My name is Masahiro Kihara, President and Group CEO of Mizuho Financial Group. The company announced its financial results on May 15th, and this was followed by the financial results presentation, and last week by a small meeting for institutional investors and analysts. Today's event pertains to the company's initiatives to address climate change. Allow me to thank you for taking the time today to view the Mizuho IR Select 2023 event. As previously announced, the company received a shareholder proposal, which involved the addition of a clause pertaining to climate change to the company's articles of incorporation. As announced, Mizuho opposes this proposal, and today we will be going over sustainability initiatives and our opinion and position regarding this shareholder proposal. I have mentioned the topic of sustainability multiple times throughout my discussion of the medium-term business plan.
To give you a brief review, we started by identifying Mizuho's vision for the world in 20 or 30 years from now, and we used this as a starting point to identify the kind of world Mizuho should work to make a reality 10 years from now. We therefore selected business focus areas within the medium-term business plan toward achieving these goals. Within this, we position sustainability as being of paramount importance, both in Japan and globally. Naturally, toward the year 2050, we remain steadfast in our commitment toward achieving carbon neutrality and upholding the Paris Agreement's goals of pursuing efforts to limit the temperature increase to 1.5 degrees Celsius above pre-industrial levels. It was against this backdrop that we received the shareholder proposal at hand.
Even before considering, agreeing, or rejecting the proposal, we set up today's IR Select 2023 event for the purpose of sharing with stakeholders Mizuho's commitment to sustainability and the progress made in terms of initiatives in this area. Present here today is Mr. Yasuhiko Ushikubo, who holds the position of Group Chief Sustainability Officer. Mr. Ushikubo has tremendous expertise in industry research and has driven Mizuho's sustainability initiatives. Mizuho has issued its sustainability report this year, but today, Mr. Ushikubo will be delving a little deeper into our sustainability initiatives, discussing these in concrete detail, and also discuss our opinion regarding the shareholder proposal. Also present today is Ms. Izumi Kobayashi, Chairman of Mizuho's Board of Directors, who will be discussing the board of directors' opinion regarding the shareholder proposal and the oversight status regarding executive officers' sustainability initiatives.
This could perhaps be a rather lengthy presentation, but we invite you to listen all the way through to the end. This concludes my remarks. Thank you for your time.
I am Yasuhiko Ushikubo, Group Chief Sustainability Officer of Mizuho Financial Group. Thank you for taking the time off your busy schedules to view today's presentation. I would now like to start my presentation, which will be progressing in the order of the presentation materials. First, allow me to go over a summary of the sustainability progress report released in early April, with a focus on the initiatives we carried out over the course of last fiscal year. In the latter half of my presentation, I will be going over our thoughts and understanding regarding the recent shareholder proposal. Please turn to page four.
Shown here is Mizuho's Net Zero Transition Plan toward the year 2050, which we announced in April of last year. Shown here at the bottom, by fiscal year 2030, we seek to achieve carbon neutral in terms of Scope 1 GHG emissions, that is, emissions from sources directly owned by the company. We also have governance, strategy, and other, showing a commitment to achieving Net Zero by 2050, including in terms of Scope 3 emissions. Simply formulating this governance strategy and targets isn't enough, as these require constant review. Last fiscal year, we made a number of revisions and additions shown here in red. Please turn to page five. The corporate governance structure is of tremendous importance in promoting the execution of these initiatives. Last fiscal year, we registered a number of large changes.
Let me direct your attention to the diagram on the right. Group Chief Sustainability Officer was appointed as a new position in September 2022, to which I was appointed to oversee and drive group-wide sustainability promotion structure at Mizuho. Additionally, the Sustainability Risk Management Office was newly established in April 2023 under Group CRO. Risk management is tremendously important in the promotion of sustainability, so this office was established to centrally carry out risk management functions. Please turn to page six. Mizuho has been making gradual progress in the reduction of Scope 1 and 2, our own greenhouse gas emissions. In terms of Scope 1 emissions, BK completed its shift to renewable energy on properties it contracts directly. Going forward, we intend to expand these initiatives to office leases, et cetera, and additionally, within Scope 1, we have started EV adoption for corporate vehicles.
Please turn to page seven, which pertains to Scope 3, which we view as a very important area. Mizuho has already disclosed its emission reduction targets for fiscal year 2030 when it comes to the sectors of electric power, oil and gas, and thermal coal mining. We carefully monitored the progress we made last year. The graphs on page eight go into more detail. The oil and gas sector, in particular, have registered a significant increase in price volatility resulting from the Russian-Ukraine situation. Consequently, given this volatility, there is a need to adopt a long-term perspective, but we believe steady progress is being made towards the fiscal year 2030 target. Please turn to page nine. As I mentioned earlier, promoting sustainability requires a risk management component.
