Standard Bank, Africa’s largest lender, has come clean about its exposure to climate change, revealing that almost 12% of its loan book — about R180bn — is exposed to elevated climate-related risk.
SA lenders have come under pressure from environmental justice groups and shareholder activists to be more transparent about their lending to polluting businesses.
In a report published by the bank, as at December 2019, 4.4% or R67.8bn of Standard Bank’s loan book was exposed to fossil fuels ranging from coal-fired power stations to coal mining and oil and gas exploration, production and trading.
Another R110bn, or 7.24%, of the bank’s book accounts for loans to agriculture, which faces physical risks associated with climate change, such as flooding and drought.
The bank’s exposure comes through the clients it finances across Africa.
Standard Bank also noted that its loan book carried R12.3bn for renewables, accounting for 0.8% of the book.
In 2019 Standard Bank was the first SA company to table climate-related resolutions at its annual general meeting, one of which was passed and required the bank to adopt and publish a policy on lending to coal projects. The resolution that was not passed was for it to disclose its lending exposure to fossil fuels.
This year, however, the bank resisted pressure to table further climate-related resolutions, saying shareholders did not have a legal right to vote on such matters.
Wendy Dobson, head of group policy, advocacy and sustainability at Standard Bank, on Thursday said the disclosure was a “work in progress” with methodologies still evolving and different banks choosing different ways to measure climate risk.
Standard Bank is not the first to offer a glimpse of the climate-risk exposure in its lending book, in line with the principles and recommendations of the global task force on climate-related financial disclosures.
FirstRand, another big bank in SA, in an annual report released this week did disclose that its main loan exposures were R19.7bn to fossil fuels, making up 1.5% of group loans; about R8.7bn, or 0.7% of total loans, was made to power utilities; and 1.4% of the loan book, or R17.9bn, was attributed to renewables.
Investec has reported that fossil fuels account for 1.3% of its “gross credit and counterparty exposure”.
Dobson said Standard Bank took the issue very seriously and had identified climate risk as a top risk and a material issue of concern to its stakeholders which affects its ability to create value for them in the long term.
Still, the lender needed to balance the climate risk with the need to drive development on the continent, she said.
Standard Bank operates in 22 African countries where many people are living without access to affordable and reliable energy, she said, adding that this inhibited human development.
Standard Bank said it had published the policy on lending to coal projects and was “well into the process” of developing a broader fossil fuels financing policy, which it aims to adopt and publish by the end of 2020.
The group’s environmental, social and government risk framework is being updated to include climate-related risk and to ensure accountability for climate-related risk management, the bank said.
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