Nedbank signals its ambition to lead the future economy by exiting fossil feuls
22 April 2021
Nedbank’s new energy policy will see the bank make an orderly exit from fossil fuels over time while scaling up renewable-energy financing.
Nedbank is accelerating its efforts to finance renewable energy solutions to support socioeconomic development and build resilience to climate change. Today, on Earth Day, the bank announced the adoption of an energy policy designed to redirect investment funds towards cleaner energy alternatives and outlined its commitment, over time, to aligning its business strategy, policies, mandates and incentives with the Paris Agreement.
Nedbank will scale up its market-leading commitment towards the fast-growing renewable energy sector. In addition to the R50bn limits already committed to the South African Renewable Energy Independent Power Producer Procurement Programme, Nedbank will further its embedded generation financing to accelerate the transition and aims to achieve R2bn in financing by 2022.
Nedbank Chief Financial Officer Mike Davis says the bank has strong credentials in leading the change required to address climate change. ‘Banks play a central role in driving sustainable socioeconomic development for the benefit of all stakeholders, by directing capital where it is needed most. Nedbank’s financing choices can serve to accelerate the transition to a net-zero economy and contribute towards building climate resilience through the financing of adaptation measures.’
Nedbank has further committed not to provide funding for new thermal coal mines, regardless of jurisdiction, from 1 January 2025. Nedbank also announced that it will not directly finance new oil and gas exploration projects with immediate effect, and not advance any new finance for oil production, regardless of jurisdiction, from 1 January 2035.
Davis says: ‘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 and that an orderly exit from fossil fuel financing is necessary well before 2050, given the long lifetimes of the physical assets. Accordingly, Nedbank’s energy policy serves to guide the bank’s transition away from fossil fuels while still providing appropriate support to existing energy requirements.’ While Nedbank does see a potential role for natural gas in facilitating the transition to a zero-carbon energy system, it aims to have withdrawn fully from fossil fuel extraction activities by 2045.
The Sustainable Development Framework of the bank, based on the United Nations Sustainable Development Goals (SDGs), will continue to inform its understanding of how to close financing gaps and capture new business opportunities linked to creating a net-zero economy.
These opportunities include the provision of clean, affordable, safe and efficient energy services, as well as clean water and sanitation, nature-based solutions, sustainable cities, climate-resilient infrastructure and digital technologies, with both the positive and negative impacts of these activities being considered.
As the sustainability journey of the bank continues to grow and mature, Nedbank acknowledges that, in the context of the Paris Agreement and the mounting concerns of climate change and its impacts, much more needs to be done. The ultimate objective of the Paris Agreement, which was adopted globally five years ago, is to reduce net greenhouse gas emissions rapidly with the aim to avoid dangerous climate change.
Nedbank is committed to transparent disclosure of progress against climate-relevant performance targets and indicators, aligned with evolving global best practice. Accordingly, Nedbank endorses the guidelines of the Task Force on Climate-related Financial Disclosures (TFCD) on governance, strategy, risk management, metrics and targets, and will report progress annually. Disclosures will include both positive and negative impacts on the business, to allow for monitoring and assessing progress towards increasing positive impacts and reducing negative impacts, in absolute terms.
Our inaugural TCFD report, also published today, is available at nedbankgroup.co.za. For more information see the Nedbank Energy Policy.
