Absa Group, Africa’s largest funder of renewables, has announced its long-term ambition to reach Net Zero state by 2050 for scope 1, 2, and 3 emissions.
According to the bank, supporting a transition to a low carbon economy is underpinned by the Group’s aspirations to be an active force for good in everything it does, prioritising business activities that have the most positive environmental, social, and economic impact, while mitigating negative impacts.
Announcing the target, Punki Modise, Absa Group Chief Strategy and Sustainability Officer, said, “While we recognise Africa’s particular vulnerability to climate change, our approach to Net Zero also takes cognisance of the development needs of Africa’s people”.
“Our Net Zero declaration underpins our belief in and support for a Just Transition. The transition to a resilient and sustainable economy must be inclusive and equitable for communities, investors, and industries and leave no one behind. We are committed to mobilising the resources necessary for supporting our clients’ energy transition, thereby reducing their carbon emissions and, ultimately, those of the countries in which we operate.
“Our commitment to entrench environmental, social and governance (ESG) principles throughout our business underpins this support, as we believe that ESG is vital for delivering real long-term value and our purpose of empowering Africa’s tomorrow, together …one story at a time.”
Punki Modise
Absa Group, meanwhile, recognised its contribution to a sustainable future and the extent to which its business needs to reflect that in the operating choices that it makes. As such, the Group continues its journey towards a group-wide target to reduce operational emissions by 51.0% from 2018 levels by 2030. “The Group is on track with this target and has achieved an overall reduction of 21.3% to date. The Group commits to setting near and long-term scope 1 and 2 targets and having these targets validated by the Science-based Targets initiative (SBTi),” Punki Modise said.
Sectoral Targets on Financed Emissions
Under the sectoral targets in financed emissions, the group indicated that it supports diversifying electricity and energy supply, and strive for a balanced energy mix, supporting clients through the energy transition.
“Funding of the sector will be in line with the Group’s Coal Financing Standard, which provides a framework for addressing Absa Group’s sustainability risks and disclosures. Coal credit exposure as a percentage of the Group loans and advances to customers (including off-balance sheet items) was 0.04% in 2022. We expect to reduce the coal credit exposure limits from 0.20% in 2023 (2022: 0.20%) to 0.11% in 2030, with further reductions to 0.06% in 2040 and 0.03% in 2050.”
Punki Modise
Under Oil and Gas, Absa said its credit exposure limits to the oil sector are expected to peak at 1.41% of Group loans and advances to customers (including off-balance sheet items) in 2023 (2022: 1.03%). Thereafter, it targets a significant reduction to 0.46% in 2030, 0.22% in 2040 and 0.04% in 2050. The bank noted that as it considers gas as a transition fuel, the trajectory of its lending targets differ from oil and coal.
“Our gas sector Group loans and advances to customers (including off-balance sheet items) are expected to exceed oil by 2027. We expect our total credit exposure limits to the gas sector to increase to 0.60% in 2023 (2022: 0.51%) and to peak at 0.83% in 2030. Thereafter, we target a material reduction to 0.52% in 2040 and 0.32% by 2050.”
Punki Modise
Moreover, under wind and solar energy, Absa Group celebrates being the first bank in South Africa to announce its plan to mobilise a cumulative R100 billion of sustainable finance by the end of 2025. Its Relationship Banking unit in South Africa aims to finance R2.5 billion of embedded renewable power by 2025. The Group expects to grow its renewable energy lending at a compound annual growth rate of 26% by 2025, doubling the lending commitment over the period.
In addition, the Group, through its Vehicle and Asset Finance division, commits to support the adoption of New Energy Vehicles (NEV), taking into account the charging and other infrastructure needs for both in-home and on-the-road usage.
Progress to date in Financing the Low-Carbon Energy Transition
Absa Group has made significant strides in delivering against its sustainability agenda and cemented its position as Africa’s leading bank in renewable energy financing. The Group issued its first green bond (Africa’s first certified green loan), published its Sustainable Financing Issuance Framework, and closed a $400 million sustainability-linked term loan facility.
The Group invested in the African Rainbow Energy platform with an initial cash investment of R500 million and by transferring R5 billion of its existing renewable energy assets. This investment aligns with the Group’s commitment to renewable energy and the green economy, and it brings expertise in renewable energy financing, thus creating South Africa’s largest, black-owned, renewable energy fund.
Additionally, the Group has delivered a landmark transaction with Harmony Gold Mining Company Limited which it believes will be a blueprint for other sustainable finance transactions over the course of 2023 and beyond. This R10.4 billion transactions were the largest sustainability-linked transaction in the sector in 2022 and incentivised Harmony Gold Mining Company Limited to reduce its overall carbon footprint by setting targets for greenhouse gas emissions, renewable energy consumption, and water usage.
At the end of 2022, Absa Relationship Banking in South Africa had financed over R1 billion in SME embedded renewable power generation capacity. It also acted as sole sustainability coordinator in the first sustainability-linked transaction in the paper and pulp industry for Sappi and enabled the evolution of Teraco’s energy usage towards renewable sources by arranging a R1.5 billion green loan.
Absa Group endeavours to ensure that its financing does not harm vulnerable communities and that they have access to affordable renewable energy. Consequently, the Group applies enhanced due diligence when considering the environmental and social impacts of projects, ensuring that it adheres to best practices.
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