Briefing on Standard Bank’s 2022 climate-related financial disclosures report

Just Share has analysed Standard Bank Group’s Climate-related financial disclosures report 2022 (“2022 climate report”) published on 31 March 2023 and “informed by the recommendations of the Task Force on Climate-Related Financial Disclosures”.

In April last year, Just Share analysed Standard Bank’s Climate Policy, which allows the bank to increase its financing of fossil fuels until at least 2040. The bank’s 2022 climate report evidences this increase over the past year.

Standard Bank’s justification of its increased investment in fossil fuels as being “in line with” its climate policy demonstrates the weakness and lack of ambition of the bank’s policy, as identified in Just Share’s 2022 analysis: adopting targets that are not aligned with climate science allows Standard Bank to increase its exposure to fossil fuels, while claiming that this increase is aligned with a purported commitment to taking climate action.

A climate policy that fails to set science-based absolute emission contraction targets and incorporate meaningful exclusions will never support capital allocation which is informed by a robust understanding of climate risks and opportunities.

Other key messages from Just Share’s analysis of the 2022 climate report

  • On- and off-balance sheet exposure to fossil fuels increased by 22% from 2021 to 2022. Total exposure to fossil fuel power generation, coal mining and oil and gas (integrated, trading & retail, exploration and production, and midstream) in 2022 was R119.4 billion, compared to R97.6bn for the previous year.
  • On- and off-balance sheet exposure to renewable power generation increased by 84% from 2021 to 2022, to R26.3 billion. This is a significant increase, but it is crucial to look at this number in comparison to Standard Bank’s exposure to fossil fuels, which is approximately 4.5 times higher.
  • Standard Bank maintains its position that Africa requires new fossil fuels to address energy poverty and developmental needs. The bank ignores the multiple studies and analyses by globally-respected institutions, including the Organisation for Economic Cooperation and Development, the United Nations Economic Commission for Africa, and the International Institute for Sustainable Development, that demonstrate that sustainable energy, and in particular decentralised renewable energy, represents the fastest, most cost-effective option for addressing energy poverty across the African continent.
  • Fossil fuel investment in Africa will not bring the benefits touted by its proponents. Shareholders in SBG should be interrogating why the bank consistently ignores all of the evidence that contradicts its claims about the necessity of fossil fuel investments for Africa’s growth and development.
  • Standard Bank shareholders should be concerned about the financial risks inherent in significant investment in new fossil fuels. The global decarbonisation imperative means that fossil fuel markets are rapidly shrinking. This also places new fossil fuel infrastructure at significant stranded asset risk. As the executive director of the International Energy Agency, Fatih Birol, wrote in a 14 April 2023 Financial Times article on the rapid pace of growth in clean energy across the globe:

“…the push by some companies and governments to build new large-scale fossil fuel projects is not only a bet against the world reaching its climate goals – it is also a risky proposition for investors who want reasonable returns on their capital”.

Africa has a unique opportunity to direct capital flows towards the development of sustainable, equitable energy generation which prioritises energy access for all. There is no justifiable basis to argue that significant and extended new fossil fuel investment is required for Africa’s development. On the contrary, there is significant evidence that increasing Africa’s exposure to fossil fuels would have severely negative impacts.

Financial institutions have a crucial role to play in tackling the climate crisis and enabling a shift to a just and clean energy economy. If Standard Bank is as committed to Africa’s sustainable development as it claims to be, it should set credible 1.5°C-aligned targets to reduce its exposure to existing fossil fuels and other high-emitting sectors, stop financing new fossil fuels, and dramatically increase financing to sectors that will directly contribute to the transition to a low-carbon world in which all Africans have access to sustainable energy.

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IMAGE: Daylin Paul

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