On 23 April 2021, Standard Bank shareholders Aeon Investment Management, Abax Investments, Visio Fund Management (Pty) Limited and Just Share NPC co-filed a non-binding shareholder resolution seeking disclosure of Standard Bank’s plans, if any, to set and publish a strategy, and short term, medium-term, and long-term targets, to reduce its exposure to fossil fuel assets on a timeline aligned with the goals of the Paris Agreement (“the Paris Goals”).

Although Standard Bank did not table the resolution, it committed, on 20 May 2021, to publish, as part of its 2021 reporting to shareholders, a climate strategy, and short-, medium-, and long-term targets to reduce its exposure to fossil fuel assets on a timeline aligned with the Paris Goals.

On 16 March 2022, Standard Bank published its Climate Policy. The Climate Policy does not contain any short-term or medium-term targets for a reduction in Standard Bank’s exposure to oil and gas. In relation to long-term targets, the Climate Policy does not envisage any reduction in absolute financed emissions from oil and gas until 2040 at the earliest.
In addition to setting out some circumstances in which it will not provide funding, the Climate Policy only commits Standard Bank to seeking to reduce emissions intensity while managing its exposure to oil and gas, and to reducing the percentage of total group advances to particular projects.

By limiting its commitments in this way, the Climate Policy allows the bank to expand its financing of fossil fuels until at least 2040.

Significant absolute emission reductions by 2030 are crucial for limiting temperature rise to 1.5⁰C

Standard Bank’s reporting acknowledges that climate change is material and poses significant risks; including to its ability to generate value for its shareholders over time. In Standard Bank’s 2020 Thermal Coal Mining Policy, its 2020 Task Force on Climate-related Financial Disclosures Report, its 2020 Fossil Fuels Financing Policy, and its 2022 Climate Policy, the bank states that it supports the goals of the Paris Agreement, which include limiting the global temperature increase to 1.5⁰C above pre-industrial levels.

Keeping the global average temperature rise to 1.5°C is essential to limit the worst impacts of global heating. This is only possible with immediate, rapid, and large-scale reductions in greenhouse gas (GHG) emissions.

Even factoring in the updated nationally determined contributions and other commitments submitted at COP26, annual global GHG emissions would need to be roughly halved by 2030 to become consistent with a 1.5°C least-cost pathway. Overshooting 1.5⁰C will mean that “human and natural systems will face additional severe risks”, including some that are “irreversible”.

The International Energy Agency’s May 2021 Net Zero by 2050 scenario finds that in order to achieve the 1.5⁰C goal, “there is no need for investment in new fossil fuel supply”. In fact, oil and gas production needs to fall by 3% each year until 2050 to meet the goals of the Paris Agreement.

Exceeding a 1.5⁰ scenario jeopardizes the global economy. Under current emission trajectories, it is estimated that 10% of total global economic value could be lost by 2050.

The Paris Agreement also recognises “the imperatives of a just transition of the workforce and the creation of decent work and quality jobs in accordance with nationally defined development priorities”. Rapid and extensive scaling up of renewable energy generation is the most cost-optimal energy pathway for Africa, and presents significant economic benefits and opportunities. Expanding fossil fuel production runs counter to the urgent need to transition to a low-carbon, climate-resilient economy that will create new and better jobs, grow the economy, help protect the environment, and improve human health.

As the largest African bank by assets, and Africa’s biggest lender to the oil and gas industry, Standard Bank’s lending, investing and other financial intermediary activities in Africa will influence whether or not the global temperature increase is kept to 1.5⁰C, and whether or not a just transition is achieved.

The United Nations Environment Programme Finance Initiative’s 2021 Recommendations for Credible Net-Zero Commitments state that “net-zero commitments which are not explicitly tied to, or do not follow specifically 1.5°C [Intergovernmental Panel on Climate Change (IPCC)] carbon budget (as derived from the consensus of IPCC 1.5°C scenarios) should not qualify as credible.”

By failing to set credible, Paris and 1.5⁰C-aligned targets to reduce its exposure to oil and gas, and instead adopting a Climate Policy which allows it to increase financing to oil and gas, Standard Bank is exposing itself to significant financial, reputational and litigation risks.