A new report from Just Share evaluates the climate commitments of South Africa’s largest banks — Absa, FirstRand, Investec, Nedbank, and Standard Bank — revealing concerning gaps in climate risk management.
“There is not enough public sector money to drive the now-required pace and the scale of decarbonisation, climate adaptation and disaster risk management,” Anton Cartwright, an independent development economist, told Daily Maverick.
“We need private financiers and governments to align their investments; to not only stop making the problem worse through their capital allocations but to provide the investments that will drive climate-resilient development.”
South Africa’s top five banks have all pledged to support climate action. Yet, the latest report from non-profit shareholder activism organisation Just Share finds that their climate risk management practices are largely insufficient to limit global warming to the Paris Agreement’s 1.5°C goal.
The report, How Cool Is Your Bank?, released in October 2024, evaluates the climate risk management practices of South Africa’s top five banks, to see the extent to which the banks disclose, manage and integrate climate risks and opportunities into their financial decision-making.
“Through their lending, investment and underwriting activities, banks can either exacerbate the climate emergency or play a constructive role in urgently reducing greenhouse gas emissions and financing the transition to a low-carbon, inclusive economy,” noted Karishma Bhoolia, senior climate risk analyst at Just Share.
“However, the lack of progress made since our 2023 assessment, especially by the leaders, reveals that this is not happening either at the pace or scale required to limit global temperature rise to 1.5°C above pre-industrial levels — or even to meet South Africa’s own global commitments under the Paris Agreement.”
Here’s how they rank:
The report examined each bank’s approach to climate risks and opportunities, including their fossil fuel exposure, emission targets, governance and strategy, and sustainable finance.
- Nedbank: leading the pack, but still room for improvement
With a score of 65%, Nedbank tops the list, having made strides in sustainable finance. It is the only bank to disclose its sustainable loans as a percentage of total loans, currently at 16%, and plans to raise this to over 20% by 2025.
Nedbank has also committed to reducing its thermal coal exposure by 47% by 2030, and has set a cap of 165gCO2e/kWh on emissions from its power generation financing.
Despite these advances, Nedbank’s fossil fuel exposure grew by 2% over the past year. Non-renewable power generation went down, but Nedbank’s exposure to upstream oil increased by 13%, and to upstream gas by 11% from 2022 to 2023.
Plus, Just Share pointed out that there was a staggering 173% increase in its upstream gas facility limits, which refers to how much the bank is able to finance, but not what is actually financed.
Key findings:
- Leads in sustainable finance, with clear targets and disclosure.
- Only bank to disclose sustainable finance as a percentage of total loan book (16%).
- Has a target to increase sustainable finance to over 20% of gross loans by 2025.
- Provides most detailed disclosure of scenario analyses.
- Has set some medium- and long-term targets for reducing fossil fuel exposure.
- Partially disclosed strategies for meeting emission reduction targets.
- Fossil fuel exposure grew by 2% over the past year.
Nedbank’s increase in gas lending has raised questions about its alignment with global climate goals, despite its commitment to reach zero fossil fuel exposure by 2045.
Daily Maverick reached out to all the banks in this report for comment on their ranking. In response to their ranking, Nedbank underscored that 17% of their total gross loans and advances are dedicated to sustainable development finance, up from 14% in 2022.
While they noted fossil fuels make up less than 1% of its total book, the bank said, “gas also has an important role to play in our transition away from coal.”
Nedbank said that in line with their commitment to a science-based approach, they choose to measure the climate impact of its fossil fuel investments by tracking the actual emissions produced by the projects it funds, rather than just looking at the size of its fossil fuel portfolio.
Last year, Nedbank cut emissions tied to its oil and gas investments from around 6,000 to 4,000 kilotonnes of CO₂—putting it on track to meet its goal of reducing financed emissions by 26% by 2030. To put that in perspective, reducing 2,000 kilotonnes of CO₂ is roughly equivalent to taking 430,000 cars off the road for a year.
- FirstRand: strong in disclosure, weak in reduction
Scoring 51%, FirstRand has made strides in climate disclosures but falls short in reducing emissions.
Without clear targets for phasing out fossil fuel investments, Just Share reports that progress remains insufficient.
Key findings:
- The only bank to reduce fossil fuel exposure in the past year, though only marginally, by less than 2%.
- Discloses financed emissions for five sectors beyond fossil fuels.