As shown on the left-hand side, Mizuho has put in place a risk appetite framework, integrating the execution of business and financial strategies with risk management. Against this backdrop, as shown on the right, we have further refined our approach and made progress in terms of climate-related risk management. As shown below that, as I mentioned earlier, Mizuho has made various progress, for example, with the establishment of the Sustainability Risk Management Office and other. Please turn to page 10, which pertains to risk control in carbon-related sectors. Let me direct your attention to the diagram on the left. We control risks in carbon-related sectors along the two axes of customer sectors and progress of response to transition risks. Additionally, as shown on the right-hand side, in October of last year, we clarified five indicators to be used to gauge clients' transition status.
Allow me to skip page 11, as we will be going over this information when discussing the shareholder proposal. Please turn to page 12. Earlier, I mentioned how we control risks along two axes. In carrying out dialogue with clients, we have been able to confirm that steady progress has been taking place to address their transition risks. Page 12 demonstrates this progress. At the top of the page, you have a gradient color arrow representing the status of responses to the transition risks, going from low in orange on the left to high in green on the right.
As shown on the horizontal bar graphs, and based on the number of companies and on the amount of exposure, our clients in the sectors of electric power, resources, iron and steel, and cement, which are sectors Mizuho has been focusing on, have been making steady progress toward the green portion of the graphs. Please turn to page 13. This page pertains to sustainability and innovation. Within the scope of promoting sustainability, Mizuho had established sustainable finance targets. Previously, the target for fiscal year 2030 had been JPY 25 trillion, but recently, we have quadrupled this target to JPY 100 trillion.
This is by no means an easy target, but in order to make sure definite progress is made through to fiscal year 2030, which is the midpoint in achieving carbon neutrality for Japan as a whole by 2050, there is a need for us to do whatever we can as one of Japan's mega banks. We formulated these targets. Pages 14 through 16 contain information on progress on a number of concrete initiatives advanced by Mizuho. We invite you to review this when you have the time. Please turn to page 17. This page marks the start of the latter half of my presentation. Mizuho received a shareholder proposal. Kiko Network, one of the NGOs behind this shareholder proposal, has released information about the proposal as well as information for investors. We believe the main thrust of the proposal can be summarized into three items.
As shown on the left-hand side at the top, the first concern is that Mizuho could have policies and targets that are incompatible with NZBA, Net Zero Banking Alliance, and net zero commitments. The second concern is a perceived lack of transparent and effective engagement. Lastly, the third concern is that the scenarios outlined by the company in terms of financed emissions trajectories require reliance on unproven technologies. Each of these bullet points branches out into more granular points, but we believe that, in broad strokes, these are the main concerns voiced in the shareholder proposal. Starting on page 18 is Mizuho's views on the shareholder proposal. We went into quite a bit of detail in the presentation materials, which we invite you to review later at your convenience, but allow me to express Mizuho's views in a more succinct manner here. Please turn to page 18.
First is Mizuho's response regarding concerns that Mizuho's policies and targets are incompatible with NZBA and net zero commitments. Allow me to direct your attention to the area colored blue, which we titled "Mizuho's Views." This area contains three bullet points. Allow me to start with the second one, which states that Mizuho sets its midterm targets according to the NZBA guidelines. As I mentioned earlier, targets have already been set for the electric power, oil and gas, and thermal coal mining sectors, and we are additionally carrying out preparations in earnest toward establishing targets for the sectors of iron and steel, automotive, maritime transportation, and real estate sectors. Additionally, the target values were set using the IEA Net Zero Emissions scenario benchmark.
In light of the gap between targets to limit the temperature increase to 1.5 degrees Celsius above pre-industrial levels and national policies as they currently stand, we partially used IEA SDS, Sustainable Development Scenario, as a range. However, the base for these targets is the NZE scenario. The next point can be found on the bullet point above that, which states that Mizuho should consider the full range of Scope 3 value chain emissions. As you are aware, the majority of Scope 3 emissions by financial institutions fall under ISO Category 15, that is, financed emissions. Regarding financed emissions, as I mentioned earlier, we are in the process of formulating targets for each sector, going from high-priority sectors to lower-priority ones. Another point that was brought up was a lack of short-term targets.
As you are aware, executing changes to the business structure of companies in these GHG-intensive sectors and transitioning to a cleaner emissions profile takes time. We believe Mizuho setting short-term targets for its clients and then evaluating their performance based on how well they match these, could actually serve to impede progress in Japan's overall transition and transition in the real economy. We have set medium-term targets for fiscal year 2030, so it goes without saying that we will be monitoring progress on this front every year. Please turn to page 19, which also contains a list of concerns regarding Mizuho's policies and targets, possibly being incompatible with NZBA and net zero commitments. One such concern is that the target for the electricity sector pertains to emission intensity and does not guarantee reduction in absolute emissions.
