Absa said on Thursday it would consider conditional funding of new coal-fired power projects, joining most of the country’s big banks still open to such lending despite pressure on the sector to help tackle climate change.
This leaves the country’s lenders – some of the continent’s biggest banks – out of step with many peers elsewhere in the world who have committed to end direct finance for new thermal coal mines and coal plants.
Nedbank is the only one of South Africa’s big four to make such a commitment.
In its policy on coal financing published on Thursday, Absa said it would only fund new-coal fired electricity generation under “extenuating circumstances” and strict guidelines, assessing against criteria including country commitments in national development plans and World Bank guidelines.
“Through this policy and standard, and by working together with our clients and customers, we will continue to integrate sustainability into our strategy and operations to drive positive change,” Daniel Mminele, Absa’s Group chief executive, said.
The bank added that the financing of new coal-fired industrial boilers or furnaces and projects using metallurgical coal will also be subject to enhanced due diligence, while standards for financing in other climate-sensitive sectors would be added in due course.
Many environmental campaigners say a commitment to ending funding for new coal-fired power projects is essential to meaningfully addressing the risk of climate change.
Many major banks have made such a pledge as they try to keep pace with growing demands also from activist investors for sustainability in their financing.
Even in countries like Poland, where coal is relied upon heavily in the energy mix and politicians are reluctant to abandon the sector, both private and state banks are gradually withdrawing financing. The country’s biggest lender PKO has said it will reduce its exposure to coal mining and not finance new coal power stations.
South African banks, and many investors, argue countries like South Africa face a tension between protecting the environment and the social costs of doing so – it is reliant on its coal industry for growth, jobs and power.
FirstRand’s corporate and investment banking arm, RMB, has said it recognises the importance of coal in the economy and it will continue supporting the sector financially.
Standard Bank, meanwhile, published its policy on lending to coal-fired power projects in July last year, and added a policy on financing thermal coal-mining projects alongside its full-year results in March.
In both cases, the policies said such activities are a key source of energy and growth for many of the countries in which it operates and as the continent’s biggest bank by assets it has to play a role.
South Africa’s Centre for Environmental Rights said at the time such a “business as usual” approach was disappointing and irresponsible.