Standard Bank is helping Africa chart a green energy path
The bank is committed to the shift to a low-carbon economy
The Covid-19 crisis is presenting governments and businesses with an opportunity to accelerate the shift to a low-carbon economy that allows current and future generations to prosper.
As Africa’s largest bank by assets, Standard Bank Group fully recognises the role it has to play in enabling this transition, and we have been preparing ourselves accordingly.
In recent years investors have become increasingly concerned about climate change, with investment mandates giving more weight to environmental, social and corporate governance issues. This important development means corporates have a strong mandate to ensure they create value not just for shareholders, but for other stakeholders too.
In this regard, Standard Bank recognises that climate change is a material risk to our ability to generate value for all our stakeholders over time, and to our purpose of uplifting and safeguarding African societies, environments and economies.
In 2019, the group became the first SA company to table a climate-related resolution proposed by shareholder activists for vote at its annual general meeting. Shareholders voted in favour of a requirement that the group develop a policy on lending to coal-fired power projects and to coal-mining operations. Those policies, which were published by the bank in due course, include stringent parameters around lending to the coal industry.
This year Standard Bank received a new set of proposed resolutions aimed at requiring the bank to adopt a policy on lending to carbon-intensive, fossil fuels activities, and to commit to a hard deadline for enhanced disclosures related to climate risk.
The board declined the request to table these resolutions, since these were matters on which shareholders do not have a legal right to vote in terms of the Companies Act, and because the resolutions would in effect usurp the role and function of the board. Furthermore, the resolutions ignored the substantial progress Standard Bank has already made in these areas.
The group, which supports the Paris Agreement and is a founding signatory of the UN Principles for Responsible Banking, is already doing extensive work to enhance its assessment of climate risk and to make appropriate disclosures in line with the principles of the global task force on climate-related financial disclosures (TCFD).
Given the lack of existing data needed to assess, price and manage climate-related risks, this process requires collaborations with other stakeholders. To that effect, we are participating in the UN Environment Programme Finance Initiative’s TCFD pilot programme, and we are working with the Banking Association SA and the National Business Initiative to enhance our data on climate risk. We are committed to fully understanding and accurately reporting on our exposure to carbon-intensive assets, and aim to publish our first TCFD-aligned disclosure in the third quarter of 2020.
The group is also well into the process of developing a broader fossil fuels financing policy, which we aim to adopt and publish by the end of the year. To complement this work our new sustainable finance unit is up and running, having recently raised $200m in a green-bond issuance — the proceeds of which will be used to fund renewable energy projects, water efficiency projects and green building projects, among other things.
Through these and numerous other initiatives we are proactively taking steps to ensure that we maximise the positive social, economic and environmental impacts of our lending activities, while reducing any indirect negative consequences. We are also of the view that the transition to a lower-carbon economy has to be just and fair to developing countries.
The Paris Agreement recognises that the transition will take longer in developing countries, especially those in Africa, where access to reliable and affordable energy continues to constrain socio-economic development. But thanks in part to rapid declines in renewable energy prices and our adherence to global best practices, the vast majority of our total underwriting of energy transactions in recent reporting periods has been for green energy.
We are also funding natural gas projects in Mozambique, given the importance of natural gas in the transition to clean energy and the hugely transformative impact that these projects will have on the country and its people.
Unfortunately, after Standard Bank declined to table the latest climate-related resolutions put forward by activist shareholders there have been calls to vote against the re-election of five of our non-executive directors due to perceived conflicts of interest. These directors are valuable members of the group board, and all conflicts of interest are governed by the Companies Act. These directors continue to fulfil their fiduciary duties in an exemplary manner.
Standard Bank fully recognises the need for, and the work done by, activist shareholders, who play an important role in holding corporates to account and constantly elevating standards of governance. But the board is of the view that the resolutions proposed ahead of its 2020 annual meeting undermine the work it is already doing in these areas, and undermine the role of its directors.
We continue to engage with these and other stakeholders as part of our efforts to fulfil our multi-stakeholder purpose. We are indeed at an important juncture in the shift to a more sustainable economic development model, and Standard Bank is fully committed to playing its part.
• Dobson is head of group policy and sustainability in group risk at Standard Bank
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