Nedbank leads the charge against fossil fuels

An ambitious new energy policy will see Nedbank lead the way in an orderly exit from fossil fuels as the lender seeks to eliminate direct exposure to coal, oil and gas by 2045.

In adopting the new energy policy, the bank has committed to not provide funding for new thermal coal mines, regardless of jurisdiction, from January 1 2025. It will not directly finance new oil and gas exploration projects with immediate effect. In addition, it said it would not advance new finance for oil production from January 1 2035.

While Nedbank will continue to finance natural gas production where it plays an essential role in decarbonising the energy system, it aims to have zero exposure to all activities related to fossil fuels by 2045, except when gas is required to back up renewable power.

In addition to the R50bn it has committed to the government’s green power procurement programme, Nedbank said it would increase its financing of selfgeneration, or embedded

generation, of renewables with an aim to achieve R2bn in financing by 2022.

The bank’s progressive energy policy comes as financiers worldwide have come under increasing pressure from activists and investors to withdraw funding support for fossil fuels.

Nedbank CFO Mike Davis said that while the bank’s bold energy policy was partly informed by stakeholder inputs and pressure, it was also aligned with Nedbank’s ethos.

Nedbank had already limited exposure to fossil fuels accounting for R16.3bn — just 2% of its R800bn loan book. Loans to the oil sector are the highest among the fossil fuel exposure, amounting to R10.9bn. Gas accounts for R1.8bn, and thermal coal R3.6bn.

In avoiding the adoption of the standard “net zero by 2050” target and instead aiming for zero fossil fuel exposure by 2045, Nedbank also appears to set a global leadership standard among large commercial banks, says Robyn Hugo, director of climate change engagement at shareholder activist group Just Share.

CREDENTIALS

“Net zero” refers to achieving an overall balance between emissions produced and emissions taken out of the atmosphere.

Davis noted that Nedbank is a large funder of green energy and has been a more successful participant than other banks in the government’s renewable energy procurement programme.

It has strong credentials to lead the change required to tackle climate change.

“Banks play a central role in driving sustainable socioeconomic development for the benefit of all stakeholders, by directing capital where it is needed most.

“Nedbank’s financing choices can serve to accelerate the transition to a net-zero economy and contribute towards building climate resilience through the financing of adaptation measures,” he said.

Nedbank is the only SA bank to have excluded the prospect of funding coal-fired power, as stipulated in its 2019 policy on the funding of thermal coalrelated activities.

“Other banks have been far less ambitious, preferring in their policies to keep the door open to funding coal-fired electricity in certain circumstances, depending on the technology, the plant size, or the jurisdiction,” said Hugo.

Davis said Nedbank recognised that meeting the objective of the Paris Agreement — an international treaty on climate change — will require full decarbonisation of the global energy system by mid-century and that an orderly exit from fossil fuel financing is necessary well before 2050, given the long lifetimes of the physical assets.

Just Share said it hoped Nedbank’s approach would provide “much-needed impetus” for other financial institutions to set science-based decarbonisation targets and fossil fuel financing exclusions.