Both global and South African asset managers and financial institutions with assets exceeding $50 billion are adopting policies to halt investments into fossil fuels.
This as market investors are also pushing for more investments into renewable projects as part of the global de-carbonisation move.
As government and business leaders head to Dubai for the 2023 UN Climate Change Conference (COP 28) from the 30th of November, the topic of coal exclusion policies will be high on the agenda.
Clean energy solutions
As efforts towards an energy transition accelerate globally, financial institutions are investing more in clean energy solutions.
This as market investors are putting pressure on asset managers to invest their money towards environmentally friendly energy solutions.
A report by the Institute for Energy Economics and Financial Analysis shows that more than 200 financial institutions globally, including South African banks, have established coal exclusion policies.
Makwe Masilela of Makwe Fund Managers elaborates says, “Asset managers as you will know are managing funds that belong to other people. So, now you’ve got trustees and pension funds also (putting) pressure to say we want more of a cleaner environment and it’s all because of the pressures that we have when it comes to climate change. Also with the banks, that money doesn’t belong to them, it belongs to depositors, so there’s pressure as well. But let’s be honest – the good money has already been made when it comes to fossil fuels. If you had to compare that kind of an investment in coal compared to renewable energy, most probably you’ll make better returns when it comes to renewable energy.”
SA energy transition
Amid the country’s energy crisis, the South African government has confirmed that it will slow down its planned decommissioning of coal-fired power stations.
It has emphasised that the energy transition will be at the pace and scale which suits the country’s energy needs.
Chief of Strategy & Sustainability at the Association for the Advancement of black Accountants (ABASA), Punki Modise says, “We are on a transition and transition doesn’t mean shutdown everything today. People still have to live; we have to take care of peoples’ livelihoods in order for them to survive the transition. So, my sense is that we have to focus on green energy solutions and ensure that we implement them. If I look at ABASA as a case in point is that we are working very hard to ensure that we can implement some of the quick wins which relate to renewables and to that extent, if I look at the funding that we extended, we’ve extended in excess of R50-billion just on funding green energy solutions.”
International Partner Group comprising of the United States, the United Kingdom, France, Germany and the European Union, have pledged to support South Africa’s Just Transition with around R164 billion in financing.
The pledges are made up of concessional and commercial loans, as well as grants and guarantees.
