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Standard Bank CEO says their climate strategy falls within Paris Agreement

Standard Bank CEO says their climate strategy falls within Paris Agreement
Activists demonstrate outside Standard Bank head office in Rosebank while private security watch, following the 2024 AGM. 10 June 2024. (Photo: Julia Evans)

In 2023, Standard Bank Group spent R133.28-billion in their energy financing portfolio — 26% of which was for renewables and 74% for fossil fuels. Yet the Group’s CEO Sim Tshabalala is confident their Climate Policy will meet international climate targets.

At Standard Bank’s 55th annual general meeting (AGM) on Monday morning, Sim Tshabalala, CEO of the Standard Bank Group said the Group’s climate policy, “is based on common but differentiated responsibilities for countries at different levels of development, as codified in the Paris agreement”.

This was following a question by Mehluli Mncube, principal consultant from ESG Insight SA, during the Group’s AGM — held virtually this year — where he questioned how the board planned to balance its sustainability commitments with its financial interests, given the criticism of Standard Bank’s climate policy.

Tshabala said that in line with the Paris Agreement, Standard Bank’s policy is based on keeping average global temperature increases within 1.5 degrees Celsius since pre-industrial levels.

He added that when considering projects at country level, they are further guided by South Africa’s Nationally Determined Contributions in terms of the Paris Agreement.

“And so we would submit that our policy and our strategy falls within the four corners of the Paris Agreement, and falls within the four corners of each of the relevant countries’ strategies,” said Tshabalala. “And therefore the board is reasonable and rational in accepting such strategies.”

Tshabalala was referring to the Nationally Determined Contributions (NDCs) — which require each country party to the Paris Agreement (which was signed at the UN climate summit in Paris in 2015) to submit their NDCs every five years as a mechanism to track and reduce national emissions.

South Africa’s NDCs, last submitted in 2021, commits us to a 31% reduction and a fixed target of keeping annual greenhouse gas emissions in a range of 350 to 420 megatonnes of CO₂ equivalent by 2030.

The principle, adopted at a climate summit in 1992, ‘Common but Differentiated Responsibilities and Respective Capabilities’, is the idea that countries are not all equally responsible for climate change, and do not have equal capabilities to deal with it.

liberty holdings standard bank

Standard Bank Group CEO Sim Tshabalala. (Photo: Gallo Images / Business Day / Freddy Mavunda)

But, as Mncube from ESG Insights SA, which is a representative of various pension funds invested in Standard Bank, noted, this principle, “primarily applies to nation-states, not financial institutions with significant capital reserves and influence over global financial flows.

“Standard Bank, with its substantial balance sheet, has the capacity to lead rather than follow in this arena,” he said.

In 2023, Standard bank spent R133.28-billion in energy financing —  renewables made up almost 26% (R34.6-billion), with fossil fuel financing constituting the remaining 74%.

Emma Schuster, senior climate risk analyst at non-profit shareholder activist organisation Just Share, told Daily Maverick,“The argument about aligning the bank’s climate strategy with countries’ NDCs is a distraction.

“How can this be measured by investment portfolio or by banking activity? By making this statement, Standard Bank is vaguely aligning itself with the level of ambition of the country in which it is operating, rather than with the requirements of climate science.

“It is an excuse not to be ambitious, especially in countries whose NDCs are below the required level of ambition of the Paris Agreement, which most countries are.”

Can’t have both

Just Share analysed Standard Bank Group’s latest climate-related financial disclosures for 2023 (published March this year) noting that the Group’s exposure to fossil fuels increased by almost 12% from 2022 to 2023 (having increased by 22% from 2021 to 2022).

Their total exposure to fossil fuel power generation, coal mining, and oil and gas (integrated, trading and retail, “services”, upstream, and midstream) in 2023 was R133.28-billion, compared to R119.4-billion for the previous year.

Schuster noted that the bank committing to the Paris 1.5℃ goal and to our country’s NDCs is not possible.

“But both of these things cannot be true,” said Schuster, noting that the UN’s Emissions Gap Report analysed the difference between country NDCs and what is required to meet the Paris goals, and according to its latest analysis at the end of 2023, “the world is heading for a temperature rise far above the Paris Agreement goals unless countries deliver more than they have promised”.

Read more in Daily Maverick: New UN report (once again) warns that the world is well behind emission targets

Schuster noted that despite the Bank’s stated commitment to climate action — and explicitly to the goal of limiting global warming to 1.5 degrees — “there has been little-to-no progress when it comes to aligning its financing and other activities with these commitments”.

Just Share published a report last November which found that Standard Bank scored the lowest of SA’s big five banks when it came to the percentage share of financing for renewables within total energy financing.

