Ask five South African banks to define “transition finance” and you’re likely to get five different answers.
That may sound like a technical problem. It isn’t. It goes to the heart of whether our financial system is equipped to support the country’s transition to a low-carbon, inclusive economy.
Banks increasingly speak the language of sustainability. Net zero. Climate resilience. Sustainable finance. Client engagement. Just transition. The vocabulary has become familiar, even reassuring. On paper, it suggests a sector moving with purpose towards a common goal.
Look a little closer and that confidence begins to unravel.
As we prepare this year’s edition of Just Share’s How Cool Is Your Bank report, one of the biggest challenges has not been evaluating the banks’ performance. It has been working out what they actually mean.
Banks use many of the same words but often describe very different things. Definitions vary. Methodologies differ. Disclosures range from detailed and thoughtful to frustratingly opaque. In some cases, concepts that sit at the centre of climate strategy are barely defined at all.
Transition finance is perhaps the clearest example.
Everyone agrees it is important. Almost nobody explains it in the same way.
Some banks present transition finance alongside green finance without clearly distinguishing between the two. Others include financing for gas . Some set out detailed eligibility criteria while others offer little more than a broad description of intent.
This is a problem because transition finance is not just another sustainability label. Properly understood, it is the finance that enables businesses, sectors and communities to move from where they are today to where they need to be tomorrow. It should support the real economy to decarbonise while protecting livelihoods, strengthening resilience and ensuring the transition is fair.
If banks cannot clearly explain what they mean by transition finance, how can investors, regulators or the public judge whether they are delivering it?
The problem runs deeper than disclosure.
Most banks have climate ambitions. Many have emissions targets. Most have committed billions towards sustainable finance.
Far fewer explain how they intend to achieve those ambitions.
The prevailing strategy appears to be remarkably simple: engage with clients and encourage them to transition.
Engagement is essential. Banks should be talking to their clients. They should understand the challenges they face and support them to navigate one of the biggest economic transformations in generations.
But engagement is a tool. It is not a strategy.
A credible transition strategy answers difficult questions.
What does a successful client transition actually look like? What support will banks provide? What milestones are clients expected to meet? How will progress be measured? What happens when clients consistently fail to deliver? At what point does continued financing become inconsistent with a bank’s own climate commitments?
Too often, those answers are missing.
Instead, transition strategies risk becoming little more than statements of optimism – based on the assumption that if banks engage with clients long enough, the transition will somehow take care of itself.
Hope is not a strategy.
Neither is the idea that clients will decarbonise without clear expectations, incentives and accountability.
The debate around gas illustrates this perfectly.
Many banks describe gas as a transition fuel. In some circumstances, that argument may have merit. But every transition has an end point.
If gas is genuinely a transition fuel, then transition to what? By when? Under what conditions? What milestones determine whether financing remains appropriate? And when does that finance come to an end?
Without clear answers, “transition fuel” risks becoming an open-ended justification for continued fossil fuel expansion rather than a temporary step towards a lower-carbon economy.
The same principle applies across every high-emitting sector. Transition finance should finance change. It should not simply relabel existing lending.
This is precisely why benchmarking matters.
Before publishing this year’s How Cool Is Your Bank findings, we are engaging with the banks. Not because scores are negotiable – they are not – but because understanding the barriers to progress is as important as measuring progress itself.
Some constraints will be genuine. Others may prove less convincing once viewed alongside peers that have found practical solutions. Comparing approaches helps identify both.
That is one of the strengths of benchmarking. It does more than reveal leaders and laggards. It exposes what is possible.
To be clear, there has been progress. Several banks have strengthened governance, improved disclosure and developed more sophisticated approaches to climate risk.
But there has also been backsliding. At a time when South Africa needs financial institutions to provide greater clarity and stronger leadership, some commitments appear to have become less ambitious, not more.
South Africa’s transition will not happen because banks publish glossy sustainability reports or adopt the latest climate terminology.
It will happen because banks make deliberate decisions about where capital flows, what conditions accompany that finance and how they help reshape the economy over the coming decades.
That demands more than aspirations.
It demands credible transition plans that explain not only where banks want the economy to end up, but exactly how they intend to help get it there.
Until then, the biggest question facing South African banking is not whether institutions support the transition.
It is whether they have a realistic plan to deliver it.
Nicole Martens is the Executive Director at Just Share.