As the race for climate funding heats up, SA is sharpening its green investment rule book to stay competitive, credible and ready for global capital.
The Treasury on Tuesday released a technical report evaluating the country’s Green Finance Taxonomy (SA GFT) — a system that defines which economic activities can be considered environmentally sustainable.
The report, compiled by the Climate Policy Initiative and GreenCape, recommends steps to enhance the taxonomy’s alignment with global standards and improve its usability by the private sector, financial institutions, and regulators.
First introduced in 2022, the SA GFT serves as a classification tool that helps guide funding towards credible green projects — and away from those that simply appear green on the surface.
SA’s green finance ambitions come with an urgent price tag.
According to the report, the country is estimated to require R334bn per year to meet its net zero target by 2050 and R535bn annually for its Nationally Determined Contributions (NDCs) by 2030. NDCs are national climate action plans submitted by countries under the Paris Agreement.
Currently, SA attracts just more than R130bn per year in climate finance investments, with more than 90% sourced from international investors primarily located in Western Europe.
To meet its climate needs, SA must offer investors clarity, credibility and consistency — something the taxonomy is designed to deliver.
The taxonomy sets out three core criteria a project must meet to be labelled green:
- Make a substantial contribution to at least one environmental goal (for example climate mitigation, water conservation);
- Do no significant harm to any of the other goals;
- Comply with minimum social safeguards, such as labour rights and inclusive economic practices like the BBBEE Act and the Women Empowerment and Gender Equality Bill.
While the SA GFT is already considered well-aligned with international frameworks, including the EU taxonomy, the report identifies usability and adoption challenges, including vague criteria, limited guidance and a lack of standardised disclosure tools.
Users have found it difficult to apply the “Do no significant harm” and “Minimum social safeguards” requirements consistently, highlighting the need for clearer thresholds, sector-specific guidance and improved governance structures.
In an interview with Business Day, Robert Lewenson, head of responsible investment at Old Mutual Investment Group, urged the government for more clarity and a more coherent policy framework before committing to green investments.
“We’re probably one of the biggest, if not the biggest, investors in the green economy in SA and Africa,” Lewenson told Business Day last year.
“We’ve really got a lot of skin in the game. We have the funds set up. [But] we do need a little bit more clarity around the political regulatory environment to enable this. We need very clearly defined terms, conditions and governance structures for these projects,” said Lewenson, stressing the importance of a well-functioning “clearing house” for managing funding and projects.
In its statement, the Treasury acknowledged that the concerns flagged by the report require clear guidelines, stronger governance and improved processes.
The report recommends the creation of a multi-stakeholder working group to refine the taxonomy and support its practical implementation.
Other recommendations include developing common metrics that align with widely recognised sustainability reporting frameworks for transparency and market confidence.
SA was the first country in Africa to publish a GFT. According to the Treasury, this puts the country in a strong position to lead efforts to align green finance rules across countries and make it easier for investors to compare sustainable investments globally.
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