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Shareholders call on Standard Bank to table advisory resolution on climate risk

Shareholders call on Standard Bank to table advisory resolution on climate risk
Mining News Pro - Three Standard Bank asset manager shareholders, together with shareholder activist organisation Just Share, have co-filed a nonbinding advisory shareholder resolution ahead of the bank’s annual general meeting (AGM) on May 27.

In the nonbinding advisory resolution, the shareholders – which include asset manager shareholders Aeon Investment Management, Abax Investments and Visio Fund Management – make a number of recommendations.

To promote the long-term success and sustainability of the company, the shareholders are recommending and requesting that the company and its directors include, in its reporting to shareholders for the year ending December 31, 2021, the company’s plans, if any, to set and publish a strategy and short-, medium-, and long-term targets, to reduce its exposure to fossil fuel assets on a timeline aligned with the goals of the Paris Agreement.

Standard Bank has not yet indicated whether it will table the resolution at the AGM.

The resolution was filed in response to Standard Bank having released a Coal-Fired Power Finance Policy in July 2019 and a Thermal Coal Mining Policy in March 2020.

In December 2020, the bank released its first climate-related financial disclosures report, guided by the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), as well as a Fossil Fuels Financing Policy.

Standard Bank’s reporting acknowledges that climate change is material and poses significant risks, including to its ability to generate value for its shareholders over time. In each of the TCFD report, the Fossil Fuels Financing Policy and the Thermal Coal Mining Policy, Standard Bank also states that it supports the goals of the Paris Agreement.

However, the shareholder lamented that none of the bank’s disclosures “provide any strategy or measurable targets that show how, and when, it will align its financing with this stated commitment to the Paris Agreement goals”.

This is in stark contrast to Nedbank, for example, which recently released an Energy Policy targeting zero fossil fuel exposure by 2045, and which includes specific short-, medium-, and long-term deadlines for doing so, the shareholders say.

“To better appraise the long-term investment proposition, investors require more information to understand what steps Standard Bank is taking, if any, to reduce its exposure to fossil fuel assets in the short-, medium- and long-term, on a timeline aligned with the Paris Agreement goals.”

Following Standard Bank’s refusal to table a climate risk-related shareholder resolution in 2020, Just Share has received a legal opinion from Advocates Tembeka Ngcukaitobi and Chris McConnachie, on shareholder rights to file climate risk-related resolutions.

The opinion concludes that, within the Companies Act, Section 7 specifies that the Act must be interpreted in a manner that promotes compliance with the Bill of Rights, and in accordance with a number of other purposes of the Act, including encouraging transparency and high standards of corporate governance.

“Climate change is a serious human rights issue, which poses particularly severe risks to South Africa’s ability to develop in a sustainable and inclusive manner,” the opinion stated, adding that the aims of promoting transparency, sound corporate governance and balancing the rights of shareholders and directors, would all be best promoted by allowing shareholders to call for further information, particularly on climate change and environmental, social and governance (ESG) issues.

Additionally, the international movement towards greater corporate disclosure of greenhouse-gas (GHG) emissions, climate risk and strategies and targets for decarbonisation, shows that disclosure is viewed as a necessary requirement, both to protect human rights, as well as to safeguard shareholders’ investments.

“Barring shareholders from proposing any resolutions on climate change and ESG matters would not best promote the Bill of Rights or the purposes of Section 7 of the Companies Act and would be out of step with the company laws in other comparable common law countries,” the opinion further said, adding that “directors do not have a unilateral discretion to refuse to table shareholder-proposed resolutions on content-based grounds”.

They added that if there are disagreements over the validity of a resolution, those disagreements should “arguably be aired at the shareholders’ meeting and put to a vote”, adding that, at the very least, “directors should go to court to seek an order blocking the resolutions”.

Considering that the courts are likely to find that shareholders are entitled to file binding resolutions relating to disclosure on climate change matters, Just Share climate change engagement director Robyn Hugo says “Standard Bank is Africa’s biggest lender by assets, and it is poised to facilitate significant fossil fuel expansion on the continent. This is at odds with the bank’s repeated statements that it is committed to the Paris Agreement goals”.

Without a strategy and measurable targets, Hugo laments that it is “impossible for shareholders to evaluate the strength of the bank’s commitments to align its lending activities with the Paris Agreement”.

The nonbinding resolution calls for the bank to disclose whether it has any such strategy and targets, Hugo explains, adding that “there is no reason why Standard Bank should not already have agreed to table it and embarked on the administrative process of notifying shareholders of the change to its proxy voting form”.

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