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16 April 2020
Absa Group Publishes Sustainability Policy and Standard on Coal Financing
Absa has published its updated sustainability policy and standard for financing coal, affirming the group’s commitment as a responsible financier to address the negative impacts of climate change.
The updated policy and standard apply the Principles for Responsible Banking (PRB), which is the framework that establishes the role of the banking industry globally in helping to meet the objectives of the United Nations Sustainable Development Goals (SDGs) and the 2015 Paris Climate Agreement. Absa became a founding signatory to the PRB in September 2019.
“As a leading African bank, we recognise the impact of climate change and believe that we can play a shaping role in enabling sustainable economic and social development for the societies in which we operate. 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,” says Daniel Mminele, Absa’s Group Chief Executive
The accumulation in the atmosphere of greenhouse gases, especially those resulting from burning of fossil fuels such as coal, has been found to be the predominant cause of global warming and climate change. As a result, Absa will not fund new coal-fired electricity generation unless under extenuating circumstances that will be governed under strict guidelines.
Effective immediately, projects requesting this type of funding will be evaluated using the following enhanced due diligence criteria:
- The Equator Principles;
- The OECD export credit eligibility criteria based on country, technology and plant size;
- Country commitments in their national development plans and nationally determined contributions to the Paris Climate Agreements;
- The World Bank Environmental, Health and Safety guidelines;
- A climate-related transition risk review to consider the project’s impact on water quality and availability, and air pollution; and
- Independent advisors will assess feasible and cost-effective options to reduce project-related greenhouse gas emissions.
Absa encourages renewable energy technology such as wind and hydropower as a viable means to meet Africa’s power needs.
“We are already a leading player in financing the continent’s renewable energy, and we plan to intensify our focus on funding renewable energy projects that are environmentally, socially and economically feasible,” says Mminele.
Financing of new coal-fired industrial boilers or furnaces and projects using metallurgical coal will also be subject to enhanced due diligence.
Absa will continue to finance existing coal sector clients while supporting them to transition to more sustainable business models. Greenfield coal mining projects will not be financed unless they meet Absa’s enhanced due diligence criteria.
Absa will add standards for financing other climate-sensitive sectors in due course.