Standard Bank gets a spank from activists and groupings Just Share, BankTrack and StopEACOP
The bad boy of financiers, Standard Bank, has been nailed by activist groupings Just Share, BankTrack and StopEACOP for continuing to tease with the idea of funding carbon-intensive projects. This, while the rest of South Africa's big banks – FirstRand, Nedbank, Absa and Investec – have opted out of the project. Standard Bank has yet to confirm its participation.
French and Chinese oil producers Total and Cnooc penned the final investment decision in a massive R150bn East African Crude Oil Pipeline project. Although Standard Bank is yet to commit to funding, it has said funding remains subject to an environmental due diligence process and meeting the requirements of the Equator Principles. It comes at a time when the world is looking to reduce its exposure to fossil fuel-related assets in a bid to transition to a greener economy.
However, the path to a greener economy has become increasingly tricky as environmental, social and governance requirements have become more stringent. Banks and asset managers are under pressure to abide by mandates that restrict funding and optionality for these fossil fuel-related businesses. This has led to unprecedented commodity shortages, at least according to Goldman Sachs' head of commodities research, Jeff Currie, who says this is unlike anything he has ever seen in his 30-year career.
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To get a better understanding of the subject, I had a conversation with climate risk analyst Emma Schuster from Just Share with the aim of trying to get a balanced view. Many commodities, especially oil and energy markets, have had supply-demand imbalances, which have led to prices surging. It is simple economics; when demand is strong and supply is limited, prices increase. The world is in a transitioning phase when it comes to oil and energy and understanding the need for change is important; however, balancing that with keeping the lights on is just as important. It isn't the time to go dark on all fossil fuel projects. Funding for existing projects is still critical for supply. Just Share's argument lies with new projects, over which Standard Bank is mulling its participation. I've transcribed two interesting snippets from our conversation below.
Emma Schuster on Standard Bank's participation in carbon-intensive projects
Standard Bank is the biggest. It's self-proclaimed, the largest funder of oil and gas on the continent. It is also a major participant in other carbon-intensive projects. I don't know the numbers and how that would compare with the other banks, but what I do know is that it is the most exposed to fossil fuel assets.
On the balancing act of transitioning to renewable energy whilst keeping the lights on:
It is a false pretence that is often brought up; that it's either new fossil fuel projects or the lights are switched off. That's not at all what we talking about. What all the activists and energy experts are talking about is this transitionary period that we are in. The longer we leave it and the more we explore new fossil fuel projects, it makes it more likely the lights will switch off. If the world is going to meet the commitments governments have made and we actually want to survive, our dependency on fossil fuels has to end. What we ask for at Just Share is about transition plans. It's about policies that recognise this reality and [define] and set targets with strategies on how we are going to do that without having to switch off the lights.
It's a balancing act. It's important to not get overly emotional any which way you look at it. The transition will take time and fossil fuels will still be around for time to come. And if we usher them out too early, without a viable solution, the repercussions could be dramatic.
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