As the 28th Conference of the Parties (COP28) approaches, South African banks are being put to the test to see how effectively they manage climate risks. A recent report by Just Share, an NGO focused on climate change, reveals the progress made by the country’s big five banks in addressing climate risks but also highlights the need for further action.

Just Share has been analyzing and engaging with South African banks for the past five years, examining their commitment to fighting climate change. The goal of the report was to provide customers with the tools to assess the banks’ actions in relation to climate change.

The report assessed the banks across 20 indicators and established a rigorous methodology for the analysis. While the overall findings showed some progress, with none of the banks doing enough, the highest scoring bank received a score of only 60 percent.

One key finding of the report was the impact of governance on climate risk management. Banks with better climate competence on their boards tended to perform better across all indicators. This highlights the importance of having relevant expertise and minimizing climate conflicts within the boardroom.

Emma Schuster, Senior Climate Risk Analyst at Just Share, stated, “The overall thing is that the banks are making some progress, but they have a long way to go to properly align their climate integration with their commitments and with the goals of the Paris Agreement.”

The report also pointed out the banks’ lack of progress in recognizing and acting on climate risks related to fossil gas. Schuster argued against the argument that increased investment in fossil fuels would benefit development outcomes in South Africa. She emphasized that South Africa has a high emissions profile and a high rate of inequality, and investing in fossil fuels is not the solution to these issues.

Schuster also highlighted the opportunity for South Africa to transition to cleaner and more inclusive energy systems. The falling costs of renewable energy and the global transition away from fossil fuel-based economies present a huge opportunity for the country to reimagine and revitalize its energy sector.

While acknowledging the exposure of South African banks to fossil fuels due to the structure of the country’s economy, the report emphasized the importance of an orderly and just transition away from fossil fuels. It called on banks to plan and prepare for the future, taking into account the needs of workers and communities dependent on fossil fuel systems.

The findings of the report provide valuable insights for customers looking to assess the climate risk management of South African banks. With COP28 just around the corner, the report serves as a reminder of the importance of addressing climate risks and aligning actions with global goals. It is a call to action for banks to prioritize climate risk management and contribute to a sustainable and just future.