Standard Bank, one of the sponsors of a controversial $10bn (R150bn) oil project in Uganda, has defended itself against criticism that its participation will contribute to the destruction of biodiversity in the eastern African region where the construction of the oil pipeline is set begin.
French oil giant TotalEnergies and Chinese state-run oil developer CNOOC are spearheading the project, which is seen as a potential windfall for Uganda, but is criticised by environmental groups as a blow to global efforts to reduce reliance on fossil fuels.
The controversy over the oil project underlines the global dilemma as the world transitions from environmentally damaging fossil fuels such as oil and coal into cleaner energy sources like wind and solar.
Even as businesses and companies set targets to limit global warming to 1.5°C by 2050, analysts warn that it could take decades longer than that for the world, and more specifically African countries, to completely wean themselves off the fossil fuels used to generate electricity and to produce fuel.
Standard Bank spokesperson Ross Linstrom said on Wednesday the bank’s participation in the funding of the 1,500km East African Crude Oil Pipeline (EACOP) is subject to the findings of environmental and social due diligence assessments, as well as meeting the requirements of the Equator Principles — a framework for financial institutions to identify, assess and manage environmental and social risks.
The funding is subject to a full assessment of the EACOP sponsors’ climate change strategies and targets, he said. The full due diligence reports are expected in the coming months.
Standard Bank, the largest banking group by assets in Africa, is in favour of a so-called just transition that takes into account the critical role played by coal, gas and oil on the continent. The lender has the highest fossil fuel exposure relative to other banks, at nearly 4% of its total lending book, according its 2021 report.
CEO Sim Tshabalala said in mid-March, when the group released its new climate policy, that while Africa must join the global drive towards limiting greenhouse gas emissions, the action needed to be considered within the context of Africa’s just transition towards a low-carbon economy, and in a manner that recognises and addresses the deep energy deficit across African economies.
But Just Share executive director Tracey Davies said during an interview on Wednesday that shareholder activist groups and other non-governmental organisations had engaged Standard Bank on the controversial project.
“We have always emphasised that the potential risks posed by the project far outweigh the benefits, but Standard Bank appears to be looking at the matter from a purely commercial point of view,” she said. “Financial institutions will try and prolong the time that they are able to profit off these projects.”
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