Absa to finance new coal projects under ‘extenuating’ circumstances

Adding such financing would be evaluated against criteria including the country’s national development plan and World Bank guidelines. 
Image: Moneyweb

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.

Competing priorities

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.

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.

COMMENTS   2

Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in to comment.

SIGN IN SIGN UP

“If you can’t change your mind – you are not using – beware the ‘’Ides of Corona’’ – it could destroy the economy!

The Corona Virus, together with the cost and availability of working capital after the recent Junk grading will also change everything the way we originally thought (some months ago), how we would stop picking the coal ‘’low hanging fruit’’!

I think it’s absolutely imperative that the Local Banks start ‘’syndicating’’ the risks etc., and start working together to get the energy (coal) sector up and running as soon as possible – load shedding post-Corona virus will be catastrophic!
“FirstRand’s has said it recognizes the importance of coal in the economy and it will continue supporting the sector financially” – Funny how other local banks don’t!

South Africa is part of the merging market and has large reserves of coal – we haven’t got long-term shortages hence no need for renewed interest in the expansion of nuclear power and renewable energy.
Solar and wind power have proved economical in small scale and specialized uses in SA but together account for only a tiny fraction of energy use to date.
I don’t think emerging market countries like sunny SA is at all concerned that the burning of coal in various power plants should be restrained by concerns about global warming and other environmental damages.
Technology has already alleviated some of these concerns, and given the limited range of alternatives, coal is likely to remain the major source of energy in the future of South Africa…

Extenuating circumstances, like when the stock price drops and income is needed? For example?

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

NEWSLETTERS WEB APP SHOP PORTFOLIO TOOL TRENDING CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company: