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Sustainability 16 March 2022

Standard Bank unveils climate targets to support Africa’s sustainable development

Group sets course for a net zero future and pledges to mobilise a cumulative amount of between R250 billion and R300 billion in sustainable finance by end of 2026.

The Standard Bank Group today publishes its climate policy, setting out progressive short, medium, and long-term targets to reduce its contribution to carbon emissions and accelerate its sustainable finance commitments with a focus on renewable energy projects across Africa.

The Group has committed to achieving net zero carbon emissions from its own operations by 2040 and from its portfolio of financed emissions by 2050, aligned to the Paris Agreement.

It sees promoting sustainable finance both as an ethical obligation and as a significant commercial opportunity. To this end, it is substantially increasing support for the financing of renewable energy and the use of sustainable finance instruments.

The Group will mobilise a cumulative amount of between R250 billion and R300 billion for sustainable finance by the end of 2026. This target includes R50 billion of financing for renewable energy, and underwriting of a further R15 billion for renewable energy by the end of 2024.

As Africa’s largest bank by assets, not only do we feel strongly compelled to act responsibly, but we also understand that we can make a significant positive impact.

“To achieve our purpose to drive Africa’s growth, our core business activities are being directed towards solving Africa’s development challenges and maximising opportunities for sustainable and inclusive growth, while also managing the risks posed by climate change,” says Sim Tshabalala, Chief Executive of Standard Bank Group.

Standard Bank notes that Africa has not made a significant contribution to global warming, yet Africa will be among the most vulnerable to its negative effects. While Africa must join the global drive towards limiting greenhouse gas emissions, this action must be considered within the context of Africa’s just transition towards a low-carbon economy and in a manner that recognises and addresses the deep energy deficit across African economies. Fewer than 43% of people in sub-Saharan Africa have access to grid electricity.

As the World Bank has recently argued, Africa’s recovery from the pandemic, and its medium-term development both require a degree of openness to further investment in ‘brown’ activities. Standard Bank agrees. Therefore, in certain tightly defined circumstances, the Group will remain open to supporting ‘brown’ energy and mining projects in Africa.

“In our view, a refusal to accept this would amount to denying Africa’s right to sustainable development. Over the past several centuries, Africa has borne very considerable economic and human costs for other regions. A total or immediate ban on further transitional projects in Africa in order to help reduce environmental pressure in much richer regions would be a cost too far,” says Sim Tshabalala.

“Having said that, our long-term goal is clear. The Standard Bank Group will achieve a portfolio mix that is net zero by 2050. That will entail reducing our financed emissions and simultaneously scaling up our financing of renewables, reforestation, climate-smart agriculture, decarbonisation and transition technologies, and supporting the development of credible carbon offset programmes,” adds Tshabalala.

The climate policy takes Africa’s social, economic, and environmental context as its starting point. Commitments and targets have been set for thermal coal, oil, gas, and agriculture, based on their identified levels of elevated climate risk. These include:

Agriculture

  • No financing of:
    • the deforestation of natural forests and indigenous trees (except where this will have a positive impact, as in the de-bushing of farming blocks for grazing and cropping);
    • the production of or trade in other non-indigenous forestry products except from sustainably managed forests;
    • unsustainable fishing methods.
  • Encouraging sustainable agricultural practices through sustainable loan products that support renewable energy opportunities, climate-smart agriculture, and through digital platforms to assist small-holder farmers.
  • Collecting data through partnerships with research groups and industry experts to set an emissions reduction target and a portfolio baseline.

Gas

  • Committing to developing a transition finance product framework that will support the use of gas in its specific role as a transition fuel in Africa.
  • Financing gas-related projects that have zero to minimal fugitive emissions or that are committed to a pathway that reduces the carbon intensity of liquified natural gas (LNG) plants.
  • Prioritising finance for the construction of gas-fired power plants when:
    • providing support services as part of an integrated renewable energy power solution; or
    • converting existing coal or oil-fired power plants as part of a clearly defined decarbonisation plan aligned to net zero by 2050.
  • Limiting the financing of standalone gas-fired power plants providing general baseload, mid-merit or peaking power to a cap of 0.75% of total group advances after 2026.
  • Reducing exposure to gas by 2045 in line with the commitment to net zero by 2050, while considering the energy security of the markets the group operates in.

Oil

  • Reducing group advances to upstream oil by 5% by 2030.
  • Reducing financing to power sector clients generating power mainly from oil, from 0.05% of total group advances in 2021 to 0.03% in 2026 and 0% from 2030.
  • Not providing financial products and services for the extraction of tar sands or construction of associated export facilities, exploration and production of tight oil resources, and pipelines transporting a significant volume of tight oil and export terminals supplied by a significant volume of tight oil.
  • Not financing companies with unrestricted flaring for new assets and seeking from existing companies with flaring, timebound plans to eliminate flaring for existing assets.
  • No financing for new oil-fired power plant construction or expansion in the generating capacity of existing oil-fired power plants, except where such plants provide support services as part of an integrated renewable energy power plant.

Thermal coal

  • Limiting exposure to 0.70% of group loans and advances in 2021 and to 0.50% by 2030.
  • No financing for the construction of new coal-fired power plants and for the expansion in generating capacity of existing coal-fired power plants.
  • Reducing the financing of power sector clients that generate power mainly from coal, from 0.18% of total group advances in 2021 to 0.15% in 2026 and 0.12% from 2030.
  • Financing of new coal mines only when there is an overall positive environmental impact.

Standard Bank will also partner with clients and stakeholders to support their transitions and the national climate commitments of the countries in which the Group conducts business.

Over the next two to three years, climate targets and commitments will also be set in additional sectors including insurance, residential and commercial property, and transportation.

“In line with our values, we will be transparent in our decision-making, and we commit to annually report on our action plans and progress toward achieving our climate targets. We will also review our targets and commitments on a three-year cycle and in accordance with current climate science and aligned to the Task Force on Climate-Related Financial Disclosures (TCFD) principles,” said Kenny Fihla, Chief Executive: Corporate  and Investment Banking  at Standard Bank Group.

Standard Bank Group’s climate policy can be accessed here.