A decision by one of the traditional big four banks to stop financing certain types of fossil-fuel based energy generation projects provides yet another sign that it might become even harder for SA to achieve the future energy mix envisaged in the Integrated Resources Plan 2019 (IRP 2019) than the authors of this plan might have anticipated.
Published by the department of mineral resources & energy, the IRP 2019 budgets on 3,000MW of gas power and a further 1,500MW of coal-fired power generation to be added to SA’s energy mix by 2030. This would not be a particularly large coal power station compared with Kusile and Medupi that will, once the plants become fully operational, have capacity to generate 4,800MW each. However, it does serve as an indication of the country’s reliance on coal and gas as sources of fuel for at least the next 40 years, the projected lifespan of new coal-fired plants.
Announcing on Wednesday that it will no longer be funding any new construction of coal-fired power plants or the expansion in generating capacity of existing coal plants, Standard Bank echoed similar commitments that have been made by some of the other major SA banks.
The bank’s climate policy and targets will have to walk a fine line between supporting economic development in Africa, while progressively reducing its contribution to carbon emissions and financing non-renewable energy projects.
Commitments made include achieving net zero carbon emissions from its own operations by 2040 and from emissions generated by projects that it finances by 2050. The group will also mobilise a cumulative amount of R250bn-R300bn for sustainable finance by end-2026. This target includes R50bn of financing for renewable energy and underwriting of R15bn more for renewable energy by end-2024.
‘Energy deficit’
However, to support economic growth in Africa and to address “the deep energy deficit across African economies”, Standard Bank said it will, “in certain tightly defined circumstances”, remain open to supporting “brown” energy and mining projects on the continent.
“In our view, a refusal to accept this would amount to denying Africa’s right to sustainable development,” Standard Bank CEO Sim Tshabalala said.
“Over the past several centuries, Africa has borne considerable economic and human costs for other regions. A total or immediate ban on further transitional projects in Africa to help reduce environmental pressure in much richer regions, would be a cost too far. We are determined to do what is right and appropriate for the African continent,” he said.
Other commitments made by the group include not providing financial products and services for the “exploration and production of tight oil resources, and pipelines transporting a significant volume of tight oil”. This refers to shale oil reserves that are extracted using hydraulic fracturing or “fracking”.
The group vowed not to provide financing for new oil-fired power plant construction or expansion in the generating capacity of existing oil-fired power plants, except where such plants provide support services as part of an integrated renewable energy power plant.
Financing of new coal mines will only be considered in the Southern African region and only when there is an overall positive environmental effect, for example, if a new mine will limit current damaging practices such as the trucking of coal over long distances by being located close to the power station, where the fuel is needed.
Gas projects
Standard Bank did indicate that it views gas as “a transition fuel in Africa” and said it will develop a transition finance product framework that will support the use of gas by, for example, “financing gas-related projects that have zero to minimal fugitive emissions or that are committed to a pathway that reduces the carbon intensity of liquefied natural gas”.
The group will also prioritise finance for the construction of gas-fired power plants when projects are aimed at “converting existing coal or oil-fired power plants as part of a clearly defined decarbonisation plan aligned to net zero by 2050”.
Other large SA banks have been more explicit in their commitments to stop funding fossil-fuel energy projects. Nedbank’s energy policy commits the bank to not providing financing to thermal coal mines outside SA in the short term, and to no new thermal coal mines, regardless of jurisdiction, from 2025.
BankTrack, an NGO that tracks the activities financed by banks worldwide, criticised Standard Bank’s overall emissions targets for being vague.
“Standard Bank has set a net zero emissions target for 2050, but there is no overall target to reach zero exposure to fossil fuel companies. In addition, the interim targets are not about reducing actual financed emissions, but about reducing the percentage of the bank’s overall lending going to specific fossil fuel subsectors,” said Maaike Beenes, the campaign lead banks and climate at BankTrack.
Beenes said that among its African peers, Nedbank set an important example last year by committing to zero fossil fuel exposure by 2045.
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