Nedbank makes pioneering ‘zero fossil

Simultaneously, Nedbank said it would scale up its renewable-energy commitments, announcing a target for R2-billion-worth of embedded-generation financing by 2022, in addition to the R50-billion already committed to South Africa’s Renewable Energy Independent Power Producer Procurement Programme, which resumed this month following a seven-year interruption.

CFO Mike Davis argued that the bank’s financing choices could serve to accelerate the transition to a net-zero economy and contribute towards building climate resilience through the financing of adaptation measures.

Besides its withdrawal from all coal project financing by 2025, the new policy includes the following undertakings:

not to provide financing to thermal coal mines outside of South Africa with immediate effect;
to restrict total financing in aggregate for coal mining companies, infrastructure-related to thermal coal, and trade related to thermal coal to less than 1% of the group’s total advances, with this decreasing to 0.5% by 2030;
-not to finance new oil and gas exploration projects directly with immediate effect;
-not to provide any new financing for oil production, regardless of jurisdiction, from January 1, 2035;
-not to provide financing to any new coal-fired power stations, regardless of technology or jurisdiction; and
-not to provide financing for new utility-scale or embedded oil-fired power generation, unless it is integrated as backup supply to renewable generation projects.

While the new policy prevents the bank from financing new gas exploration projects, it does still allow for the continued financing of natural gas production “where it will play an essential role in facilitating the transition to a zero-carbon energy system by 2050”.

Nedbank will not provide financing for new utility-scale or embedded gas-fired power generation from January 1, 2030, unless these are for renewable generation projects with integrated gas-fired backup supply, the conversion of existing coal- or oil-based generation to gas, or for mid-merit or peaking capacity.

“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see a potential role for natural gas in facilitating the transition to a zero-carbon energy system, it aims to have withdrawn fully from fossil-fuel extraction activities by 2045,” the JSE-listed group said in a statement.

The bank also committed to report on its actual exposure to thermal coal, upstream oil, upstream gas and power generation financing activities as part of it results, as well as to track the transition away from fossil fuel financing, in line with the goal of a zero-carbon energy system by 2050.

Commenting on the announcement, shareholder activism organisation Just Share describe Nedbank’s energy policy as “by far the most ambitious fossil-fuel financing policy of any South African bank”.

It added that the policy also appeared to set a global leadership standard among large commercial banks, by avoiding the adoption of the standard ‘net zero by 2050’ target, and instead aiming for “zero fossil fuel exposure by 2045”.

“We hope that [Nedbank’s] approach will provide a much-needed impetus to other financial institutions to set meaningful, climate science-based decarbonisation targets and fossil fuel financing exclusions,” Just Share climate change engagement director Robyn Hugo said in a statement.

“We also call on all banks to abandon the narrative that the growth of fossil fuels is required for increased energy security and poverty reduction in Africa.”