An edited version of this opinion piece in Business Day.
A severe El Niño is one of the three scenarios the Monetary Policy Committee has used this year to project inflation and decide on interest rates.
For South Africa, El Niño means hotter, drier summers, more heatwaves, pressure on water supplies and greater strain on farmers. It is projected to result in 1,200 deaths between September 2026 and February 2027.
It will also have severe financial implications for banks. Failed harvests mean defaulted farm loans. Flooded homes mean unpaid mortgages. And as the world moves away from coal, oil and gas, loans to these sectors are becoming riskier.
Our 2026 How cool is your bank? report assessed five of South Africa’s biggest banks across climate risk, financing, governance and disclosure. Only one bank, Nedbank, has publicly disclosed R1.6 billion in impairment overlays for anticipated climate impacts. That sounds like a lot, but it is only a fraction of the risk the sector faces. The Reserve Bank has estimated that these risks to the South African market, simply encompassed under ‘transition risk’, could amount to almost R2 trillion, accumulated between 2013 and 2035.
The gap between these two numbers is stark. It is also a measure of the gap between acknowledging climate risk and actively managing it.
Nedbank is once again the best-performing bank in this year’s edition of How cool is your bank?, scoring only 59%. And even its performance has been declining over time. If this is what the sector’s best-performing bank looks like, it is difficult to argue that our banking sector is prepared for the scale of transition risk ahead.
Not one of the five banks has published a transition plan showing how it will move from its current portfolio towards its net zero target. And, other than Nedbank, the banks treat climate-scenario analysis largely as a disclosure and box-ticking exercise rather than using it to inform lending, risk management or capital allocation.
The problem is not that banks cannot see the risk. It is that they are not yet consistently acting on what they see.
When confronted with this contradiction, the banks have consistently offered the same justification: the idea that Africa’s development means that climate action cannot proceed at the same pace here as elsewhere, so continued fossil fuel financing is necessary.
In other words, there is a sector-wide belief that development necessitates continued fossil fuel use.
But fossil fuel dependence does not automatically produce inclusive or resilient development. South Africa itself provides strong evidence of this.
The question is not whether South Africa needs development. It is what kind of development we are financing by continuing to prioritise a fossil fuel loan book.
Our banks need to recognise that development and transition are not competing objectives. For a country as exposed to climate and socioeconomic risks as South Africa, the transition is itself part of the development challenge.
Banks like to talk about ambition. But ambition should be judged by what happens to their balance sheets.
Renewable energy and sustainable finance are growing, but this tells us little about the direction of the overall loan book. A bank can finance more renewable energy while also increasing fossil fuel exposure. Sustainable finance averages just 4% of total lending across the five banks.
This is not the pace, scale or direction of change needed to contain transition risk.
The reality is that South Africa’s big five banks continue to enable fossil fuel sectors that drive the emissions behind heatwaves, droughts and floods that damage real estate, transport and agricultural sectors to which they lend.
They are, in fact, underwriting their own future losses.
With up to R2 trillion on the line, South Africa’s banks have a responsibility not only to safeguard their own balance sheets, but also to protect the resilience of the broader financial system from climate-related risks.
And this brings us back to accountability.
While a Super El Niño looms, climate disclosure and transition planning remain largely voluntary. The window for an orderly transition is narrowing as risks to banks and the wider economy grow.
By Lara French, Déna Jansen and Joylyn Mutata, analysts at Just Share.