Just Share has harshly criticised Absa’s climate-risk policies, accusing SA’s fourth-biggest lender of failing to understand climate science and falling behind its peers in taking proactive steps to facilitate the global transition to a low-carbon economy.
The shareholder activist group has taken particular aim at Absa’s 2021 Task Force on Climate-related Financial Disclosures (TCFD) report, which it released in May 2022. It also criticised aspects of the bank’s coal financing and oil and gas financing standards.
“Absa’s recently published policies and disclosures do not take the bank’s position on climate change forward in any significant way,” Just Share said in an analysis of the bank’s climate-risk policies and standards released on Tuesday.
“Absa’s latest standards contain some worrying errors and gaps in its understanding of the core issues and of why it is crucial for financial institutions to have robust policies and stringent exclusions for financing fossil fuels in a world facing an urgent and escalating climate crisis. Absa’s standards do not reveal any understanding of or engagement with climate science or the urgency of taking climate action.”
Just Share said in March the climate risk-related disclosures of SA’s traditional big five banks — FirstRand, Standard Bank, Absa, Investec and Nedbank — all fell short of the TCFD recommendations, one of the world’s key frameworks outlining how financial firms should report climate-related information. Though the activist group acknowledged that SA banks were still in the early cycles of adopting TCFD recommendations, it said they all had “a way to go” in making adequate climate-risk disclosures.
Even so, Just Share argues that Absa has been particularly tardy on climate-risk issues as it is the last of the traditional “big five” banks to publish fossil-fuel policies covering oil and gas, and continued to lag in its understanding of climate risk.
“Although all SA’s major banks’ fossil-fuel policies leave significant room for improvement, Absa’s policies demonstrate that it still lags in its understanding of climate risk and the imperative to transition to a low-carbon, resilient and sustainable economy,” Just Share said.
In Absa’s 2021 TCFD report, says Just Share, there are many recommended elements of reporting that are missing, with the bank providing more detail for the guidance points with which it has already complied, rather than increasing the number of guidance points with which it aims to comply.
Just Share says Absa has still not provided information on how climate-related performance metrics can be incorporated into its remuneration policies, only saying that “non-financial” metrics are part of short- and long-term management incentives.
The activist group also criticised Absa for not ruling out the financing of new coal projects in its updated coal financing standard despite its recognition that the fossil fuel is a major contributor to global warming and air pollution.
Though Absa now excludes financing new coal-fired power generation it has not ruled out providing funding for existing coal-fired electricity plants, new greenfield coal mining projects, industrial and metallurgical use of coal or new coal-fired industrial boilers or furnaces.
“This is a wholly inadequate assessment of climate risk,” said Just Share. “It is inconsistent for Absa to claim to be aligned with the goals of the Paris Agreement while still supporting new coal projects.”
Nedbank and FirstRand are the only two banks that have ruled out financing all new coal-fired power as well as all new coal mining, which Just Share argues should be a minimum requirement for any financial firm that claims to support climate action. Climate Analytics’ research shows that coal must be phased out globally by 2040 to meet the goals of the Paris Agreement on climate change.
Just Share also took aim at Absa’s first policy relating to oil and gas, admonishing the bank for its enthusiasm for the opportunities presented by Africa’s “significant oil and gas reserves”. The activist group said Absa’s continued emphasis of the “so-called strategic importance of oil and gas for economic growth in Africa” ignored the growing body of evidence that developing fossil fuels is neither necessary nor desirable for Africa to improve energy security, job creation or poverty alleviation.
“Absa provides no evidentiary basis for these sweeping claims,” said Just Share. “The bank also fails to consider the long history of the failure of fossil fuels to bring economic prosperity to Africa, and ignores the significant time and cost implications of developing new fossil fuel reserves, all of which can be avoided with the mass deployment of renewable energy.”
Absa’s misnaming of key climate-related terms and acronyms in its policy documents also came in for strong criticism.
“For example, it refers to Nationally Determined Contributions, a requirement under the Paris Agreement, as National Development Commitments and at other points appears to confuse SA’s Nationally Determined Contribution with the National Development Plan, which is a different policy document altogether,” said Just Share.
Absa responded to say it appreciates the gravity and urgency of climate change and that managing this risk is a key priority for the group. Though the bank said it had done “substantial work” on calculating its indirect or financed emissions, it acknowledged that it had more to do to calculate its overall baseline financed emissions before it could set absolute long-term targets.
“We are investing in this space and will continue to improve in what is an evolving area,” Absa said. “We view Just Share as an important stakeholder in this space and we will continue to engage them appropriately on this imperative as we have done in the past.”
Update: July 26 2022
This article has been updated with additional information
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