Just Share shines the torch on Standard Bank’s climate related financial disclosures ahead of AGM

• Ahead of Standard Bank (SBK)’s 10 June 2024 electronic-only AGM, Just Share has released a briefing on the bank’s latest climate-related financial disclosures.

The reversion to online-only AGMs by some JSE-listed companies, including SBK, after they held hybrid AGMs last year, appears to be a deliberate strategy to shut down contestation on crucial issues, including the potential for protests. Such protests at AGMs are effectively managed by companies around the world and preventing them, by restricting participation to online-only engagement, is a poor approach to corporate governance and stakeholder engagement.

Increased fossil fuel financing

SBK’s on- and off-balance sheet exposure to fossil fuels increased by almost 12% from 2022 to 2023 (having increased by 22% from 2021 to 2022). Total exposure to fossil fuel power generation, coal mining, and oil and gas (integrated, trading & retail, “services”, upstream, and midstream) in 2023 was R133,28 billion, compared to R119,4 billion for the previous year.

Using total amounts (both on- and off-balance sheet), in 2023, renewables made up almost 26% (R34,6 billion) of the bank’s total energy financing (R133,28 billion), with fossil fuel financing constituting the remaining 74%.

SBK reports that it “anticipate[s]an increase in gas exposure up to 2030, in line with our recognition of gas as a transition fuel, followed by a decline after 2030”.

SBK has targeted the reduction of group advances to upstream oil by 5% by 2030. By 31 December 2023, this exposure had increased by 34,59%.

Reporting falls short of the requirements of 2022 shareholder resolution

SBK scored the lowest of the big five South African banks in Just Share’s November 2023 report “How cool is your bank? An analysis of how South Africa’s big five banks understand and manage climate risk.” There have been some improvements this year when measured against the “How cool is your bank?” indicators.

However, the real test of SBK’s commitment to climate action will be in 2025, when it is required by a 2022 shareholder resolution (co-filed by Just Share and Aeon Investment Management) to publish a strategy and targets for reducing its financed emissions from oil and gas in alignment with the Paris Agreement goal of limiting the global temperature increase to 1.5ºC above pre-industrial levels.

The resolution, approved by 99% of shareholders at its 2022 AGM, also required SBK to disclose, by 31 March 2024, its “baseline financed greenhouse gas emissions from its exposure to oil and gas”.

However, SBK has this year reported on its financed emissions for 82% of its total upstream oil and gas on balance sheet loans and advances, which constitutes only 19% of its oil and gas portfolio. This falls short of what is required by the resolution, i.e., that the bank disclose “baseline financed greenhouse gas emissions from its exposure to oil and gas” by 31 March 2024.

Climate commitments continue to be undermined by intention to finance more fossil fuels

In its latest reporting suite, SBK has made even clearer than before that, in its view, “a just transition in Africa” includes a “substantial role for transition fuels like natural gas”.  The bank states that it supports “an energy mix that includes traditional carbon-based fuels like coal and oil, transition fuels such as natural gas, and renewable sources like solar, wind and hydro”.

SBK proclaims that it understands and supports climate science, and that it is aware of Africa’s severe vulnerability to climate risk. But this understanding and awareness appear to be playing no role in driving the bank’s climate finance strategy.

It is impossible to reconcile SBK’s sustainable finance ambitions with its increasing financing of the fossil fuel industry.

The misleading African development narratives relied on by SBK are not supported by science. Rather, these are used to support the bank’s intention to continue to benefit from the profits generated by lending to the oil and gas industry, while deploying sustainable lending to greenwash its contribution to the climate crisis.

Finance flows fall far short of the levels needed to meet climate goals across all sectors and regions. To keep temperature rise to 1.5ºC – the level essential to avoid the worst impacts of the climate crisis – we must halve global emissions by 2030. Instead of making science-aligned decisions to exclude funding and to set clear emission reduction targets, financial institutions continue to fund new fossil fuels, often relying on inaccurate development narratives to justify this funding.

Call to action

Shareholders and other stakeholders should call on the bank to comply with the requirements and timeframes set out in the 2022 resolution, including that the short-, medium-, and long-term emission reduction targets it sets by 31 March 2025:

• are set from a baseline that includes all of the bank’s financed GHG emissions from oil and gas; 
• include all of the bank’s financed GHG emissions from oil and gas; and are aligned with limiting global temperature increase to 1.5ºC above pre-industrial levels,
• and not with SBK’s views that fossil fuels are required for a just transition and/or that it is Africa’s “turn” to develop its fossil fuel resources.

Download the full briefing HERE

Source: Just Share