Climate change is a growing concern for all South Africans, many of whom are increasingly concerned about how the financial institutions that receive, manage and invest their savings are responding to the climate emergency. The United Nations (UN) Intergovernmental Panel on Climate Change (IPCC) has made it clear that exceeding a global average temperature increase of more than 1.5°C will result in more severe climate impacts.
Scientists estimate that the global average temperature has already increased by at least 1.1°C and the IPCC Synthesis Report of the Sixth Assessment, released in March 2023, confirmed that there is a “rapidly closing window of opportunity to secure a liveable and sustainable future for all” and that “the choices and actions implemented in this decade will have impacts now and for thousands of years”. The IPCC highlights that “Rapid and deep and in most cases immediate GHG emission reductions in all sectors” are required to limit the worst impacts of the climate crisis.”
The role of banks
Limiting global average temperature increase to 1.5°C requires ambitious action from all sectors of the economy. One of the key goals of the 2015 Paris Agreement is to “[make] finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient
development”. This means, amongst other things, that capital should urgently be directed away from high-carbon activities towards low-carbon solutions.
Through their lending, investment and underwriting activities, banks can either exacerbate the climate emergency or play a constructive role in urgently reducing greenhouse gas (GHG) emissions and financing the transition to a low-carbon, inclusive economy.
South Africa’s “big five” banks – Absa Group Limited (Absa), FirstRand Limited (FirstRand), Investec Limited (Investec), Nedbank Group Limited (Nedbank), and Standard Bank Group Limited (Standard Bank) – all state that they support climate science and the goals of the 2015 Paris Agreement and all have committed to achieving net zero in their financed emissions by 2050. Absa, FirstRand, Investec and Standard Bank are signatories to the UN Environment Programme’s Principles for Responsible Banking (PRB), and Nedbank states that it is “in support of” the PRB, but has “elected not to officially sign up to the PRB”. Investec has also signed up to the UN-convened Net Zero
Banking Alliance.
Increasingly, both policy and legislation are being developed to provide guidelines and requirements for what assertive climate action in the financial sector looks like. In May 2024, the Prudential Authority (the prudential regulator within the administration of the South African Reserve Bank (SARB)) issued “Guidance on climate-related governance and risk practices for banks” and “Guidance on climate-related disclosures for banks”, in terms of the Banks Act 94 of 1990.
The Prudential Authority stresses that “disclosures of climate-related risks and opportunities are required to promote market discipline through the provision of meaningful information to stakeholders on a consistent and comparable basis…” and that “[It] is important that financial institutions build the necessary capacity and capabilities to identify, assess, manage, and disclose climaterelated risks and opportunities within their existing risk management and governance frameworks, including any metrics or targets developed by the bank”.
South Africa’s Climate Change Act 22 of 2024 recognises that South Africa’s international commitments and obligations include the communication and implementation of an effective nationally determined climate change response, encompassing mitigation and adaptation actions, that represents the country’s fair contribution to the global climate change response.
South Africa will also be required to submit a new Nationally Determined Contribution (NDC) in terms of the Paris Agreement in 2025, which “reflect[s] its highest possible ambition, reflecting its common but differentiated responsibilities and respective capabilities, in the light of different national circumstances” 9. Banks can and must play an important role in ensuring that South Africa takes timeous and effective climate action to meet its international commitments.
This report
As in 2023, Just Share has analysed the most recent climate-related disclosures, policies and practices of South Africa’s five largest banks: Absa, FirstRand, Investec, Nedbank, and Standard Bank, in order to evaluate the extent to which these big five banks disclose, manage and integrate climate risks and opportunities into their financial decision-making, and the extent to which their lending and investment activities support their stated commitment to the goals of the Paris Agreement.
The banks all deploy highly visible marketing campaigns aimed at convincing customers and potential customers that they are acting responsibly when it comes to climate risk. However, finance flows still fall far short of the levels needed to meet climate goals across all sectors and regions and there has been no significant positive change in any of the assessed indicators in 2024.
The decisions made by financial institutions today are crucial in determining whether we are able to limit the worst impacts of climate change. However, despite their sustainability claims, and even in the face of increasingly severe and unpredictable weather events which are having catastrophic impacts across the globe, all of the big five banks continue to fund new fossil fuels, and to resist setting clear,