Mizuho views the use of emission intensity, that is, GHG emissions per unit of power generated, as appropriate. Within the shift towards decarbonization, it is important to carry out electrification and then follow this with the adoption of renewable energies. Against this backdrop, a temporary demand increase for electricity is expected in developing countries as well as Japan. In light of this, we believe there is a very real possibility that this will involve a temporary increase in emissions. NZBA guidance also lists emission intensity-based targets as an option. We monitor absolute emission levels, but we believe our reasoning is sound in setting up targets based on emissions per unit of power generated. Another concern is that while Mizuho has formulated targets for the oil and gas sector, these are primarily limited to upstream operations.
They have pointed out about the reduction targets across the value chain as a whole, also downstream and midstream. Upstream production operations comprise the majority of Mizuho's portfolio in this sector. By setting up targets for oil and gas extraction operations, this naturally has an impact on midstream operations. This was the reasoning behind our decision to set targets primarily centered around upstream operations. For example, in terms of downstream operations, these are impacted by society overall. For example, in terms of progress in automobile electrification. As such, we also follow and monitor decarbonization initiatives from the demand side. Please turn to page 20. Another concern voiced here is that Mizuho has no policy to rule out financing to new and expansionary oil and gas projects or companies pursuing such projects. This refers to Mizuho's ES Policy. Recently, it has become increasingly important to secure a stable supply of energy.
As an island country, Japan lacks natural resources, and in light of this, we have decided not to introduce an across-the-board prohibition clause for new financing and investment in oil and gas extraction businesses. With that being said, as shown on the second bullet point, we have revised our ES Policy to assess whether sufficient measures to reduce greenhouse gases are taken or not when making any new financing and investment used for oil and gas extraction projects. Additionally, as I mentioned earlier, we have medium-term GHG reduction targets for 2030. In addition to making sure of compatibility with these medium-term targets, we have also strengthened standards for verifying funds to be used for new oil and gas extraction projects. Naturally, we will consider changes at the international level, among other factors, and adopt a flexible approach in periodically reviewing our policy and executing revisions whenever necessary.
Please turn to page 21, which pertains to the coal sector. Broadly speaking, this sector is divided into three categories: coal-fired power, and then in terms of mining, into thermal coal and metallurgical coal. Another concern contained in the shareholder proposal is that Mizuho has no policy to rule out financing to companies expanding operations in coal-fired power, thermal coal mining, and metallurgical coal mines. We addressed this concern at length in the area colored blue, but let me give you a shorter answer. First, Mizuho, too, views the sector of coal-fired power as posing tremendous transition risk. We have set a policy prohibiting financing or investment used for the new construction or expansion of coal-fired power generation plants. Furthermore, we have set a target to have no outstanding credit balance with coal-fired power generation facilities by fiscal year 2040.
We also prohibit financing or investment in any new development or expansion of thermal coal mining and infrastructure linked with thermal coal mining, such as access roads or rail lines to transport the coal. While we currently don't prohibit financing or investment in metallurgical coal mining projects, we nevertheless view this as a sector posing high transition risks. We are closely monitoring these projects. On the topic of coal-fired power generation facilities and metallurgical coal mining projects, we do not prohibit financing or investment across the board in technological innovation or the deployment of next-generation technologies. We nevertheless apply the same strict policies I mentioned just now. Please turn to page 22.
Earlier, I mentioned how the shareholder proposal could be broken down into three broad categories, page 22 deals with the second category, pertaining to concerns that Mizuho lacks transparency and effective engagement on clients' transition and the company's views and response. Page 22 contains three bullet points. As I mentioned earlier, we evaluate risks in carbon-related sectors along the two axes of customer sectors and progress of response to transition risks. As such, in the case of clients in high transition risk domains, we confirm clients' measures to address transition risk at least once a year through client engagement and dialogue. The results of this engagement are, as I mentioned earlier, back on page 12, which showed a gradual lengthening of the green bars as our clients continue addressing risks while carrying out dialogue with us.
While I believe these cases are extremely rare, we will consider whether or not to continue our business with a client in the event that the client is not willing to address transition risks and has not formulated a transition strategy even one year after the initial engagement. Please turn to page 23. This page pertains to concerns regarding financed emission trajectories and a possible reliance on unproven technologies, and whether Mizuho's policy could actually lead to support for projects perpetuating the reliance on fossil fuels. As we explore at length on page 23, electrification and the widespread adoption of renewable energies is of utmost importance in making a decarbonized society a reality.
Considering the potential for the adoption of renewable energies in Japan, and in light of volatility levels associated with these types of energies, we believe coal-fired power generation plants will continue to exist for the foreseeable future for purposes of offsetting some of this volatility. Against this backdrop, it is important to further refine co-firing technology involving replacing some of the coal used for combustion with hydrogen and ammonia. It is also paramount to further refine CCS and CCUS technologies to capture the CO₂ byproduct resulting from the burning of coal. Mizuho is committed to carrying out talks with clients regarding these initiatives and, in some cases, provide support. We view this to be very important. This is featured in Japan's GX strategy as a priority target, with a certain percentage of the strategy's JPY 150 trillion budget being allocated to this.
