Banks go greener as climate pressure mounts
Africa’s biggest lender, Standard Bank, this week announced plans to achieve net zero carbon emissions from its operations by 2040 and from its portfolio of financed emissions by 2050, joining global banks that have moved to mitigate the impact of climate change.
Lenders and institutional investors are coming under pressure to lead the charge on reducing emissions as the burning of fossil fuels threatens a climate change catastrophe.
Standard Bank said it would mobilise up to R300bn for sustainable finance by the end of 2026, including R50bn for renewable energy, and the underwriting of a further R1bn for renewable energy by the end of 2024.
The CEO of Standard Bank’s Corporate and Investment Banking, Kenny Fihla, said climate targets include ceasing financing of new oil-fired power plant construction or the expansion of existing oil-fired power plants, except where the plants provide support services as part of an integrated renewable energy power plant. In terms of thermal coal, the bank is saying no to financing the construction of new coal-fired power plants or the expansion in generating capacity of existing coal-fired power plants.
“If Eskom were to say we want to expand the capacity of an existing coal-fired power plant, we will say no. It is as simple as that. But if Eskom were to say we want to convert an existing coal-fired power plant to gas, we will consider that because that will significantly reduce carbon emissions because gas is about 50% of the carbon emissions of coal.’
Fihla said the financing of new coal mines in Southern Africa will occur only when “there is an overall positive environmental impact”.
However, Omar Elmawi, co-ordinator of the #StopEACOP coalition, said it is hard to imagine any positive environmental impact from coal mines.
“The emissions and other environmental impacts associated with opening a new coal mine to provide feedstock for an existing power plant — especially where coal-fired power is neither least-cost nor required for energy security — would clearly outweigh any claimed ‘positive environmental impact’,” he said.
Absa, SA’s fourth-largest bank by market value, said its Corporate and Investment Bank unit aims to finance R100bn worth of environmental, social and governance (ESG)-related projects by 2025, and Relationship Banking plans to finance R2.5bn or 250MW of embedded power in SA by 2025.
Absa’s interim financial director, Punki Modise, said sustainable finance offers a significant growth opportunity. “It’s not just funding, but [will] also give concessions to support corporates as they transition out of current energy to more clean sources.”
In its report “Major Banks Analysis”, which looked at the 2021 financial performance of SA’s four major banks, PwC said responding to evolving social and regulatory expectations to climate risk and ESG-related topics is a high priority.
“As financial intermediaries and risk managers, banks will play a key role in facilitating an orderly energy transition as economies, markets and companies adapt to evolving climate policy. At the same time, they will seek to service the wide-ranging ESG needs of clients and the growing investor appetite for ESG products, evidenced by several ‘green-bond’ issuances that the major banks undertook in full-year [2021],” PwC said.
Absa, Standard Bank, Nedbank and First Rand Bank all released their financial results this month, with PwC saying that the groups delivered strong results on the back of a rebound in economic activity, increased client engagement levels and gains made through the execution of their digitallycentric strategies.
Combined headline earnings were R86.8bn, an increase of 99% against fullyear 2020, said PwC.