FirstRand to continue funding some coal projects, but aims for disinvestment

Financial services provider FirstRand [JSE:FSR] says it will continue to fund some coal projects, but is committed to longer-term disinvestment from coal due to climate change concerns.   

The group's chairperson, Roger Jardine, said FirstRand would "consider thermal coal financing for new capacity", subject to international emissions standards. 

"However, because we consider these projects sensitive and high risk, we will limit that financing to below 0.5% of our total loans and advances," he said in his chairperson's letter in the group's recent annual report.  

Coal 'non-strategic'

Jardine said FirstRand's total coal portfolio, including new coal financing, would be limited to below 2% of total group loans. "This means lending to the coal industry is now non-strategic for the group and we are committed to a longer-term thermal coal divestment strategy."

He said it was right that financial institutions lending to the energy sector were coming under increasing scrutiny, saying the science for climate change was compelling.  "No one can deny the evidence, as polar ice caps and glaciers millions of years old melt before our eyes."

But he added it was not sensible to advocate for either an "immediate withdrawal from coal" or for forcing banks to invest in coal. Coal still played a key role in the country's energy generation mix. In addition, SA earned R80bn from coal exports in 2018, and coal mining and related industries employ about 285 000 people.  

"The reality in South Africa, and many other emerging markets, is that coal capacity is still needed in the short to medium term, particularly when balancing social, economic and environmental considerations". 

In late November, when FirstRand holds in annual general meeting in Sandton, shareholders will get to a vote on a few climate change related resolutions. These include making public by October 2020 the assessment of its exposure to climate change related risks, and publishing its official policy on lending to fossil fuel-related projects. 

Minister of Energy and Mineral Resources Gwede Mantashe, meanwhile, on Tuesday announced at a wind conference in Cape Town that the country's long-term plan for electricity generation will be tabled before Cabinet next week. The final Integrated Resource Plan will lay out the state's timetable for the decommissioning of coal-fired power plants, in addition to projections for future energy generation, electricity demand, costs and the role of renewables. 

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