Standard Bank has become the first listed company in South Africa to ask shareholders to vote on whether they believe the bank should be more transparent about its exposure to climate change risk. This relates specifically to its lending, financing and investment activities.
The proposed resolution was published in the group’s notice of its upcoming AGM, released last week. It was proposed by the Raith Foundation and shareholder activist Theo Botha, with support from advocates for responsible investing, Just Share.
Despite tabling the resolution, the Standard Bank board has surprisingly recommended that shareholders vote against the resolution.
“The resolution is asking the bank to provide more disclosure on the carbon risk exposure of its lending portfolio,” says Tracey Davies, executive director of Just Share. “Shareholder proposals on climate risk, the environment and other social issues are common in the US, UK and some European countries. Shareholders there have moved on to proposing that companies introduce measures to cut their emissions. But here in South Africa, this is uncharted territory. Standard Bank’s move shows exceptional leadership.”
Last year Raith and Botha attempted to table a climate risk resolution ahead of the Sasol AGM. While the Companies Act permits shareholders to table resolutions for voting at the company’s AGM, Sasol refused. This was based on a legal opinion, which it had commissioned but did not divulge, to the effect that climate change issues do not constitute matters that shareholders are entitled to exercise voting rights on.
‘Very much’ a shareholder issue
“This is very much a shareholder issue,” says Davies. “There is sufficient evidence that climate change poses immediate and long-term financial risks to many companies. Investors are increasingly aware of the physical impact of climate change – just look at Mozambique – which can have huge knock-on consequences for companies.”
Standard Bank, like its peers, is grappling with climate change and its associated risks and recently announced that it would only provide finance for coal-fired power stations within a certain set of parameters.
Nedbank went a step further when in January it announced a clean break away from financing coal-fired power plans by committing to not finance Thabametsi and Khanyisa, which form part of the first round of South Africa’s Coal Baseload Independent Power Producer (IPP) Programme.
This went further than the bank’s 2018 declaration that it would no longer provide project financing for coal-fired power stations, which specifically excluded the above-mentioned coal IPPs it had committed to.
Oil companies familiar with these pressures
Globally the oil majors have become accustomed to shareholders campaigning for them to reduce their carbon footprints. In February BP’s board agreed to back a shareholder resolution at its annual meeting this year that would force the company to align its business strategy with the goals of the Paris Agreement on climate change.
The move comes after shareholders passed a motion in 2015 that asked the company to improve its corporate reporting and transparency on climate change-related risks.
Similarly, a group of Amazon shareholders has filed a formal shareholder resolution requiring the tech company to create a plan to move to green power sources. In this case, the board intends to advise shareholders to vote against the resolution at the AGM, which is planned for May.
What this could mean for Standard Bank
If more than 50% of its shareholders vote in favour of the resolution, Standard Bank will have to report to shareholders its assessment of the greenhouse gas emissions resulting from its financing portfolio and its exposure to climate change risk in its lending, investing and financing activities.
This includes the amount and percentage of carbon-related assets relative to total assets, and a description of any significant concentrations of credit exposure to carbon-related assets. The bank will also be required to adopt and publicly disclose a policy on lending to coal-fired power projects and coal mining operations.
The AGM is scheduled for May 30, and all eyes will be the Government Employees Pension Fund, which holds 12.3% of the bank and is the second largest shareholder after the Industrial and Commercial Bank of China, with 20.1%.