HYWEL GEORGE: Navigating a sensible route to net zero while managing a just transition for Africa

The world’s multiyear journey to net-zero and Africa’s desire for a just transition from fossil fuels to renewable energy share a common theme: neither will be easy.

Globally, stakeholders face the daunting task of assessing whether the net-zero road map agreed in Paris almost a decade ago will deliver on its intent by 2030. And in Africa, decisionmakers must navigate the transition to cleaner forms of energy without causing socioeconomic harm.

There are two undisputed truths that will influence proceedings at the 29th UN Climate Change Conference (COP29) set for November 11-22 2024 in Baku, Azerbaijan.

The first is that the earth is unequivocally warming up, and rapidly. Global temperatures have risen by about 1°C over the past 50 years — and the Arctic, Antarctic and Greenland ice sheets are in decline. To make matters worse, the latest assessments suggest the world could be much warmer than expected at the 2050 and 2100 markers.

The second truth is that the global CO₂ emissions targets agreed to under the 2015 Paris Accord — signatories to that deal undertook to halve emissions by 2030 — are not on track to be met. In fact, the latest measurements, reported at the halfway point of the 15-year cycle, show that total global CO₂ emissions have actually risen rather than reduced; global CO₂ emissions are up from 35-billion tonnes in 2015, to 37-billion tonnes in 2022, per the latest available data.

The data shows regional successes and failures, with the US reducing its emissions by 6% over the seven years; the EU by 9%; and the UK by 25%. For 2022, the US and EU emitted about 5-billion tonnes of CO₂ each, and the UK just 300-million tonnes.

On the flipside, Asia, excluding China, produced 8% more CO₂ emissions in 2022 than in 2015, while China ended the period 16% higher. Combined, Asia and China produced 18.5-billion tonnes of CO₂. The widespread media comment on Africa’s lesser contribution to climate change and global warming is reflected in the continent’s 1.5-billion tonnes of CO₂ emissions in 2022, 7% higher than in 2015.

Closer to home, SA is the main CO₂ emitter in Africa, producing about 400-million tonnes annually, with electricity producer Eskom accounting for half this number. SA’s 2030 target is to reduce CO₂ emissions by 32%-42%, with a 9% reduction achieved so far in 2015-22. The bulk of these cuts have been achieved within the framework of the ambitious Integrated Resource Plan (IRP), which targets 20GW of electricity generation from renewables by 2030. SA has made good progress here, investing more than $14bn and installing about 6GW in capacity over the past 14 years.

Old Mutual is a signatory to the voluntary UN-convened Net-Zero Asset Owner Alliance and has a strong track record in enabling investments in the renewables space, having some level of exposure — on behalf of clients or alongside co-investors — in about half of the aforementioned 6GW of new capacity across SA. There are big plans afoot for COP29 — already being branded “the finance COP”, where we expect the government to introduce a new, expanded IRP among other initiatives.

SA will lead the charge in Africa’s energy transition, sharing the myriad lessons learnt from its successful renewable energy programme. The government is likely to play a key role in the broader debate at COP29, including lobbying the developed world for firmer commitments on providing transition capital to developing economies. The numbers are daunting, with estimates that Africa alone will need $100bn a year just to meet its infrastructure needs between now and 2030.

SA assumes the presidency of the influential Group of 20 (G20) bloc for 2025 and will be in a good position to influence decarbonisation and transition finance debates, especially through the G20 climate sustainability working group.

Old Mutual and the other key business and investment stakeholders that will accompany the government to COP29 will be intensely focused on helping SA achieve its overarching decarbonisation and just transition goals. Old Mutual as a corporate, asset owner and asset manager can influence this conversation in three ways.

First, as an asset owner and asset manager, we exert influence over listed companies operating domestically via stewardship on themes such as the just transition and decarbonisation. The engagements we have with the board and management teams at those companies is critical in helping to guide them along their just transition pathways.

Second, as an asset manager and asset owner of unlisted investments, we have direct influence over the private companies we take stakes in or own outright. These investments (totalling $10bn in clients’ assets) give us a level of direct influence on the SA economy through renewable energy and infrastructure programmes, direct corporate investments, as well as impact investing across schools, affordable housing and agriculture.

Third, we participate in SA’s just transition journey in our corporate capacity. Old Mutual remains active in local business associations as well as various private-public forums aimed at building a climate-aligned economic and financial future — with due consideration for the overlap of environmental and social outcomes.

Asset owners and asset managers in Africa will have to tackle decarbonisation and the transition away from fossil fuels on two fronts. Locally, allocators of capital need to find ways to support businesses in the fossil fuel and mining sectors as they pursue their just transition goals and move away from fossil fuels — we cannot simply abandon them by divesting or withdrawing capital — while supporting direct investment in the green economy.

Globally, where a broader range of opportunities exists, we can be even more targeted in directing additional capital into green investments.

• George is director of investments at Old Mutual Investments.