[ad_1]
When South Africa’s Standard Bank became the first company in the country to file a climate-related shareholders resolution last year, few expected investors to endorse measures that required the bank to adopt and disclose policies on new mine loans. coal and power plants in Africa.
The bank is the largest lender on a continent desperate for energy and exposed to climate change. At the same time, the bank’s home country relies heavily on coal to generate most of its power.
With 55 percent support, the vote passed “to everyone’s surprise, including ours. . . it was the first time we had ever done it, ”says Tracey Davies, CEO of Just Share, a non-profit group that promotes shareholder activism and responsible investing in South Africa.
The vote in favor of a coal lending policy marked a watershed moment, although only 38% of shareholders at the meeting supported the bank’s broader climate disclosures.
In the year since then, there has been a wave of public commitments from South African banks to incorporate climate risk into lending, a shift with profound implications for access to capital for energy projects in the region.
Recent resolutions on climate risks that were introduced by South African banks themselves, including Investec and Nedbank, garnered overwhelming votes in favor, “a strong indication that shareholders want the banks to provide them with climate information”, particularly with regard to the proportion of loans that have weather risks, according to Ms. Davies.
In October, Standard Bank released its own disclosures, which revealed R67 billion ($ 4.2 billion), or 4.4 percent, of the bank’s credit exposures were linked to fossil fuels, up from R12 billion to renewable energy.
“There has been a very rapid change for all banks to understand that this is a serious risk and that they need to improve their game in terms of disclosure. Everyone has done a lot, ”says Ms. Davies.
This year, Investec became the first South African bank to detail a financing policy for all fossil fuels, and Standard Bank is preparing to publish a similar policy early next year.
What seems like sudden change reflects the accumulation of quiet behind-the-scenes changes over time, says Wendy Dobson, group corporate citizenship director at Standard Bank. “We have reached a turning point,” he says. South Africa’s financial regulators have become more interested in climate risk in the banking system and institutional investors have added their voice, he says.
The latest Standard Bank weather disclosures allow investors “to get a sense of the type of risk appetite the bank is taking in these sectors. . . that allows them to make decisions about what they want to invest in, ”says Ms. Dobson. The disclosures are also intended as a work in progress, it adds. “We do not yet have a definitive approach to definitions and methodologies. . . This is something that is evolving. “
The bigger question may be to define how these new policies will relate to Africa’s own challenges, both with the rise in global temperature and with the need for its economies to catch up.
The latest disclosures from Standard Bank point to how it believes climate change could devastate African economies and lead to bank losses, including a warning that R111bn of farm loans is exposed to “high physical risk.”
At the same time, less than half of Africans have access to the electricity grid and fewer gigawatts have been installed south of the Sahara desert than in Spain.
“We are in a different context in Africa; we still face the fundamental challenges of people who have access to power, ”says Ms Dobson. Standard Bank is being guided by the Paris Agreement, which allows poorer countries more time to transition away from fossil fuels, it adds.
None of the policies of South African banks prohibit loans to build new coal mines or African power plants, although coal is generally a small part of their energy portfolios.
Investec, which has less than a fifth of its energy portfolio in coal, “will only finance new coal mining transactions or the expansion of ongoing operations if there is a comprehensive socio-economic motivation” that top management has agreed to be valid, according to your new financing policy.
“Many of these policies will exclude South Africa’s current plans, but they basically say that if the opportunity arose elsewhere in Africa, we would consider it,” says Robyn Hugo, director of climate change engagement at Just Share.
In any case, says Ms Hugo, oil and gas are overtaking coal as the next big area of contention for banks’ climate policies in Africa. Natural gas in particular is being classified by banks as a “transition fuel” that can aid economic development while producing relatively less greenhouse gases than coal.
Some of the biggest capital projects on the continent are at stake. They range from the development of LNG (liquefied natural gas) in Mozambique, where France’s Total recently agreed to the region’s largest debt financing at $ 15 billion, to the world’s longest heated oil pipeline in East Africa that would link the fields. oil companies in Uganda with ports in Tanzania. Standard Bank is making loans to both.
South Africa’s latest energy plan also pointed to a larger role for natural gas in accelerating the country’s transition from aging coal plants.
Activists argue that many African countries will see little energy security benefits from LNG pipelines and terminals focused on exports to rich nations, and that far from being a transitional fuel, natural gas will become deadweight infrastructure. given the pace of change in global emissions targets.
These activists also argue that African bankers should develop lending policies for renewable energy, as prices for solar, wind and other sources fall and the reliability of such projects increases. Lenders “still rely on old fossil fuel baseload arguments” or favor coal, oil and gas to supply basic demand, Ms. Davies says.
The latest Standard Bank climate release says that renewables “provide great potential for African energy services companies,” but adds that renewable energy generation in the region is still limited and that hydropower, the largest renewable energy in Africa supplies only 16% of the continent’s energy.
Even after last year’s changes of change, it is unclear whether shareholders in South African banks will continue to discuss climate issues at annual general meetings.
After its shareholders’ decisive vote in 2019, Standard Bank did not present the climate risk resolutions proposed by Just Share and the Raith Foundation this year. He said that his board’s decision “not to allow usurpation of its role by interested parties who have no fiduciary responsibility with the company does not suggest that the board is deviating from its environmental responsibility. . . path”.
Despite the disputes, the terms of the debate have changed and bank shareholders can now compare climate policies between lenders, Davies says. “We have certainly come a long way.”
