Water pollution. Picture: SUPPLIED/WITS UNIVERSITY
Water pollution. Picture: SUPPLIED/WITS UNIVERSITY

While environmental, social and governance (ESG) principles have come to dominate the global investment arena in recent years, there still seems to be a widespread misperception that these are three separate imperatives. Yet it is not possible to separate the effect that humankind’s actions are having on the environment from those felt by society, nor is it possible to practice good governance in isolation from the other two vital considerations.

Nowhere is the link between environment, society and good governance more evident than in the realm of climate justice. It is now widely accepted that an effective response to climate change requires understanding, and acknowledgment, of the fact that the systemic risks created by climate change are some of the most pressing threats that humankind has ever had to face. And a systemic crisis requires system-orientated solutions.

This understanding of climate change as a systemic challenge has gained traction in recent years, and that broader view is finally prompting a wholesale shift from treating climate change as a purely environmental crisis, to finding collaborative, systemic solutions and alternatives that address environmental challenges, but are also cognisant of the vital need to align these alternatives to social and economic systems that deliver common good. As Sir David Attenborough so aptly put it at COP26: “If working apart we are a force powerful to destabilise our planet, surely working together we are powerful enough to save it.”

The successful achievement of a “just transition”, especially for the climate-vulnerable nations of the Global South, requires a concerted focus, clearly defined strategic effort and, of course, access to climate finance. However, it also demands something that until now has been far less clearly defined, namely committed and bold leadership informed by a clear purpose and guided by a bigger picture view of the climate change challenge.

Put another way, for any climate change efforts and investments to truly be effective they must be viewed and undertaken through a comprehensive and integrated sustainable development lens. A bold purpose is what holds that lens securely in place and enables delivery on all ambitious climate change-related commitments.

Unfortunately, shifting from topical thinking and localised action to a systemic, purpose-led approach is not typically straightforward for most organisations. At Nedbank we have first-hand experience of the challenges involved in making this transition, despite being well positioned to do so.

Nedbank is often anecdotally known as SA’s “green bank”, thanks to our established reputation for demonstrating a strong, integrated environmental and social sustainability commitment over the years. This integrated sustainability philosophy, which underpins fulfilment of our purpose, has informed our business strategies and our societal upliftment and development commitments for a number of decades.

From a climate change commitment perspective, this sustainability commitment saw Nedbank achieving a number of firsts, including our achievement of carbon neutrality in 2010, our involvement in the launch of SA’s first Green Index in 2011, and our recent energy policy commitments.

Despite these solid sustainability foundations, the full integration of climate resilience into our core corporate governance framework has not always been smooth sailing. In reality we found the transformation to be something of a challenging leap, not because we lacked the commitment to become effective climate mitigation and adaptation leaders, but because of the sheer number and complexity of issues that need to be considered, managed and appropriately leveraged to give effect to a meaningful systems-based approach.

For us, significant momentum in this shift was achieved when we recognised the value and importance of being a fully purpose-led organisation. Our stated purpose is to use our financial expertise to do good for individuals, families, businesses, and society. The good in that purpose represents the group’s understanding of, and commitment to, the need for systemic solutions to the needs and challenges facing society, many of the most pressing of which are being created, or worsened, by climate change.

In response, our purpose aligns our thinking and actions to the UN sustainable development goals (SDGs), which are essentially a catalogue of systemic global challenges and the resulting unmet needs of much of the world. And for us, that catalogue of needs, including the imperative for a climate resilient future, is the road map to a truly just transition.

In following this road map and being guided by our purpose, we are steadily continuing our own transition from localised and isolated climate change action to being facilitators and enablers of the systemic solutions and alternatives required to achieve a socially just, climate resilient new economy for SA.

While banks are not high-emission businesses, they have a central role to play in driving sustainable socioeconomic development by directing capital where it is needed most. That makes it imperative that these financial institutions lead the way in terms of embedding systemic thinking into their operating and funding models.

This systemic approach is evidenced by our focus on the provision of climate finance solutions that have the potential to deliver far-reaching socioeconomic benefits. In 2019 Nedbank was the first commercial SA bank to launch a green bond on the JSE, the proceeds of which are being applied in support of various renewable energy projects, particularly in the solar PV space.

Then, in 2020 we partnered with the International Finance Corporation in raising $200m in climate-linked loan financing that is being directed towards a combination of solar, wind and biomass projects. And in the same year, we launched a R2bn SDG-linked tier 2 capital instrument (the first of its kind in SA), the proceeds of which will be used to fund solar and wind renewable energy projects.

Nedbank has committed R36.2bn towards the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). Our recently formulated energy policy sets investment targets of R50bn to the REIPPPP and a further R2bn in support of embedded generation in the coming year — both of which are not only essential for the country’s transition from fossil-fuel based energy but are also valuable contributors to a just transition through skills transfer, employment creation and community upliftment.

A more recent milestone on this purpose-led journey was our establishment, in March this year, of a dedicated Nedbank board subcommittee, the Group Climate Resilience Committee, which is mandated to guide the board, and the group, in effectively transforming, optimising, and managing systemic climate-related risks and opportunities across its operating, lending, and investing activities. “Rather than serving as a separate entity, the committee has been structured in a way that it can effectively entrench climate change mitigation and adaptation as a core governance responsibility within Nedbank Group” says Brian Dames, the inaugural chairperson of the committee.

The historic international partnership to support a just transition announced at COP26 presents Nedbank with further opportunities to assist SA to structure sustainable financial and technical support within the broader transition to a low emission economy, and in setting up co-ordination platforms with development finance institutions and key stakeholders to further develop the conceptual approach and leverage technical and financial support towards their most impactful uses.

Ultimately, irrespective of the progress the world makes in mitigating climate change through focused, and necessary, efforts like fossil fuel reduction and limiting industrial emissions, isolated mitigation efforts will not address the immediate need for people and ecosystems to adapt to the long-term effects of climate change to achieve vital resilience. Success in the achievement of such resilient, socially just adaptation is only achievable through a systemic approach built on appropriate legal, political, economic, social, and environmental structures. And all of these are only possible through purpose-led leadership.

• Makwana is acting chair and lead independent director of the Nedbank Group board.

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