Standard Bank grilled on fossil fuel funding

Activist shareholders of Standard Bank put its board in the firing line at the company’s annual general meeting (AGM), over the lender’s decision to continue financing oil and gas projects.

South Africa’s largest bank by assets held its 54th AGM on Monday, at its Rosebank base in Johannesburg, where its stance on climate policy took centre stage.

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In defence, its group chairman, Nonkululeko Nyembezi, said the bank will continue to fund gas and oil projects in the short- to medium term, adding that its concern is growth on the African continent.

“We will not privilege sustainability at the expense of developing a poor country,” Nyembezi said.

“If we say we drive Africa’s growth, it becomes very difficult to articulate a case for how we get to do that without funding and really concerning ourselves about economic growth,” she explained.

Renergen funding

One of its latest transactions, which remains subject to conditions, is debt financing of $250 million to JSE-listed Renergen, which recently began construction on the second phase of its gas project in Virginia in the Free State.

Renergen highlighted the funding deal in a shareholder notice issued last week. The helium and gas producer said it also got approval for senior debt funding of $500 million from the United States International Development Finance Corporation.

The company’s Virginia gas project comprises exploration and production rights of 187 000 hectares of gas fields across Welkom, Virginia, and Theunissen.

The loans, Renergen said, are subject to various conditions.

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Among the investors that questioned Standard Bank’s financing to Renergen was the Centre for Environmental Rights’ Leanne Govindsamy, who heads up corporate accountability and transparency at the organisation.

Govindsamy queried whether the bank had done due diligence in relation to the project, which she criticised for having negative social and environmental impacts, and further asked whether the bank is risking shareholder value given the potential stranded assets related to this project.

But in Standard Bank’s view, funding Renergen’s said gas project in Virginia would not be misaligned with the lender’s climate policies.

The bank considers gas as a transition fuel, Kenny Fihla, CEO of Standard Bank’s Corporate and Investment Banking segment, said in response.

“On a high level, it conforms with our [climate] policy,” added Fihla.

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But Emma Schuster, senior climate risk analyst at shareholder activism organisation Just Share, says the bank’s stance on incorporating gas as a transition fuel is a “another convenient position that the bank has taken”.

“Some of the recent models are showing that a very small amount of gas may be necessary to account in a peaking capacity for some of the shortcomings of renewable energy,” Schuster said, adding that the bank is however using this fact broadly to permit itself to dive into major gas projects.

She said Standard Bank’s dogged view that there’s a balancing act required between Africa’s development and a just transition is problematic.

“The just transition is about African development – it’s not contrary to African development,” Schuster said.

Controversial project

Meanwhile, climate activists represented in part by Earthlife’s Makoma Lekalakala at Standard Bank’s AGM, picketed outside the venue, calling for the bank to stop financing fossil fuels – including the controversial East African Crude Oil Pipeline project (Eacop).

The Eacop project is a 1 443 km pipeline that will ferry crude oil from oil fields in Uganda to Tanzania.

Despite the bank’s financing of the project drawing criticism from green lobby groups, Standard Bank CEO Sim Tshabalala stood resolute.

He confirmed the lender acted as an advisor on the transaction and will be providing finance “directly for ourselves”.

“Our financing and our advice in the Eacop transaction is based on a fundamental belief by ourselves, that this is consistent with the strategy of the group, international norms on human rights and is in the interest of our clients and the Ugandan people and the Tanzanian people,” Tshabalala said.

Last month, Standard Bank issued an update on its climate policy and said that financing for renewable energy is now 439% greater than finance for non-renewable energy.

It channelled R55 billion towards sustainable finance transactions in 2022, exceeding its previously set target of R40 billion for the period. By 2026, the bank’s ambition is to have supported sustainable projects with between R250 billion to R300 billion in financing.

Listen to Just Share’s executive director Tracey Davies speaking on the MoneywebNOW podcast with Simon Brown (or read the transcript): 

You can also listen to this podcast on iono.fm here.