Extreme weather events driven by climate change are exposing the hollowness of corporate South Africa’s purported commitment to climate action. Different units of the same companies are working at cross-purposes and no-one is talking about it. This approach might drive up corporate profits but will dramatically increase costs for consumers.

In January, Old Mutual said there has been an almost 30% increase in the cost of “reinsuring against catastrophic events”. Garth Napier, an MD at the company, is reported to have estimated that clients could be looking at a 10% increase in premiums “across the board” in 2024.

The company’s chief risk officer, Richard Treagus, writes in the group’s 2023 climate change report that “we are facing the greatest challenge of our time” and that “where risks become uninsurable and reinsurers exit certain types of cover or regions, we may be forced to do the same”.

Santam, 62% owned by Sanlam, is developing a tool to help underwriters “determine when a property is at greater risk of climate change-related events”. If your home falls into that category, expect to be charged higher premiums for house and contents insurance.

At a “dialogue” sponsored by Standard Bank Insurance in February on the topic “insuring a sustainable future”, the company’s Hardy Ncube said they are developing “innovative and forward-thinking policies and leveraging technological advances (to) offer more tailored insurance products” (read: higher premiums for those exposed to higher climate risks).

Ncube positioned this as “one of the key ways insurers are contributing to the fight against climate change”.

Part of the problem

But what these insurance executives who speak so solemnly about climate risks won’t mention is that the groups that employ them are contributing to the climate crisis.

At the event mentioned above, Standard Insurance CEO Johan van Greuning said Africa’s economic growth potential is threatened by “rising temperatures and rising sea levels, changing rainfall patterns and the frequency of extreme weather events like droughts or floods”.

But Standard Bank has more than R130bn of exposure to fossil fuels, and unequivocally asserts its intention to continue to finance oil and gas in Africa. The bank’s latest climate change report says that “African nations have the right and urgent duty to develop their natural resources {in other words, fossil fuels} and economies to improve their people’s lives”.

Old Mutual Investment Group and Sanlam Investment Group are among the largest shareholders in South Africa’s biggest carbon emitters, including fossil fuel giant Sasol and coal miners Thungela and Exxaro, all major contributors to the climate crisis.

Sasol is one of the 57 companies responsible for 80% of global greenhouse gas emissions since the Paris Agreement was signed in 2015. The company’s 2023 greenhouse gas emissions were about 64Mt, and Sasol says these will increase this year, despite its target to reduce emissions by 30% by 2030.

Neither Thungela nor Exxaro has any plan to reduce their Scope 3 emissions – that is, emissions from the coal they mine, in line with climate science.

Green talk, carbon cash

Old Mutual boasts of its “active stewardship” of these companies, and what Treagus describes as “assertive advocacy to higher sustainability”. Sanlam says “sustainability is at the heart of what we do”. But this has made no dent in actual carbon emissions from these entities.

Sanlam and Old Mutual are investing billions of rand of their clients’ money in companies that share responsibility for climate impacts that will cause huge increases in insurance premiums in the coming years.

But the insurance arms of these companies position themselves as climate warriors, helping their clients to “build resilience” in the face of increasing extreme weather events such as the floods in KwaZulu-Natal in 2022.

The soft, friendly approach to responsible investment adopted by South Africa’s major institutional investors sends a clear message to big emitters: we need to look like we’re taking this seriously, but what we really care about is short-term returns, so don’t do anything too drastic.

Endless “engagement” and “stewardship” activities are just what they do to ensure their share of the great sustainability money-spinning machine.

If client resilience really did drive Old Mutual and Sanlam, they would be taking every opportunity to push the companies they are invested in to reduce emissions, including filing shareholder resolutions, voting against the re-election of directors responsible for climate strategy, and demanding transition plans that are connected to what is required by climate science.

But without client outrage and regulatory pressure, expect this extreme corporate cognitive dissonance to continue.

This article was first published in the Financial Mail on 2 May 2024.

By: Tracey Davies

IMAGE: Gallo Images / Contributor

Make a donation

Our work is only possible with the generous support of philanthropic funding and individual donations, which are tax deductible.

Every contribution helps us to keep doing what we do. Please consider making a donation and becoming part of the movement working to build a more just, equal and sustainable country.

Please email us at donate@justshare.org.za to request a section 18A Tax Certificate.

Donate via EFT Below are our bank details
Bank Nedbank
Account number 1172492603
Account type Business PAYU
Branch code 10134000
Branch name CPT Western Suburbs Metro BB

Scan the QR code below in your SnapScan mobile app to complete the payment