Against this backdrop, this policy on Mizuho's part to carry out dialogue with clients while supporting further improvements to this type of technology does not necessarily contradict its commitment to achieving carbon neutrality by 2050. I believe promoting the transition to carbon neutrality, as Mizuho has committed to doing, is a target of the utmost importance. At the same time, against this backdrop, we have a responsibility to maintain a stable growth trajectory for Japan's economy or even further enhance this trajectory, raising the standard of living for those in Japan. I believe this to be a very important mission for the country's megabanks. Neither of these two targets is subordinated to the other. We view the pursuit of these two targets as Mizuho's role as a megabank, and we will be doing everything we can toward this end. This concludes my presentation.
My name is Izumi Kobayashi, Chairperson of Mizuho's Board of Directors. Thank you for taking the time to view today's Mizuho IR Select 2023 event. I will be going over the Board of Directors' thoughts through the perspective of oversight on the shareholder proposal, as well as the issues I believe exist from the perspective of oversight. First, regarding the shareholder proposal, and as announced in a press release and discussed earlier in today's event by President Kihara, the Board of Directors opposes the shareholder proposal. The shareholder proposal called for a change in the company's articles of incorporation. The articles of incorporation refer to foundational information for the company, so we therefore do not consider it appropriate to include elements pertaining to the execution of specific business operations into said articles of incorporation.
With that being said, the Board of Directors' position regarding the points brought up in this shareholder proposal is to carry out sincere efforts to address these. As Mr. Ushikubo mentioned earlier, the company at all times addresses the individual items raised in the shareholder proposal. Additionally, in terms of issues we will need to address going forward, from an oversight perspective, the Board of Directors is committed to carefully analyzing such issues. Second, I would like to go over the ways in which the Board of Directors oversees initiatives to address climate change. We oversee these initiatives from two perspectives, the first being the perspective of risk.
I personally have a seat in both the board of directors as well as Mizuho's Risk Committee, and I can attest to comprehensive discussions carried out within this committee regarding the risks associated with climate change and ways to thoroughly mitigate these risks. In fact, the Risk Committee has a very comprehensive approach to risk and is consequently viewed by executives at Mizuho as a rather strict committee. This isn't restricted simply to the validity of the plan to address the issue of climate change, but also an assessment of our ability to address changes in the direction going forward and changes in the international discourse regarding climate change. Other analyses involve assessing credit exposure risks and the impact of those risks on capital over the medium to long term. At each session, we therefore assign homework, if you will, on a number of complex and detailed topics.
On the other hand, the board of directors reviews the company's overall policy and oversees execution progress to make sure things move according to plan. Additionally, we also discuss whether we have been able to approach climate change as a business opportunity and what business opportunities present themselves to the company in this area. In light of this, we believe that through this two-layered structure consisting of the board of directors and the Risk Committee, our oversight of climate change is carried out in an adequate manner. I would now like to use this opportunity to discuss my personal views on what I consider to be issues that need to be addressed.
First, given that the company positions addressing climate change as the central point of its strategy, an issue here is telling the difference between client engagement in name only and the execution of actual initiatives to tackle climate change. We are therefore focusing on whether a structure is in place allowing for the objective measure of the effects of the initiatives being executed. The second issue is whether the training and development of human resources capable of executing these strategies is advancing or not. Human resources possessing expert knowledge, the ability to analyze from multiple angles these complex and intricate problems, and also the ability to execute, are naturally very important.
However, another important element in terms of human resources is having employees with boots on the ground that interpret climate change as something that personally affects them, and based on this, are capable of making improvements to their operations in various businesses and to their work processes. Another desirable trait is the ability to identify challenges facing clients, making adequate proposals, and monitoring their progress. I therefore believe that raising the bar in terms of the employees working on the front lines is extremely important. Third, as Mr. Ushikubo mentioned earlier, another issue is whether Mizuho's efforts are being accurately understood by investors and by society at large. I therefore believe that there remains much room for improvement in terms of disclosures and external communications.
Naturally, it is important to constantly review and improve initiatives that need to be executed, but I believe that explaining the initiatives carried out by the company in an easy-to-understand manner is also very important. It is therefore important to further enhance disclosure. This isn't just about expressing a compelling story, but also about discussing challenges facing the company. Additionally, against the backdrop of increased interest and hopes for the company's initiatives on the part of investors, I believe something very important is for Mizuho to disclose the issues the company has identified in a positive, forward-looking manner and carrying out disclosure, giving people the opportunity to better understand our corporate activities. This concludes my presentation.