Briefing on FirstRand’s 2023 climate-related disclosures

Just Share has released a briefing on FirstRand’s latest climate-related financial disclosures, published in September 2023. This is the final briefing in Just Share’s series of in-depth analyses of the 2023 climate-related disclosures of South Africa’s five largest banks: FirstRand, Absa Group, Investec, Nedbank Group, and Standard Bank Group.

In November 2023, Just Share also published a report, How cool is your bank?, in which we assess and rank the five banks’ understanding, disclosure, and integration of climate risks and opportunities in their decision-making. At the time of publication, FirstRand had not yet released its 2023 reports and so the analysis was based on its reports released in 2022. This briefing considers its disclosures published after the release of the report, which will also be captured in an update to How cool is your bank? later this year.

In its latest suite of reports, FirstRand has produced a clear and useful set of climate disclosures. It has attempted to address most elements of the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), and its disclosures make it possible for stakeholders to identify the gaps and challenges that it is facing in fully integrating climate risk into its decision-making.

FirstRand and Investec are the only two banks to have decreased their overall exposure to fossil fuels over their most recent reporting periods. In FirstRand’s case, this was due to a decrease in its exposure to thermal coal. However, its exposure to gas has increased more than two-and-a-half times. Standard Bank, Nedbank, and Absa’s overall exposure to fossil fuels all increased.

Key takeaways

  • FirstRand has not set any climate science-aligned emission reduction targets, nor updated its 2021 climate policy. However, the bank has said that it will disclose a “high-level climate alignment pathway strategy for FirstRand and 2030 interim pathway for oil and gas” in the 2024/2025 financial year.
  • FirstRand has updated the group’s principal and supporting risks and has now classified climate risk as a principal risk.
  • What FirstRand refers to as its fossil fuel financing “limits” in fact allow it to increase its financing to thermal coal by at least three times, and to upstream oil and gas by five times.
  • FirstRand recognises that gas will not play a long-term role in the transition to a low-carbon economy, and the potential for stranded gas assets, yet it intends to continue to increase its financing of gas in the short- and medium- term. The bank’s exposure to upstream oil and gas increased from R2,9bn to R7,76bn over the reporting period, more than two-and-a-half times. It attributes this increase to increased exposure for existing clients.
  • However, the bank’s total reported financed emissions from fossil fuels decreased by 37%, largely due to a decrease in its exposure to thermal coal, which FirstRand explains as being because of refinements in methodology, improvement of data, and reduction in exposure to coal-fired power.
  • FirstRand has included climate metrics in executive directors’, prescribed officers’, and certain other bank positions’ short-term incentives, and allows for a downward adjustment of long-term incentives for materially negative outcomes within managerial control.

FirstRand approaches climate risk integration systematically and thoroughly, but its efforts to mitigate climate risk lack urgency. FirstRand’s high-level climate alignment pathway strategy and 2030 interim pathway for oil and gas, to be published in 2024/2025, will be a crucial indicator of the bank’s real commitment to supporting South Africa’s transition to a low-carbon, inclusive and sustainable economy.

The Intergovernmental Panel on Climate Change Synthesis Report of the Sixth Assessment, released in March 2023, starkly reiterates that climate change is driving widespread loss and damage to nature and people. Vulnerable communities – which have historically contributed the least to current climate change – are already being, and will continue to be, disproportionately affected.

Despite all evidence, including increasingly severe and unpredictable weather events which are having catastrophic impacts across the globe, financial institutions continue to fund new fossil fuels, and to resist setting clear science-aligned emission reduction targets. In addition, finance flows fall far short of the levels needed to meet climate goals across all sectors and regions.

Download the full briefing

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