Responsible investment organisation Just Share executive director Tracey Davies has described the Standard Bank Coal-Fired Power Finance Policy, which was released on July 31, as “disappointing”.
At a Standard Bank annual general meeting in May, 55% of shareholders voted in favour of the bank adopting a policy on disclosing lending to coal-fired power projects and coal mining operations.
This was the first time that a South African bank – or listed South African company – had to deal with a shareholder resolution on a climate-related issue.
“Now that Standard Bank has adopted a policy on disclosing lending to coal-fired power stations, shareholders can assess for themselves whether the bank’s position is sufficiently transparent and accessible, and whether it adequately addresses the severe climate and financial risks posed by the financing of new coal-fired power infrastructure,” Davies notes.
She points out that Standard Bank, in its policy, acknowledges that the signatories to the Paris Agreement on Climate Change include all 20 African countries in which the bank has a presence.
However, Davies highlights that, while the policy refers to the goals of the Paris Agreement, it does not express support for these goals, nor does it state that Standards Bank recognises and accepts the severe risks posed by climate change.
She adds that the policy also does not acknowledge the role banks have to play in facilitating the transition to a low-carbon economy to avoid the significant social and environmental impacts of failing to limit global temperature increases to less than 1.5 ˚C above pre-industrial levels.
“Interpreting the parameters set out in the policy requires a significant degree of technical expertise, which most shareholders will not possess. Standard Bank does not rule out the financing of new coal-fired power plants, but rather sets "minimum eligibility requirements" for doing so.
“The policy states that these minimum requirements are consistent with the principles and standards for coal-fired power finance contained in the latest Organisation for Economic Cooperation and Development Annex VI sector understanding on export credits for coal-fired electricity generation projects dated January 2019,” Davies noted.
She further says the policy summarises the qualifying parameters for financing, which are "linked to the level of development of the country in question".
“As a very broad summary, high-efficiency plants are generally eligible for financing. Less efficient, smaller plants are only eligible for financing in International Development Association (IDA), or less developed, countries,” states Davies, adding that South Africa is not an IDA country.
On August 5, Just Share and the Raith Foundation submitted a climate risk resolution to another financial services provider FirstRand. FirstRand's annual general meeting will be held on November 28.
Like the Standard Bank resolution, the FirstRand resolution calls for improved disclosure on FirstRand's exposure to climate-related risks, and for it to adopt and publicly disclose a policy on lending to fossil fuel-related projects.