Standard Bank CEO Sim Tshabalala says it is unreasonable to expect African countries to cease reliance on fossil fuels in the rush to transition, and the lender will continue to invest in oil and gas projects.
Tshabalala said the bank believes the just energy transition must recognise the right of African nations to develop their natural resources and economies to improve their people’s lives.
He cited countries such as Nigeria, Angola, Ghana and Mozambique, which produce oil and gas for international markets, saying their activities in the space hauls in foreign currency and tax revenues to develop their respective economies.
The group, which reported R3.7-trillion in assets at the end of December, cementing its place as Africa’s largest lender by assets, is present in 20 countries on the continent, including the oil and gas producing states.
“Standard Bank will continue to finance new oil and gas projects, which have the potential to provide affordable and reliable energy to Africa’s people, when these are designed and implemented with robust environmental and social risk controls, as part of clients’ business strategies to transition to a low carbon future, and within the parameters of our group climate policy and targets,” Tshabalala said in the group’s annual report published on Friday.
The bank has set a target to limit its upstream oil and gas exposure to less than 30% of its energy book, and less than 3% of the group’s total loans and advances in the next five years.
We accept that we will continue to receive criticism from some stakeholders, who believe that a much faster transition is possible or who insist on immediate divestment from fossil fuels.
The CEO said the bank’s door remains open to engage with its climate policy critics.
“We accept that we will continue to receive criticism from some stakeholders, who believe that a much faster transition is possible or who insist on immediate divestment from fossil fuels. We are a real economy, African bank,” Tshabalala said.
“Many of our countries of operation will remain heavily dependent on their oil, gas and coal resources for several years to come. It is neither realistic nor responsible to expect an immediate freeze on the development of these resources.”
The lender has flexed its financial muscle over the years to be a leader in climate financing on the continent, having deployed R177.4bn in sustainable finance since 2022 as part of its target of mobilising R250bn by next year.
The bank’s updated sustainable finance mobilisation target is over R450bn by 2028, cumulative from what it has already deployed from 2022.
“An integrated approach that combines renewable energy, battery storage, and some capacity from carbon-based fuels is necessary to ensure energy reliability, access and efficiency,” Tshabalala said.
“This view aligns with International Energy Agency (IEA) research, which indicates that, in the medium term, gas and oil will remain an important part of the global energy mix. The same is true for coal in the short-term.”
SA must submit a new Nationally Determined Contribution (NDC) in terms of the Paris Agreement this year.
“SA banks have a crucial role to play in ensuring that the country takes timeous and effective climate action to meet its international commitments,” said shareholder activist group, Just Share, which has had several run-ins with SA banks and financial services groups over their climate-risk policies.
According to Standard Bank, in 2022 Africa was responsible for just 3.7% of global energy-related carbon emissions. However, Africa’s share of global CO₂ emissions could rise to 20% by 2100, even with moderate economic and population growth, according to the IEA.
The pace of Africa’s just transition has become a hotly debated topic among financiers, policymakers and environmental groups.
Former UK prime minister Tony Blair last week cautioned African governments not to put just transition imperatives ahead of the requirement to develop the continent and its people, urging policymakers to wrestle back the climate change debate from environmentalists.
“You can’t say to an African country that has significant gas reserves to ignore those reserves and not develop those... my view on climate change is that it is time you took the climate change debate out of the hands of campaigners and put it in the hands of policymakers,” Blair said at the Standard Bank African Capital Markets conference held in Stellenbosch.
In SA, the Climate Change Act, enacted this month, enables the environment minister to set emissions targets for various sectors, such as energy and transport, as well as prescribe emission thresholds or carbon budgets at the company level.
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