While the world’s immediate priorities have shifted to focus on dealing with the Covid-19 pandemic, the virus is showing the importance of early action in tackling global threats, and it is therefore crucial that the world not emerge from this crisis to find itself worse off in terms of efforts to tackle climate change, nonprofit organisation (NPO) Just Share director Tracey Davies said in a statement on April 8.
The statement was issued following three developments at South African banks last week in relation to the disclosure and management of climate change risks.
Standard Bank, according to Davies, was “refusing” to table a climate-risk-related shareholder resolution co-filed by NPO Raith Foundation and Just Share ahead of its annual general meeting next month.
The updated resolution, she explained, “recognises that the bank has taken steps to acknowledge the material financial risks posed by climate change, and to improve its disclosure and management of those risks”.
However, Davies lamented that “there are still significant gaps in disclosure, and there is a lack of alignment between Standard Bank’s recognition of climate risks and its actions to mitigate these risks”.
In addition to requesting an assessment of the bank’s exposure to climate-related risks in its lending, investing and other financial intermediary activities, the resolution requested the adoption and public disclosure of a policy covering the financing of onshore and offshore oil and gas exploration and production; oil and gas pipeline projects; liquefied natural gas (LNG) terminals; and coal-to-liquids projects.
According to Davies, this is particularly relevant to Standard Bank because it is “one of the largest oil and gas lenders in sub-Saharan Africa”.
A formal decision from the bank’s board or company secretary was still outstanding, but the co-filers were advised that a shareholder resolution on the issue was “premature” owing to the updated disclosures that Standard Bank planned to make during 2020, she elaborated.
She added that the email further stated that it was Standard Bank’s view that “a shareholder resolution is a last resort measure to be used by shareholders when engagement with management on the pertinent issues has been exhausted”.
Subsequently, the co-filers have asked Standard Bank to provide them with the legal basis for this view, stating that Section 65(3) of the Companies Act was clear on shareholders’ rights to table resolutions, and that there was no provision in that Act that authorises a company to refuse to table a resolution because engagement on the issue had not been exhausted.
Meanwhile, Investec Bank has published a group fossil fuels policy, as well as a “key messaging” document relating to the policy, which covers coal-fired power generation, coal mining and oil and gas, in all of its operations.
This, Davies said, makes Investec the first South African bank to publish a fossil fuel financing policy.
The policy states that Investec supports the Paris Agreement’s aim of holding the increase in the global average temperature to well below 2 °C above pre-industrial levels and of pursuing efforts towards limiting it to 1.5 °C.
The bank stated that it “[would] apply prudent due diligence to all fossil fuel activities and require senior decision-making approval”, and said that the policy will be reviewed yearly.
While Investec’s policy had key exclusions (such as, among others, mountaintop removal coal mining, or projects that exploit high conservation areas), Just Share noted that Investec “should be commended” for voluntarily adopting and publicly disclosing a fossil fuel policy.
“It is clear that the bank has carefully considered its approach to climate risk,” Davies said.
However, despite stating that it supports the goals of the Paris Agreement, she lamented that Investec had not yet demonstrated that its provision of financial services to the energy sector was, in fact, aligned with the goals of the Paris Agreement.
The bank has, however, committed to disclosing its fossil fuel exposures in its March Annual Report, and Davies said that, if this disclosure is comprehensive, “Investec will be the first South African bank to make this information public”.
Further, in its notice of annual general meeting (AGM) released on April 1, Absa has voluntarily included a “nonbinding advisory vote on climate change risk and opportunity disclosure”.
Although this vote is nonbinding, the board said the disclosure represented the first step in a multi-year journey to integrate sustainability into Absa’s strategy and operations, while being transparent about, and accountable for, creating shared prosperity for current and future generations, in line with the Principles for Responsible Banking.
“Absa has taken the unprecedented step of voluntarily including a shareholder vote on climate risk, “for which it should be congratulated”.
Davies encouraged institutional investors to use this opportunity to indicate their commitment to managing the material financial risks posed to their clients by climate change, by voting in favour of the resolution.
However, she said it was unclear on what legal basis the bank has made this vote a “nonbinding advisory vote”.
The only nonbinding advisory shareholder votes provided for in South African law are those in terms of JSE Listings Requirement, on remuneration policies and remuneration implementation reports, Just Share noted.
As such, Just Share said that it would be seeking clarity from the JSE on whether companies are permitted to make other issues the subject of non-binding advisory shareholder votes.
Additionally, Just Share has been engaging with Nedbank in relation to its climate risk disclosures, and resolutions to be tabled at its upcoming AGM, and the organisation expects the bank to release further information soon.
FirstRand published a Thermal Coal Financing Policy in August 2019, and at the company’s AGM on November 28, 2019, 99.9% of shareholders voted in favour of a climate risk shareholder resolution that requires the bank to adopt and disclose a policy on fossil fuel lending by end October 2020.
At the AGM, the bank’s chairperson also committed to releasing a “full roadmap for FirstRand’s climate risk disclosure” this year.