Standard Bank leads Africa's shift toward sustainable economic practices
Standard Bank is steering the economic future of Africa toward sustainable practices. Standard Bank Group, renowned for its extensive presence across the continent, has pledged to spearhead a fair energy transition.
According to the World Economic Forum, global climate finance flows surpassed an estimated $2 trillion in 2023, remaining well short of what is needed to achieve net-zero emissions, estimated at more than $8 trillion per year). Global climate finance flows have surged in recent years.
In Africa, Standard Bank is steering the continent's economic future toward sustainable practices. Standard Bank Group, renowned for its extensive presence across the continent, has pledged to spearhead a fair energy transition in Africa.
The financial giant aims to attain net-zero emissions in its financed portfolio by the year 2050, aligning with global environmental goals. Standard Bank has committed to mobilising more than R250 billion in sustainable finance by 2026, reporting progress as of December 2023 of R105 billion. This includes financing R50 billion for renewable energy power plants and underwriting a further R15 billion by the end of 2024.
This shift is important within an African continent where we’ve seen severe drought that has been declared as a national disaster in Zimbabwe, Zambia, and Malawi, and the El Niño phenomenon that is gripping Southern Africa and affecting summer grains.
“By transitioning to a greener economy, mitigating the impact of climate change and ensuring we are capable of adapting to the impacts of climate change, Africa stands to benefit tremendously in the long run as financing this transition will reduce the frequency and severity of, and reduce the impact of climate-related disasters,” says Sasha Cook, Standard Bank Head of Sustainable Finance.
The bank is not just focusing on ‘greening’ its operations but is also influencing the broader economy by choosing to finance and invest in businesses with robust net-zero emission strategies.
Committing to achieving net zero within their operations is valuable, but where they have the most significant impact is in the assets or businesses they choose to finance or invest in.
“Financing businesses with credible strategies to achieve net-zero emissions targets can have a real and lasting impact in the fight against climate change, which has become a global imperative because of its far-reaching impact on the environment, economies, and society,” says Cook.
An important part of decarbonisation in Africa is taking into account the socio-economic realities of the continent and the need for reliable and affordable energy.
“To this end, Standard Bank’s climate policy is being implemented in a phased manner. The aim is to use complementary mechanisms which include targets to reduce exposure to certain sectors and activities over time, specifically high-emitting sectors such as oil and gas and thermal coal. In March 2024, Standard Bank also published baseline financed emissions for the upstream oil sector, an important milestone in tracking and monitoring the bank’s financed emissions,” Cook says.
Transition Finance
Another key player in the green economy, which remains underdeveloped in Africa, is transition financing, which is investments meant to decarbonise high-emitting and hard-to-abate industries such as steel, aviation, and shipping.
“Transition finance can help facilitate a move away from high carbon emitting methods of production to more climate-friendly methods, whether it be within a sector such as aviation or cement where players seek a pathway to achieving lower carbon emissions, or a transition away from an industry such as coal mining with its carbon-heavy activities towards more future-proof climate-friendly activities such as renewable energy,” says Cook.
Decentralised Energy
In the burgeoning sector of decentralised or off-grid energy, significant prospects are emerging. Numerous leading industrial firms and mining corporations are collaborating with external partners to construct their renewable energy facilities.
This strategic move aims to secure a reliable energy supply and diminish its environmental impact by reducing carbon emissions.
“A recent example is where we facilitated R4 billion in financing for energy company Seriti Green, a subsidiary of Seriti Resources, to fund a 150MW wind farm, currently the largest wind farm in the country in Mpumalanga, which will provide clean and reliable energy to Seriti Resources,” Cook explains.
Funding the Just Energy Transition
One of the most important things for Standard Bank in the evolution towards a cleaner, greener energy future is mitigating any potential negative social impacts and increasing sustainable jobs. This is called a just energy transition (“JET”).
“The JET Implementation Plan published in 2023 estimates the cost of financing the just energy transition (2023-2027) at almost US$100 billion (approximately R1.5 trillion). This is a staggering amount that will require all financial stakeholders, including the government, financial institutions, private investors, development finance institutions, concessional funders, and donors, to get involved. Many of the initiatives highlighted as being required by the JET IP (such as skills development, and municipal capacity) are not always commercially bankable. Therefore, a greater focus on blended finance is needed if the just energy transition is to succeed,” Cook says.
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