A new global research report revealed that South African institutional investors hold a whopping $17.1-billion (R305-billion) in shares and bonds of global coal, oil and gas companies worldwide — much of which is invested in Sasol and Eskom.

South Africa’s biggest institutional investor in fossil fuel companies is the Government Employees Pension Fund (GEPF) — which has invested roughly $7.4-billion invested in local coal, oil and gas companies, most of which ($5.5-billion) is in Eskom.

The report, published by Urgewald, Reclaim Finance, and 23 other NGO partners from around the world, found that investors globally invested over $3-trillion into coal, oil and gas companies as of January 2023. And with SA investors holding $17.1-billion in global fossil fuel companies, the report ranked South Africa 19 out of 74 countries globally for the amount of money invested in fossil fuel companies.

South Africa’s second-biggest fossil fuel investor is the Public Investment Corporation (PIC), GEPF’s asset manager, with roughly $3.4-billion invested in shares locally — most of which ($2.5-billion) is in Sasol.

This, despite the PIC being a signatory to the United Nations Global Compact and the Principles for Responsible Investment.

“The PIC is really important as well — the GEPF is huge and is putting its money in places which may not be in the best interest of government employees,” said Paine, “but the PIC has the Unemployment Investment Fund … it needs to not only invest in the best interest of its clients, but it is a public institution that needs to be investing in projects that are building up the people of South Africa.”

Greenwashing in the private sector

In terms of the private sector, Investec doesn’t follow too far behind, as the 5th biggest institutional investor in SA, investing over $629-million into oil and gas projects globally, the majority of shares ($563-million) with Shell PLC.

Locally, Investec has $0.5-million in Sasol and $0.1-million in Exxaro Resources.

Paine said it’s also important for us to look at where the private sector is investing, especially with climate targets driving green investments.

For example, Exxaro Resources, a South African coal mining company that has racked up $2.3-billion investments, says on its website that its vision is, “to produce resources that Power a Clean World. Powering Better Lives in Africa and Beyond is our purpose”.

“But at the same time, they say they are among the top five coal producers in South Africa,” pointed out Paine, “and they are included in the JSE Responsible Investment Top 30 Index — so they appear to be greenwashing.”

Another big bank in the fossil fuel game is Standard Bank, with $153-million invested in bonds and shares of eight fossil fuel companies globally, with the biggest sum going to Eskom ($41-million, or a cool R731-million).

The report obtained financial data from the commercial databases Refinitiv and Emaxx, and for a selection of pension funds, data was collected from the pension funds’ disclosure.

Which SA fossil fuel companies have the biggest investments?

As of January 2023, the fossil fuel companies with the biggest investment in them in South Africa are Sasol with $8.8-billion invested in it, followed by Eskom at $8-billion and Exxaro Resources Ltd, with just under $2.3 billion invested into it. 

These investments come from institutional investors around the world, like Blackrock and M&G, but Sasol’s largest investor by a landslide is South African institutional investor PIC, who old $2.5-billion in shares, and Eskom’s biggest institutional investor by far is also local, being the GEPF with $5.6-billion in bonds.

Environmental cost

The 2015 Paris Agreement saw countries committing to taking steps towards ensuring that the global average temperature does not surpass 1.5°C — a “tipping point” after which irreversible and catastrophic impacts on people and the planet will follow.

The latest Intergovernmental Panel on Climate Change (IPCC) report, released in March this year, reminded us that today the global average temperature has reached 1.1°C as a result of cumulative greenhouse gas (GHG) emissions from 1850, and heightened between 2011 and 2020 — mainly attributable to the fossil fuel industry.

Read more in Daily Maverick: The need for action on the climate crisis is more urgent than previously assessed – IPCC

But stay beneath the 1.5°C limit, we would have to halve our GHG emissions by 2030, and certainly not build any more coal, oil and gas technologies.

According to the 2018 IPCC Report, coal-fired power generation needs to be reduced by 78% by 2030 in order to keep the 1.5°C goal within reach. The recent IEA Report “Net Zero by 2050” confirmed that no new coal power plants or coal mines should be developed.

