Saturday marked the 53rd International Earth Day. While passing by relatively unnoticed in SA, the movement has become a globally significant player in mobilising the public in support of the environmental movement, active in over 190 countries around the world. This year the theme of their series of events was “Invest in our Planet”, which emphasised the need to support a green economy and especially the role of environmental, social & governance (ESG) considerations in corporate performance.
So it was fitting that the Carbon Trust and German Institute of Development & Sustainability hosted a one year review of SA’s own Green Finance Taxonomy (GFT) this Tuesday. Drawing heavily on the EU’s GFT, the local version was developed with the aim of providing clarity to investors on what precisely is, or is not, a green physical asset. This is a crucial step, not only to mitigate ever-present concerns around corporate greenwashing, but also to enable investment flows from the rapidly growing green and sustainability segments of international debt-capital markets.
In my column covering the launch of the GFT in 2022, I made reference to the Treasury’s stated ambition to follow in the EU GFT’s footsteps, of establishing a formal regulatory instrument based on the GFT over the subsequent 18-24 months. So it was disappointing to listen to the chief director for financial sector policy at the Treasury, Vukile Davidson, not only providing no examples of positive forward movement in supporting the uptake of the taxonomy, but instead opting to expand the time-horizon on this work indefinitely, while also dampening hopes that an incentivisation structure would become attached to the use of the taxonomy.
As Standard Bank sustainable finance manager Praveshni Sewmohan pointed out, the business case for the use of the taxonomy does not currently exist, and given these utterances from the Treasury we would do well not to hold our breath in anticipation of such a business case coming from the state’s quarter.
So in addition to no real progress on the GFT we have a stalled $8.5bn Just Energy Transition Investment Plan; a similarly stalled Renewable Energy Independent Power Producer Procurement Programme; an immobile electric vehicle strategy; and trade, industry and competition minister Ebrahim Patel’s most recent statements that he intends to complain to the World Trade Organisation about the unfairness of the EU’s long-planned Carbon Border Adjustment Mechanism (CBAM).
Let’s not forget that the Integrated Resource Plan 2019 still plans to maintain Eskom’s emissions at 275-million tonnes of CO2 equivalent per year between 2025 and 2037 (some 22% higher than the current footprint). Let us also admit that the recent photovoltaic tax rebates are simply there to keep the economy from completely falling apart, and have nothing to do with a decarbonisation agenda.
And then let’s ask, at what point does the international community (and development finance institutions in particular) finally just accept that the SA national government simply has no interest in a just energy transition plan beyond lip-service? Because the sooner that happens the sooner development finance institutions can start to move beyond the never-ending litany of dead-end policy proposals and start focusing on economic sector interventions that can shift the needle on greenhouse gas emissions while supporting new potential growth sectors.
Instead of sinking enormous loans into the black hole of the national fiscus, as France and Germany did when they each pledged €300m in public policy loans to SA via their respective public development banks in November 2022, why not provide credit enhancement to SA commercial banks for GFT-aligned loans?
SA has the fifth most carbon-intensive economy per unit of GDP in the world, and initiatives similar to the CBAM are under development in the US, the UK, Canada and Japan, among others. For the sake of our export competitiveness it’s time to shift focus from an unresponsive state to a desperately in-need private sector, with the perfectly functional financial architecture we already have.
• Maguire is carbon project manager at Climate Neutral Group SA. He writes in his personal capacity.
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