Financial services group Old Mutual said it is concerned about what it deems lack of clarity from Sasol about its strategy to reduce its carbon emissions, which are second only to Eskom.
Old Mutual owns about 3% of Sasol. The group in its 2022 climate report released on Friday said it had climate-related engagements with its 53 investee companies, including Sasol.
“Sasol is the single biggest emitter of carbon emissions in the South African listed market. While it is a large employer and a key contributor to SA’s GDP, we remain concerned about the long-term implications of its climate impact and its stranded asset risks. We feel the company has failed to communicate a clear strategy that would resolve or improve its current climate metrics and carbon emissions,” Old Mutual said.
Remuneration policy
“We noted that climate ambition linked to remuneration was an important part of driving change. Sasol’s 2023 remuneration policy shows progress on integration of metrics aligned to the transition strategy and this is promising. We look forward to the opportunity to develop a better understanding of these metrics and to see targets ratcheted up over time. In addition, we appreciate the active plan and strategy to net zero which Sasol has committed to. Going forward, we will be focused on the execution of the strategy.”
The group, whose asset management unit Old Mutual Investment Group has about R432bn in assets under management, added that it held direct discussions with the Sasol board of directors and management team.
“Engagements include discussions on the opportunity for Sasol to refinance its loan facilities using a combination of green bonds and sustainability-linked loans to achieve specific climate mitigation goals, such as rolling out renewables and reconfiguring operations to more eco-efficient feed stock and emission mitigation measures.”
Sasol, valued at about R157bn on the JSE, is about to go through a leadership change as CEO Fleetwood Grobler is set to retire at the end of next year.
Grobler was appointed to the role in 2019 and his association with the company began as an engineering student in the early 1980s when he received a Sasol bursary before joining the group in 1984. Old Mutual said it will monitor Sasol’s succession planning and how it will affect its plans to cut back on carbon emissions.
Execution of strategy
“We believe that the board in place possesses the requisite skill and experience to deliver on the strategy, but we are wary of the tendency of the organisation to defer action on critical issues. As such, we anticipate the bulk of our engagements to be centred on execution of strategy at both a board level and an executive level. We will be closely monitoring the company’s succession planning strategy in light of the current CEO’s term coming to an end in 2024 and its subsequent effects on the long-term strategy.”
Sasol’s decarbonation targets include reducing emissions by 30% in the next seven years and reaching net zero emissions by 2050.
It is said that the group’s plant in Secunda, Mpumalanga, is one of the largest source of greenhouse gas emissions in the world.
Old Mutual also said one of its investee companies it is engaging is Glencore, a major player in the production and trading of coal globally and in SA.
Old Mutual said Glencore is in a position to co-ordinate a strong response to SA’s climate and energy crisis.
“Old Mutual Investment Group’s stewardship team continued to engage with the Glencore board during 2022 to gain a better understanding of Glencore’s priorities in mitigating the energy crisis,” the group said.
“Glencore has embedded their climate strategy to all operational aspects of the business decarbonisation strategy, and targets are now included in all life of mine strategies. Glencore is growing its ‘green’ metals/minerals portfolio, and executive compensation is intrinsically and explicitly linked to their transition strategy.”
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