Climate activists are sometimes depicted as dangerous radicals.

But the truly dangerous radicals are the countries that are increasing the production of fossil fuels.

Investing in new fossil fuels infrastructure is moral and economic madness.

— António Guterres (@antonioguterres) April 5, 2022

In 2021, oil and gas companies produced 56 billion barrels of oil equivalent. If production remains at this level, it would exhaust our entire carbon budget for 1.5°C within the next 15 years. And yet, billions of rands from companies in this country, are invested in keeping the fossil fuel industry alive.

“It is scientifically well established that southern Africa is warming at twice the global average,” Makoma Lekalakala, Director at Earthlife Africa said. 

“South Africa is already a water-scarce country and the Intergovernmental Panel on Climate Change is clear that climate change-induced drought is one of our major risks. 

“We are facing an unprecedented human rights and humanitarian crisis and investors continue to do business as usual. This must change and investors could be at the forefront of this change, instead of standing still while the climate crisis unfolds.”

‘Investing in an unstable and dangerous future’

“As managers of the pensions of teachers, nurses, and hundreds of thousands of other ordinary South Africans, the GEPF and the PIC should be using their immense power to drive climate action, not risking the future prosperity of the people who own the assets they are investing,” said Tracey Davies, Director of Just Share.

“Not only do these investments contribute to the climate crisis and therefore to an unstable and dangerous future, but they are also at risk of becoming stranded assets, creating serious financial losses for pension members. The PIC and GEPF should either publicly divest from these holdings, or they should act as responsible investors to drive a rapid transition away from fossil fuels.”  

A 2022 report from the International Institute for Sustainable Development (ISSD) on gas-fired power in South Africa argues that, while in the past fossil gas was viewed as a necessary transitionary fuel to low-carbon energy or as part of an energy mix, the decreasing costs of renewable energy and battery storage now refute this logic.

Read more in Daily Maverick: New scramble for Africa: Closure of Russian gas pipeline brings debate over African fossil fuel use into sharp focus

The report found that gas lock-ins — due to stranded assets — “can result in pressure from workers, investors and companies on the government to introduce subsidies to protect the incumbent industry. 

“These subsidies divert funds from other projects with better socio-economic metrics and cause an industry to persist even when it is economically unviable. This is already happening with Eskom, which is locked into an uneconomic and unsustainable coal fleet and still receives bailouts.”

In the 2023 study, Stranded assets and early closures in global coal mining under 1.5∘C found that about 63% of new and existing coal projects capacity would have to remain unused until 2050 due to a rapid reduction in coal demand. Additionally, the stranded asset value from currently operating coal mines alone could represent $140-billion.

“One wonders if a young teacher at a public school in South Africa is aware of the immense risk involved in these investments in fossil fuel companies?” says Bobby Peek, Executive Director at Groundwork, one of the co-publishers of the report, adding that the GEPF and the PIC are risking the pensions of ordinary government employees by continuing to invest in fossil fuel companies.

“These fossil fuel companies face the risk of stranded fossil fuel assets, while contributing to the climate crisis and undermining global efforts to avert climate disaster,” says Peek.

According to Carbon Tracker, “fossil fuel-reliant countries could see a drop of 51% in government oil and gas revenues in a shift to a low-carbon world over the next two decades”, meaning that with the world trying to meet their carbon targets, the market is changing. 

They predict that countries reliant on fossil fuels could have government revenues that are $9-trillion lower over the next 20 years under a low-carbon scenario.

Tabitha Paine, attorney at the Corporate Accountability and Transparency Programme, Centre For Environmental Rights and one of the co-publishers of this investment report, told Daily Maverick, “It is a risky investment if you look at where the world is going,” economically as well as environmentally.

Paine pointed out that despite there being no room left in our carbon budget to increase gas exploration, the data is showing that investment is going toward developing new oil and gas projects, which is something we need to be cognisant of when it comes to which institutional investors we are with or how we engage with institutional investors so that the planet and our pensions are protected.

“It’s the same thing with the GEPF, the government employees should be asking — where is my money going?” DM/OBP