- Provides detailed disclosure of scenario analyses.
- Has set some medium-term targets for reducing coal exposure.
- Links executive remuneration to climate risk and opportunity management objectives.
- Supports gas as a transition fuel without clear reduction targets.
Just Share concludes that FirstRand’s marginal decrease in fossil fuel exposure, while positive, is not substantial enough to align with urgent climate action needs.
Sam Moss, Head of Investor Relations at FirstRand, said that regarding fossil fuel targets, “the group has stated it is committed to providing a more risk sensitive approach to fossil fuel targets, and this approach will be disclosed in our 2024 report.”
He noted that Just Share’s analysis was based on FirstRand’s 2023 climate report, and that their 2024 report is due this month. Moss also acknowledged that the FirstRand group does view gas as a transition fuel and their updated thinking on target setting will also be included in their 2024 climate report.
“Generally, we believe we are making good progress on reducing fossil fuel exposures whilst taking into account South Africa’s current energy mix and the need to ensure a just transition, thus mitigating negative social impacts,” he said.
- Investec: Mixed progress and increased fossil fuel exposure
Investec scores 44%, dropping from second place in Just Share’s 2023 ‘How Cool is your bank’ assessment, due to increased fossil fuel exposure.
Key findings:
- Last year, Investec showed a decrease in its exposure to fossil fuels. This year, however, it has increased its exposure by 19%.
- Investec’s financing of oil and gas increased by 23%, from R3,5-billion in 2023 to R4,4-billion in 2024.
- Renewable energy constitutes more than 50% of energy financing.
- Has the most comprehensive disclosure of financed emissions beyond fossil fuels.
- Has set some medium and long-term targets for reducing fossil fuel exposure.
- Only one board member identified with climate-related expertise.
- No sustainable finance targets disclosed.
Just Share concludes that Investec’s significant increase in fossil fuel exposure is particularly concerning, offsetting progress made in other areas.
Melanie Janse Van Vuuren from Investec Limited acknowledged concerns over the fossil fuel exposure but noted that, “the increase in financing for oil and gas is not significant.”
She highlighted that within Investec’s Southern Africa activities, oil and gas exposure increased from 1.21% to 1.37% - an increase of R594 million, and largely due to facilities provided to existing midstream oil and gas clients, drawn in the period up to March 2024.
Janse Van Vuuren emphasised that this aligns with Investec’s commitment to transition finance, supporting the shift to a sustainable energy future. She reaffirmed the bank’s medium- and long-term goals to reduce fossil fuel exposure, adding that new sustainable finance targets will be announced in May 2025.
- Absa: Improved disclosure, but significant fossil fuel increase
Absa scored 36%, with notable improvements in climate policies but a troubling 35% increase in fossil fuel exposure — the highest of the five banks.
Key findings:
- Increased fossil fuel exposure by 35% in the past year.
- Renewable energy constitutes more than 50% of energy financing.
- Introduced reduction pathways for coal, oil, and gas portfolio.
- Does not disclose financed emissions from fossil fuel lending.
- No board members identified with clear climate-related expertise.
- Has a sustainable finance target of R100-billion by 2025.
Absa published new interim targets for reducing its financed emissions from coal, oil and gas, where it set interim targets to reduce absolute emissions from coal by 25% by 2030 (off a 2022 baseline), and to reduce the physical intensity of its financed emissions from oil and gas by 9% by 2030 (off a 2022 baseline).
However, Just Share pointed out that a “physical intensity target” focuses on reducing the amount of pollution per unit of oil or gas produced — which allows the bank to increase its lending to oil and gas projects, as long as those projects become more efficient and cleaner.
“It means overall emissions could still rise if production expands, even if the pollution per unit decreases,” said Just Share in their round-up report of Absa’s 2024 AGM.
“It therefore does not contribute to reducing real-world emissions, which should be the goal of all of Absa’s climate-related strategies and targets.”
Absa’s position on gas is that it is “an important transition fuel critical to achieving a just transition”. Yet, Just Share warns that without absolute reduction targets across all fossil fuel sectors, Absa’s climate efforts may lack the impact needed to align with a 1.5°C global temperature target.
Absa acknowledged Just Share’s concern around physical intensity targets, but said that those targets, “are designed as part of a broader strategy that supports client decarbonisation efforts”, while allowing them to maintain critical financing needed for sectors in transition.
