- Nedbank has adopted a new energy policy, directing more of its investment towards renewable energy sources
- The bank decided not to directly finance new oil and gas exploration projects with immediate effect
- Banks have faced increased scrutiny from environmental activists over the past few years regarding their decisions to continue financing fossil fuel projects
Nedbank has adopted a new energy policy which will see the bank redirect more of its investment towards renewable energy sources and gradually exit from fossil fuels.
On Thursday, the green bank announced that it has decided not to directly finance new oil and gas exploration projects with immediate effect.
It will also not provide new finance for oil production from 1 January 2035 or fund new thermal coal mines from 1 January 2025, regardless of where they are located. Its new policy will affect natural gas too. The bank said that while it sees a potential role for natural gas in the transition to cleaner energies, it wants to withdraw entirely from fossil fuel extraction activities by 2045.
"As part of Nedbank's journey as a purpose-led business, in using our financial expertise to do good, the bank recognises that meeting the Paris Agreement objectives will require, among other things, full decarbonisation of the global energy system by mid-century," said the bank's CFO, Mike Davis.
Banks have faced increased scrutiny from environmental activists over the past few years regarding their decisions to continue financing fossil fuel projects. The mounting pressure forced Standard Bank, Absa, Investec, and FirstRand to develop new coal financing policies that place stricter parameters on the funding of new coal-fired power.
But Nedbank is the only bank that environmental activists like Just Share hailed for going far enough to address climate-related risks through its financing policy.
During Thursday's announcement, which coincided with Earth Day, Davis said it was necessary to start an orderly exit from fossil fuel financing well before 2050. Many countries that signed the Paris Agreement in 2016 are chasing net-zero emissions target by 2050. In South African, the Cabinet also approved a Low Emission Development Strategy last year, which also targets net-zero carbon emissions by 2050.
Nedbank said its new policy will still ensure that appropriate support is given to existing energy requirements while the bank orderly transition away from fossil fuels.
The most ambitious energy policy
Reacting to the news, Just Share said Nedbank's energy policy was by far the most ambitious of any South African bank and the Mike Brown-led company seemed to have set a global leadership standard among large commercial banks by aiming for zero fossil fuel exposure.
"Nedbank does not simply pay lip service to the goals of the Paris Agreement, but demonstrates, through its Energy Policy and Climate Change Position Statement, that it understands the implications of the Paris Agreement, and of climate science, for its financing," wrote Just Share in a statement.
The shareholder and environmental activist organisation added that Nedbank was already the only South African bank to have completely excluded the prospect of funding coal-fired power plants. Just Share applauded the bank for not repeating the narratives put forward by some of its peers, that continued funding of fossil fuels was necessary for energy security in Africa.