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Absa falls behind its peers in climate change policy, says Just Share

Absa says it aims to publish its oil, gas, mining, and updated coal financing standards in May.

Absa says it aims to publish its oil, gas, mining, and updated coal financing standards in May.

Published Apr 19, 2022

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NON-PROFIT organisation Just Share last week said that financial services provider Absa had fallen behind its peers in adopting policies relating to climate change and fossil fuel financing.

However, Absa said this was not the case.

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In a statement, Just Share said, after a promising start in 2020, when the Absa Group voluntarily included a “non-binding advisory vote on climate change risk and opportunity disclosure” in its March 31, 2020 Notice of AGM, the bank had not followed through.

“In April 2020, Absa published a ’Coal Financing Standard’, and in April 2021, it released its first stand-alone report on climate risk, partially aligned with the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD).

“However, policies relating to Absa’s oil and gas financing promised for the first half of 2021, and a mining financing standard, promised for the second half of 2021, have still not been published,” Just Share said.

In contrast, Nedbank, Investec, FirstRand and Standard Bank had all released a fossil fuel financing policy, the non-profit said.

Around the world, companies are under pressure to help reduce global GHG emissions by half by 2030 and aim to achieve “net-zero” emissions by 2050, which means releasing no more carbon into the atmosphere than is removed. Investors and investment vehicles are placing increasingly strict conditions on companies regarding sustainability and governance.

Just Share said it had sent Absa a draft non-binding resolution for discussion.

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“The resolution asked that the group disclose, in 2023, its plans to set and publish a strategy and short-term, medium-term, and long-term absolute contraction targets for its financed greenhouse gas (GHG) emissions from its exposure to coal, oil, and gas, on a timeline aligned with the goals of the Paris Agreement,” it said.

Financed GHG emissions are the emissions that banks and investors finance through their loans and investments – in other words, the emissions associated with the projects and entities to which they lend. The resolution, therefore, asked Absa to set targets to reduce its lending to the fossil fuel industry on a timeline consistent with keeping the global temperature increase to 1.5ºC above pre-industrial levels, Just Share said.

“In numerous public disclosures, Absa acknowledges that climate change poses a material financial risk to its business, and commits to aligning its strategy with the Paris goals. However, none of Absa’s disclosures provides measurable commitments that show how, and when, Absa will implement the alignment of its portfolio with climate science. It has not yet set, for example, any short, medium, or long-term targets to reduce its exposure to fossil fuels,” the organisation said.

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Just Share highlighted that significant absolute emission reductions by 2030 are crucial for limiting temperature rise to 1.5ºC.

“As one of Africa’s largest diversified financial services groups with a presence in 12 African countries, the Absa Group’s lending, investing, and other financial intermediary activities will influence the achievement of a just transition on the continent,” it said.

Alan Hartdegen, Absa head: investor relations and group sustainability, said in Absa group’s refreshed strategy, environment, social, and governance (ESG) was elevated further as a priority from the bank’s 2018 strategy.

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“Within this, managing climate change risks and opportunities are a key priority for Absa group,” he said.

Hartdegen said within the environmental pillar, some of the things the bank aimed for include becoming Africa’s leader in sustainable finance.

“We were the first South African bank to publish an ESG-related financing target, and we are South Africa’s leader in renewable financing to date. We are proactively incorporating climate change risk into our business. This includes establishing sustainability as a principal risk and building a risk team focusing on it both in 2020, rolling out an environmental and social management system in our approval process; and we will set an ambitious net-zero carbon emission target, with short, medium, and long term components,” he said.

Hartdegen said the bank aimed to publish its oil, gas, mining, and updated coal financing standards in May.

“These would be included in our second Task Force on Climate-related Financial Disclosures report,” he said.

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