SA's largest financiers are reaffirming their commitments to combating climate change, but they are adopting pragmatic approaches as they grapple with the socioeconomic challenges of cutting emissions in a carbon-intensive country and continent.
This was one of the themes in results presentations and announcements this week from asset manager Ninety One and banking groups Investec and Standard, as investors step up the pressure on the financial sector to take action on its funding of fossil fuels.
Standard Bank and a group of activist shareholders, including Just Share, met this week to resolve tensions over the non-binding climate resolution which the banking group plans to table at its annual general meeting this week. The group, which has committed to publish a strategy and short-, medium- and long-term targets to reduce its exposure to fossil fuel assets on a timeline aligned with the Paris Goals, had earlier declined to table a resolution proposed by Just Share on the grounds it was already on track with its strategy.
On Friday, Standard and the shareholders said: "The shareholders recognise that there are significant challenges associated with the setting of meaningful and credible targets across the 20 countries on the African continent in which the group operates. They were encouraged that Standard Bank has nevertheless committed to publishing a climate strategy in its 2021 reporting to shareholders."
Along with Just Share, which has led the charge to get banks and large corporates to report on fossil-fuel exposure and commit to reducing it, the shareholders include Aeon Investment Management, Abax and Visio.
"We're deeply committed to supporting inclusive and sustainable development," said Sim Tshabalala, Standard Bank Group CEO.
Standard, which has done a series of "green transactions" for clients including a green bond, last year published its first climate-related financial disclosure report and published a policy on lending to coal-fired power projects and coal-mining operations.
All SA's big banks have started to put policies and reporting in place, in line with global standards, but the exposure reporting is more complicated because it requires banks to measure the carbon and fossil-fuel outcomes of their lending books - the emissions from the motor cars they finance for clients, for example.
And with investors increasingly scrutinising the ESG (environment, social, governance) credentials of companies in which they invest, banks and asset managers are grappling with how to balance the social, employment and development imperatives of ESG with the environmental ones.
Ratings agency Moody's in January published new ESG scores for all rated sovereigns, scoring SA at a "highly negative" four out of five, but Moody's analyst Lucie Villa said this week this was primarily because of SA's negative social-risk score, reflecting high inequality and unemployment.
Moody's had always had ESG scores as part of its ratings and the new scores would not impact ratings or the cost of credit now, but there could be ratings action related to ESG in future.
Investec CEO Fani Titi said at the release of the banking group's year-end results on Friday that the group, whose fossil-fuel policy was tabled with enthusiastic shareholder support at last year's AGM, was one of the leading investors in renewable energy and was working hard with clients to reduce reliance on coal. Its overall exposure to fossil fuels was less than 2% of loans and advances and, over time, this was likely to fall.
"Like banks here and across the world we are rapidly reducing any kind of support to coal except in very exceptional circumstances, given the nature of SA's development," said Titi, who cited rural communities that might be completely dependent on a coal-fired power station.
Hendrik du Toit, the CEO of London-listed Ninety One, which was unbundled from Investec in March last year, said that although the asset manager was not a slave to "net zero" for companies in which it invested, it requested that companies have a credible transition plan. "We don't exclude all emitters from our portfolio because they would end up very cheaply in private hands which often would care more about cash than about the environment," said Du Toit.
"The world is now moving into the implementation phase of the biggest transition we have faced since the industrial revolution and we need to start thinking practically.
"The idea that we can all quickly create a walled garden of green in the investment industry would be insane because it would ignore emerging markets where 80% of the world is living."
London- and JSE-listed Investec reported adjusted earnings per share down 14.7% for the year to March but said the second half of its financial year was up 58% on the first, as the UK and South African economies started to recover from the Covid crisis. Ninety One, which listed in the depths of last year's Covid financial markets crisis, lifted assets under management by 27% to a record £130.9bn (R2.6-trillion) as the market recovered, and increased adjusted operating profit by 9%.
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