South Africa’s biggest banks are still not progressing quickly enough on climate action, according to a new report by Just Share, a non-profit organisation that focuses on responsible investment for environmental change and the elimination of inequality.
Its report, “How co-profitable is your bank in 2024” found that even the highest-scoring bank, Nedbank, achieved only a 65% score, a statement from the organisation said yesterday.
All the major banks in South Africa have committed to achieving net-zero by 2050, which will involve decarbonising their portfolios and adopting clear investment policies for high-emitting sectors. The banks have also become actively involved in financing renewable energy projects and are the major funders.
“The low scores across all five of the biggest banks suggest that none is tackling climate risk robustly when assessed against the goals of the Paris Agreement (on Climate Change that was agreed by 196 countries in 2015),” said Karishma Bhoolia, senior climate risk analyst at Just Share.
“The incremental signs of progress are vastly insufficient, given the urgency and extent of what climate science requires.”
Some of the key findings included that financial flows still fell far short of the levels needed to meet climate goals.
Standard Bank was the lowest-scoring bank for the second year in a row, scoring only 27% and again scoring 0 out of 20 points in the governance and strategy category.
Nevertheless, as with all the banks except for Investec, Standard Bank’s score improved. It had introduced a target for reducing its exposure to fossil fuels, improved the share of renewable energy in its overall lending, and had begun disclosing its exposure to fossil fuels.
“The lack of progress since our 2023 assessment… 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,” Bhoolia said.
FirstRand is the only bank to decrease its fossil fuel exposure in the year of assessment.
Absa introduced a target to reduce exposure to fossil fuels, improving its score.
Investec is the only bank with a lower score than last year due to its increased exposure to fossil fuels - a reversal from its decreased fossil fuel exposure in 2023.
Only Absa and Nedbank had disclosed partial strategies for meeting their emission reduction targets. The failure to define decarbonisation pathways with clear milestones and targets undermined their ability to deliver on their net-zero commitments.
No bank had introduced any new exclusions or meaningful limitations on their financing for fossil fuels.
All the banks have increased the share of renewable energy in their overall energy financing.
While disclosure of scope 3 financed emissions was gradually improving, none of the banks had fully disclosed its scope 3 financed emissions.
It is the second year that Just Share analysed the most recent climate-related disclosures, policies and practices of Absa, FirstRand, Investec, Nedbank, and Standard Bank.
The report evaluates the extent to which these banks disclose, manage and integrate climate risks and opportunities into their financial decision-making, and the extent to which their lending and investment activities support their stated commitment to the goals of the Paris Agreement.
The assessment was conducted across fossil fuel exposure, emission reduction targets, governance and strategy, and sustainable finance, and comprised 20 indicators in total with a maximum score of 85 points.
Overall, the gap between the leaders and the laggards had decreased this year, due primarily to the laggards making some improvements while leaders have largely stalled in their progress.
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