Standard Bank has adopted a lending policy on coal projects, setting restrictive criteria that seek to balance Africa’s heavy reliance on thermal coal and ease the risks of climate change.
Banks and pension funds across the world have been under pressure from environmental campaigners and shareholders to curtail or completely withdraw funding for thermal coal projects and ease the transition towards a low global carbon economy.
In the build up to this year’s World Economic Forum meeting, BlackRock, an asset management industry behemoth with holdings in virtually every major company, warned corporations to step up efforts to fight climate change.
“Energy is a critical driver of economic growth in emerging markets, particularly in Africa where access to reliable and secure energy is crucial,” Standard Bank said in a statement. The bank needs to “ balance the need for broader access to electricity, with the need to mitigate the risks of climate change.”
The policy piles pressure on coal mining companies, dominated in SA by the likes of Exxaro and the Seriti Resources, to watch their environment-friendly credentials or risk being cut off from funding.
In a first for SA, Standard Bank shareholders in 2019 tabled and voted on a resolution that would have required it to publicly disclose information about the extent to which it is involved in activities that expose it to climate change risk. It failed to pass as 61% of shareholders voted against it.
Under the new policy, Africa's biggest lender requires all its thermal coal mining clients to comply with domestic legislation and the environmental, social and governance (ESG) regulations of the countries within which they operate. ESG is set of standards that broadly evaluates corporate behaviour in relation to nature, society and shareholder rights
Standard Bank also said it would apply climate-friendly Equator Principles, under which lenders promise to rein in unsustainable development in emerging markets, which was agreed in 2003.
But the bank, which reported virtually no growth in annual earnings on Thursday, said it would halt the financing of mountaintop removal mining activities, which involves the use explosives to extract coal from mountain tops and ridgelines, and has raised worries about the effect on streams and rivers in surrounding communities.
The company expects its exposure to thermal coal mining to drop in line with the expected reduction in the contribution of coal to the energy mix of the countries in which it operates.
Tracey Davies, director of Just Share, a shareholder activism organisation, said Standard Bank and its climate-conscious investors had set an encouraging precedent in the fight for climate justice in SA.
Just Share supported the Raith Foundation when it proposed the landmark climate risk shareholder resolution be tabled at Standard Bank's AGM in 2019.
“We are now looking to accelerate the pace at which banks and other institutions disclose and manage climate-related risks and opportunities as part of SA’s just transition to a low carbon economy,” Davies said.
However, Just Share cautioned that Standard Bank — or any other bank that supports the goals of the Paris Agreement to limit climate change — should be careful about linking its policy on fossil fuel financing to government strategies and policies which, in most countries, are insufficient to meet the goals of the Paris Agreement.
With Lisa Steyn.
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