All big five banks have excluded financing for new coal-fired power generation, but Standard Bank, along with FirstRand and Absa, has no plans to exclude financing for coal mining.

Standard Bank spokesperson Ross Linstrom previously told Daily Maverick that they had targets to reduce exposure to thermal coal, which included coal mining, and would only finance new coal mines in cases where there was a positive environmental impact (for example, a mine located next to a power station generates lower emissions than a mine located further away, given the emissions generated in transporting the coal).

Standard Bank

Standard Bank head office in Rosebank, Johannesburg. (Photo: Julia Evans)

“South Africa remains heavily dependent on coal-fired power generation [and] it would be irresponsible to cease funding for coal when our economy remains highly dependent on coal power. We are working with our clients, government and other partners to support a just transition,” said Linstrom.

Linsrom emphasises that investment in renewable energy infrastructure is a priority for the group, having committed to more than R50-billion of financing for new renewable energy in SA over the past 12 years.

“We recognise and acknowledge Standard Bank’s role in Just Transition, not only in financing renewable energy projects but also in supporting initiatives that create sustainable employment and economic opportunities for those affected by the transition away from fossil fuels,” Mncube told Daily Maverick.

However, he noted the Group’s fossil fuel-heavy portfolio raises concerns.

“It suggests that the bank’s current strategy might be insufficiently ambitious given the urgent need for a global energy transition,” said Mncube.

“Climate science indicates that to avoid the most catastrophic impacts of climate change, the majority of known fossil fuel reserves must remain unexploited. Thus, the current financing proportions might appear misaligned with the goal of limiting global warming to 1.5℃.

82% disclosure

At Standard Bank’s 2022 AGM, a non-binding advisory resolution (co-filed by Just Share and Aeon Investment Management) was approved by 99% of shareholders. It requires the bank to publish a strategy and targets for reducing its financed emissions from oil and gas in alignment with the Paris Agreement by 2025.

The resolution also required the Bank to disclose, by 31 March 2024, its “baseline financed greenhouse gas emissions from its exposure to oil and gas” — but despite the deadline having passed, Standard Bank has only reported on its financed emissions for 82% of its total upstream oil and gas on balance sheet loans and advances, which constitutes only 19% of its oil and gas portfolio.

Standard Bank protest

Climate activism organisation Extinction Rebellion demonstrating and creating artwork outside Standard Bank head office in Rosebank following the 2024 AGM. 10 June 2024. (Photo: Julia Evans)

Virtual AGM

Just Share noted that the decision to hold online-only AGMs by some JSE-listed companies, including Standard Bank, after they held hybrid AGMs last year, “appears to be a deliberate strategy to shut down contestation on crucial issues, including the potential for protests”.

Read about how activists were thrown out of last year’s AGM: Kumi Naidoo forcibly removed from Standard Bank HQ after protest over crude oil pipeline project

“Such protests at AGMs are effectively managed by companies around the world and preventing them, by restricting participation to online-only engagement, is a poor approach to corporate governance and stakeholder engagement,” said Just Share, which uses responsible investment and sustainable finance to drive action to combat climate change and reduce inequality.

Activists demonstrate outside Standard Bank head office in Rosebank while private security watch, following the 2024 AGM. 10 June 2024. (Photo: Julia Evans)

Climate activist organisation, Extinction Rebellion, which has held several protests outside of Standard Bank offices, as well as a three-day sit-in and a coordinated disruption at last year’s AGM, held a gathering outside the Standard Bank head office in Rosebank on Monday afternoon, following this year’s AGM.

The activists said that the aim of this action is not disruption, but, “fostering a sense of community and pride in what we have achieved in the past year since we disrupted their previous AGM”.

Activists demonstrate outside Standard Bank head office in Rosebank. 10 June 2024. (Photo: Julia Evans)

“Our ongoing presence since our September [2023] occupation at their head offices in Rosebank has resulted in them putting up a fence around their block and closely monitoring and restricting access to their building; this same caution extends to their AGM,” said the activist organisation.

“The fact that they’re hosting it online, despite shareholders’ protests, is a testament to the impact we have had.” DM

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Comments - Please in order to comment.

  • Malcolm McManus says:

    I have no problem with genuine climate activists who believe in their cause and who campaign and engage civilly. I am less fond of the paid Kentucky and “T” Shirt brigade who know nothing, and run amok, destroy property, and violate the rights of our citizens under the pretense of activism.

  • Agf Agf says:

    In my opinion banks and big corporates spend too much time virtue signaling on subjects like climate change. I would prefer them to concentrate their efforts on better servicing their customers.

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