay

Mitsubishi has pulled its support for a coal power plant in Vietnam following major pressure from investors and activists over the company’s fossil fuel investments. The decision comes as firms across Southeast Asia face intense scrutiny for environmental and social impacts and shareholders leverage their influence.


Japan’s Mitsubishi Corporation announced on February 25 that it will withdraw from a controversial coal power plant in southern Vietnam. 

Sources close to the company told Reuters that Mitsubishi decided to cut ties to the project because of climate change concerns and targets for cutting greenhouse gas emissions.

The Vinh Tan 3 coal plant in Binh Thuan province is costing an estimated US$2 billion and will generate 2,000 MW of energy if finished, becoming Vietnam’s second coal plant larger than 1,500 MW. The Vinh Tan coal power station, where the plant is being built, already has a major carbon footprint with three coal power plants.

The project was one of two large-scale coal plants in Vietnam financed in part by Mitsubishi. The other, Vung Ang 2 in central Ha Tinh province, has drawn international criticism for its massive environmental impact and carbon emissions, including from major global asset managers and the young Swedish climate activist Greta Thunberg.

Coal has become one of the riskiest energy investments in Vietnam, as the country has already built enough coal power plants to meet almost 40% of its power needs. Demand for coal will only decline as Vietnam continues its rise as the leader for solar power in Southeast Asia. In 2019, Vietnam’s 5,695 MW of solar power represented over 50% of the region’s solar capacity—before a solar building spree in 2020—according to a report by the International Renewable Energy Agency.

Mitsubishi’s decision to pull out of the Vinh Tan 3 plant shows that foreign developers will respond to the right combination of market forces, demands by shareholders and criticism over environmental and social impacts of their investments.

The announcement also comes as investors are showing increasing concern about environmental and social governance issues across Asia.

Sustainability and social impact carry increasing weight with investors

In February, Larry Fink, CEO of global investment giant BlackRock, told a conference of the Institute of International Finance that companies must adopt more sustainable strategies or “you’re just going to see less equity demand for your shares.”

“We’re not making these statements as an environmentalist—I happen to be one—but we’re making the statement that this is investment risk,” Fink said.

International investors in Southeast Asia are also facing increasing pressure in the aftermath of Myanmar’s military coup on February 1. Advocates, governments and shareholders are pushing companies and banks operating in Myanmar to cut all ties to the military and to pressure the new junta to step down and respect the results of the country’s election last November.

Business ties with Myanmar’s military have long been a public relations and ethical liability, but the spread of social media and internet access in the country has amplified the voices of activists inside the country. Investors in Myanmar—and in much of Southeast Asia—face a new level of scrutiny and increasingly powerful calls for corporate accountability.

Photo: TripodStories- AB / CC BY-SA

Mitsubishi drops one large coal plant but keeps another

Like other firms invested in fossil fuel energy and mining, Mitsubishi is particularly exposed to risks from the social and environmental impacts of its portfolio. In the 2019-20 fiscal year, the company made more than half of its profit from natural gas and mineral resource businesses. Notably, Japan has pledged to become carbon neutral by 2050.

The Vinh Tan 3 plant is backed by the government-owned Electricity of Vietnam, Pacific Group and OneEnergy. OneEnergy is a joint venture of Mitsubishi and Hong Kong-based CLP group and holds a 49% stake in the project.

CLP is also a major investor in the Vung Ang 2 coal plant, though the company announced in late 2019 that it will no longer fund new coal projects. CLP and Mitsubishi each hold a 40% stake in Vung Ang 2.

But the project’s financiers face international criticism and a stream of negative press for their hypocrisy in funding the plant while their governments commit to cutting carbon emissions. There are also major questions about the plant’s profitability.

In October 2020, a group of the world’s largest asset managers wrote an open letter to the plant’s investors urging them “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.” The letter was signed by a group of institutional investors that together manage 4.7 trillion euros in assets (US$5.67 trillion), including Nordea and Amundi.

Vung Ang 2 has quickly become a case study in the public relations and investments risks of coal projects—begging the question of why Mitsubishi has stayed with Vung Ang 2 while dropping Vinh Tan 3.

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