The bank added that its current exposure to the oil and gas sectors reflects its commitment to supporting critical transition industries, highlighting that in 2023, Absa’s total limits to the oil sector were 1.3% of their total loan book, with gas sector limits at 0.5%. Like the other banks, it said that, “natural gas serves as a critical transition fuel.”
Absa also underscored that it achieved a 33% reduction in their own emissions in 2023 (off a 2018 baseline), progressing towards their 2030 target of a 51% reduction, and are on track to achieve their R100-billion sustainable finance target ahead of schedule.
- Standard Bank: Lagging behind in climate action
For the second year in a row, Standard Bank scored the lowest, at just 27%.
Key findings:
- Increased fossil fuel exposure by 19% in the past year.
- Increased renewable energy in total energy portfolio to approximately 25%.
- Limited disclosure of financed emissions; the bank 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.
- No board members identified with clear climate-related expertise.
- Seven out of 14 board members potentially conflicted due to fossil fuel company ties.
- No clear link between executive remuneration and climate targets.
- Has a sustainable finance target of R250-billion by 2026.
The bank has also not fully complied with the requirements of a shareholder resolution approved by 99.7% of its shareholders in 2022 — which is to disclose “baseline financed greenhouse gas emissions from its exposure to oil and gas” by 31 March 2024.
Although it has increased its renewable energy financing to 25% of its energy portfolio, Just Share noted that it continues to finance fossil fuel projects, notably the controversial East African Crude Oil Pipeline — something Daily Maverick has not shied away from covering in the past.
Read more: Standard Bank CEO says their climate strategy falls within Paris Agreement
Just Share’s round-up of Standard Bank’s 2024 AGM pointed out that while Standard Bank touts its support for the Paris Agreement, its approach of being “guided by the relevant countries’ nationally determined contributions” contradicts this commitment, because they are insufficient to meet the Paris Agreement goals, and countries and banks should not be held to the same standard.
In response, Boitumelo Sethlatswe, Standard Bank’s Head of Sustainability, said that while they prioritise the financing of renewable energy solutions, they also recognise that for the short to medium term, “fossil fuels remain an essential part of the energy mix in many countries, and rapid action to cut finance for fossil fuels will worsen poverty, raise energy costs and limit opportunities for economic growth and job creation.”
She emphasised that commitments by developing countries under the Paris Agreement have been made in line with the principle of common but differentiated responsibility - noting that Africa accounts for less than 4% of global GHG emissions - is fair and reasonable.
“Our role as a financial institution is to facilitate the transition to a low carbon economy by financing viable projects and partnering with our clients to support their transition,” said Sethlatswe. “This includes supporting the transition of clients in high-carbon sectors toward lower-carbon trajectories.”
While committed to net zero financed emissions by 2050, she said Standard Bank will publish updated climate targets, including for oil and gas, in March 2025.
A bank’s role in the climate crisis
Just Share underscores that the Paris Agreement sets a clear expectation: finance must be directed toward low-carbon solutions instead of high-carbon activities. Banks have a pivotal role in this — through their lending, investments, and advisory services, they can either drive climate action or contribute to the crisis by supporting fossil fuels.
Absa, FirstRand, Investec, and Standard Bank are signatories to the UN Environment Programme’s Principles for Responsible Banking, while Nedbank has opted to support the principles without formally signing.
Investec has also signed up to the UN-convened Net Zero Banking Alliance, which is founded on the recognition that “banks play a key role in society. As financial intermediaries, it is our purpose to help develop sustainable economies and to empower people to build better futures.”
Just Share highlights that while all five banks have adopted a policy which excludes financing of new coal-fired power generation, none of the banks has any exclusion for gas-fired power generation.
They said that this indicates, “that none of the banks has yet accepted the scientific fact that gas is not ‘clean’, nor the multitude of evidence that demonstrates that large quantities of gas are not necessary to address energy poverty or energy security in Africa”.
“Banks play an integral role in society,” Bhoolia, senior climate risk analyst at Just Share, told Daily Maverick.
“As financial intermediaries, banks have the potential to finance low-carbon sustainable economies and to empower people to build better futures.
“By actively engaging with the banks and demanding greater accountability, shareholders and investors have the potential to positively shift capital flows and build a more inclusive economy in South Africa.” DM
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