FirstRand shareholders to vote on climate risk resolutions next month

9th October 2019 By: Simone Liedtke - Writer

Shareholders of financial services provider FirstRand will, next month, vote on whether the company must report on its assessment of its exposure to climate-related risks, and to adopt and publicly disclose a policy on fossil fuel lending.

This will require more than 50% of shareholders to vote in favour of Resolutions 5 and 6 during the company’s annual general meeting (AGM). The resolutions were proposed by the Raith Foundation and nonprofit shareholder activism organisation Just Share.

FirstRand is the second South African company to table climate risk-related shareholder resolutions at its AGM, the first being Standard Bank in April.

According to Just Share executive director Tracey Davies, banks’ financing choices have a major role to play in promoting carbon reduction, as bank lending and investments make up a significant source of capital for carbon-intensive industries.

“Every rand invested by South African banks in fossil fuel-related assets increases climate risk, and makes it harder for the country to achieve a just transition to a low-carbon economy,” she elaborated, pointing out that it also exposes those banks to financial, reputational and litigation risks.

As a result, she noted that banks that lend to the energy sector are under increasing scrutiny from shareholders and civil society.

The FirstRand board has not endorsed Resolution 5, but has endorsed Resolution 6.

Resolution 5, if passed, would require the bank to prepare a consolidated report to shareholders, by no later than the end of October 2020, on its assessment of its exposure to climate-related risks in its lending, investing and financing activities.

These include the amount and percentage of fossil fuel-related assets relative to total assets, as well as a description of any significant concentrations of credit exposure to fossil fuel-related assets and the amount of lending and other financing connected with climate-related opportunities.

According to a statement on Wednesday, FirstRand's board "fully agrees with the need for a consolidated report on the group's assessment of its exposure to climate-related risks", but stated that "the requisite deadline of October 2020 presents an unattainable time frame for the group".

In relation to Resolution 6, which would require FirstRand to adopt "a policy on lending to fossil fuel-related projects, including coal-fired power plants, coal mining operations and oil and gas exploration and production projects", the board confirmed that it endorsed the resolution, stating that the group had already adopted a policy on thermal coal financing, and was "in the process of developing a policy for its oil and gas financing”.

This policy will be publicly available in the next 12 months.

In commending FirstRand for its actions, Davies noted that “FirstRand was an early leader in recognising the risks that climate change poses to the financial sector, but its progress in tackling the risks appeared to have stalled”, which is why the resolutions were proposed.

However, the board's non-endorsement of Resolution 5 was concerning, she said, especially in circumstances where many banks globally are already making this information publicly available.

The proposed timeframe is realistic, according to Davies, who cited the need to transition to a low-carbon economy as “extremely urgent”. She further lamented that the disclosure requested by these resolutions is essential information for shareholders given the material financial risk posed by climate change.

“We strongly encourage shareholders to vote in favour of both resolutions,” she concluded.

FirstRand’s AGM will be held on November 28, in Sandton, Johannesburg.