Shareholders of financial services provider Standard Bank will, at the bank's next annual general meeting, vote on a resolution tabled by two shareholders to require the bank to report on its exposure to climate risk in its lending, financing and investment activities.
"This is the first time that a South African company has tabled a shareholder resolution on any climate-related issue.
“We commend Standard Bank for recognising the rights of shareholders to table resolutions on critical issues like climate change,” says Just Share executive director Tracey Davies.
“This is a ground-breaking step that shows courageous leadership and which will dramatically alter the landscape of shareholder activism and responsible investment in South Africa.”
If passed with more than 50% of the voting rights exercised on the resolution, Standard Bank will be required to report to shareholders on its assessment of the greenhouse-gas emissions resulting from its financing portfolio and its exposure to climate change risk in its lending, investing and financing activities.
This includes the amount and percentage of carbon-related assets relative to total assets, and a description of any significant concentrations of credit exposure to carbon-related assets.
It will also require the bank to adopt and publicly disclose a policy on lending to coal-fired power projects and coal mining operations.
Standard Bank's board will, however, not endorse the resolution, stating that the banking industry is "extensively and intensively regulated and supervised, both nationally and internationally. There are already significant requirements around reporting lending exposures to the regulatory authorities".
It further argues that its clients are already required to report their greenhouse-gas emissions in terms of the National Greenhouse Gas Emission Reporting Regulation pursuant to the National Environmental Management Act. "Furthermore, in South Africa, the forthcoming Carbon Tax is an important policy measure to promote a just transition to a lower carbon economy in line with the government of South Africa’s ratification of the Paris Agreement".
It also points out that there is uncertainty as to how the bank would "practically comply" with the proposed resolutions.
The board says it does not believe the proposed resolution will provide shareholders with any more meaningful understanding of the bank's climate change risk exposure and risk management.
Just Share says the board’s recommendation to vote against the resolution is counter to the recommendations of the international Task Force on Climate-Related Financial Disclosures (TCFD), which an increasing number of banks around the world are using to frame their climate-risk disclosures.
When the TCFD was established in December 2015, a key motive was to “enable stakeholders to understand better the concentrations of carbon-related assets in the financial sector and the financial system’s exposures to climate-related risks”.
Just Share says it makes sense for Standard Bank to carry out such an assessment, given its own acknowledgment that “climate change, coupled with the related issue of water scarcity, has emerged as a leading risk for business and society”.