‘Absa to finance new coal projects under ‘extenuating’ circumstances’ 16 April 2020

Absa said on Thursday it would consider conditional funding of new coal-fired power projects, joining most of the country’s big banks still open to such lending despite pressure on the sector to help tackle climate change. This leaves the country’s lenders – some of the continent’s biggest banks – out of step with many peers elsewhere in the world who have committed to end direct finance for new thermal coal mines and coal plants. Nedbank is the only one of South Africa’s big four to make such a commitment.

In its policy on coal financing published on Thursday, Absa said it would only fund new-coal fired electricity generation under “extenuating circumstances” and strict guidelines, assessing against criteria including country commitments in national development plans and World Bank guidelines. “Through this policy and standard, and by working together with our clients and customers, we will continue to integrate sustainability into our strategy and operations to drive positive change,” Daniel Mminele, Absa’s Group chief executive, said. The bank added that the financing of new coal-fired industrial boilers or furnaces and projects using metallurgical coal will also be subject to enhanced due diligence, while standards for financing in other climate-sensitive sectors would be added in due course.

…South African banks, and many investors, argue countries like South Africa face a tension between protecting the environment and the social costs of doing so – it is reliant on its coal industry for growth, jobs and power. FirstRand’s corporate and investment banking arm, RMB, has said it recognises the importance of coal in the economy and it will continue supporting the sector financially. Standard Bank, meanwhile, published its policy on lending to coal-fired power projects in July last year, and added a policy on financing thermal coal-mining projects alongside its full-year results in March.