Now that the elections are over, investor attention has turned to the economy and the steps needed to set SA on track for significant growth to tackle poverty and unemployment.
But what kind of growth is SA choosing to pursue? All signs are that most policymakers and business leaders still believe expansion based on the extraction and consumption of ever more fossil fuels will solve the country’s problems. This belief is not only wrong, but also sets SA up for ruinous social and economic consequences.
In recent months the intergovernmental panel on climate change (IPCC) and the intergovernmental science-policy platform on biodiversity and ecosystem services (Ipbes) have released reports that should have shattered global complacency about the need to change how economies work.
The IPCC warned that even if emissions are reduced as fast as possible, temperature rises are unlikely to be kept below 1.5°C, and that increases above 1.5°C will have unprecedented global impacts.
The lead author of the IPCC special report on global warming of 1.5°C recently wrote that “in scenarios with a one-in-two to two-in-three chance of keeping global warming below 1.5°C, emissions are reduced to around half their present level by 2030. That doesn’t mean we have 12 years to act: it means we have to act now, and even if we do, success is not guaranteed.”
The Ipbes global assessment report is a collaborative effort by 150 experts from 40 countries that has been approved by 132 governments. It shows that “the loss of species, ecosystems and genetic diversity is already a global and generational threat to human well-being”. Human activities “have significantly altered around three-quarters of all land and two-thirds of all oceans on the planet”.
We think it is fine for our mineral resources minister, at the opening event for Sasol’s gigantic Impumelelo Colliery, to urge the coal industry to ‘push back against the lie that its product is dirty’
These reports are the latest warnings about the consequences of failing to change behaviour now. Climate change and biodiversity loss are already manifesting themselves in Southern Africa.
The department of environmental affairs published a draft national climate adaptation strategy on May 6 that says the observed rate of warming in SA has been “more than twice the global rate of temperature increase for the western parts and the northeast” and that “climate zones across the country are already shifting, ecosystems and landscapes are being degraded, veld fires are becoming more frequent, and overused natural terrestrial and marine systems are under stress”.
The report emphasises the risks climate change poses to socioeconomic development, and highlights the opportunity presented by adaptation and mitigation for SA to “transform the economy, strengthen the social and spatial fabric and become more competitive in the global marketplace”.
With all of this going on, one would expect the government and the business sector to be devoting enormous and urgent resources to developing a society-wide plan for a transition to a low-carbon economy that creates jobs and justly redeploys coal workers. Instead, SA rejoices in Total’s “game-changer” gas discovery, despite an absence of evidence-based detail on how and when the so-called benefits will be felt; we think it is fine for our mineral resources minister, at the opening event for Sasol’s gigantic Impumelelo Colliery, to urge the coal industry to “push back against the lie that its product is ‘dirty’”; we sign oil exploration deals with South Sudan; and we approve the development and expansion of coal-mining operations in some of the country’s most biodiverse and sensitive environments.
All of these activities need financing, and that is why Standard Bank’s 2019 annual general meeting is so important.
The climate risk disclosure resolution the bank has tabled was proposed by the Raith Foundation and Theo Botha, with support from Just Share. If passed, it would require Standard Bank to publicly disclose information about the extent to which its lending, investment and financing activities are supporting fossil fuel exploration and extraction.
Global frameworks
This is the first time shareholders in SA have tabled a resolution relating to an environmental or social issue, and it is the first time in SA that institutional investors will be required to prove to their clients how serious they really are about tackling climate risk.
While Standard Bank’s board has recommended that shareholders vote against the resolution — broadly on the basis that what it asks for is too complicated — it is misleading to suggest it is too onerous to provide disclosure on climate risk. There are global frameworks that provide detailed guidance on how to disclose useful climate risk information to investors, and many banks globally are already telling shareholders how much of their financing activities support fossil fuels.
Perhaps part of the reason for the board’s recommendation against the resolution is concern about what such disclosure would show.
Standard Bank describes itself as the “leading oil and gas bank in sub-Saharan Africa”. As this newspaper recently reported, the bank “is going to be advancing a very, very substantial sum to [Anadarko’s] Mozambique LNG” project, and is also “involved in potentially funding another $30bn onshore megaproject led by ExxonMobil, the world’s largest publicly traded oil and gas company”.
Further north, Stanbic Uganda is the lead arranger for a $2.5bn loan to support the construction of the East Africa crude oil pipeline through Uganda and Tanzania that will traverse protected and biodiverse areas. These are some of the deals the bank is involved in, but the full extent of its fossil fuel financing is unclear.
Risk posed
The potential financial consequences of enormous, increasing investment in projects that will exacerbate climate change are huge: even the likes of the governor of the Bank of England are warning that “the global financial system faces an existential threat from climate change and must take urgent steps to reform”.
And so institutional investors that profess to be managing your money for the long term should be very interested in the risk posed to their portfolios by climate change. There has been encouraging feedback from some asset managers in response to the Standard Bank resolution, but it is also clear that others have given very little consideration to the issue and show no awareness of the urgency required to shift behaviour.
If you have a pension fund or other investment portfolio, you should ask the people who manage your money how they will vote on resolution 10 at Standard Bank’s AGM on May 30, and why. The answer will give you a very good sense of whether what your asset manager says about responsible investment is genuine, or just a marketing tool.
The Standard Bank resolution won’t be the last climate risk-related shareholder resolution to be tabled in SA. The bank has been rightly praised for taking this progressive step, in spite of the board’s unfortunate decision to resist the call for more investor-useful climate risk disclosure.
What remains to be seen is whether SA investors will toe the company line and vote against the resolution, or vote in favour of it and move our financial sector one step closer to recognition of the fundamental and urgent shifts that must be made to the economy if we are serious about wanting to create a prosperous future for more than a lucky few.
• Davies is executive director of Just Share, a nonprofit shareholder activism and responsible investment organisation.
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