Have we bitten off more than we can chew in committing to ambitious climate goals?
Vanessa MathebulaSteam rises at sunrise from the Lethabo Power Station, a coal-fired power station owned by state power utility ESKOM near Sasolburg on March 2 2016. REUTERS/SIPHIWE SIBEKOThe much-anticipated 2021 UN Climate Change Conference, Cop26, where each participating country — including SA — is expected to set more deliberate and ambitious climate change goals, is fast approaching. These include committing to reduce greenhouse gas emissions to net zero and restricting global warming to no more than 1.5°C by 2050 or sooner, as per the Paris Agreement.
With the introduction of the asset manager’s net-zero agreement, fund managers globally are also now able to join the movement. Interested parties can pledge their commitment to playing a role in supporting similar climate change goals to those of the respective countries by 2050 or earlier.
Globally there are already great initiatives in place, such as green financing solutions (green bonds). But given SA’s many macroeconomic challenges, where do we stand as a country? Can we realistically move to the same rhythm as the global players?Committing to advancing the goals of the Paris Agreement shows our willingness to collaborate and play a role in achieving climate-related goals. However, we might have bitten more than we can chew, especially given the expectations of upping the ante in the upcoming Cop26. headtopics.com
As a country we rely on fossil fuels. For instance, coal continues to be the primary energy source as it caters for about 77% of SA’s energy needs, according to the department of mineral resources & energy. Furthermore, no material changes in this trend are expected in at least the next two decades. Unfortunately, the coal dilemma stretches wider than the obvious coal-mining industry. As per the ripple effect theory, many other industries are, in fact, reliant on fossil fuels.
Aside from the obvious coal-mining and electricity-generating companies, transportation (including Transnet, as it transports coal) and financial sectors can also be indirectly linked to the coal industry. This therefore means the bulk of SA’s productive economy can be directly or indirectly linked to fossil fuels.
There are initiatives in place that are meant to shift the country to “greener pastures”. However, the transition to these alternative forms of climate-friendly options is relatively slow. For instance, PWC’s net-zero economy index shows SA is making minimal progress in decoupling emissions from GDP.
SA’s fundamental developmental challenges remain the main culprit. Not only do we lack the necessary infrastructure to enable such a transition, but the cost implications, especially for an overly indebted country like SA, coupled with the politics associated with such decisions, are other hurdles that cannot be ignored. We are therefore forced to acknowledge our shortcomings as a country and find ways to engage and promote realistic change. headtopics.com
In line with the net-zero goals, if asset managers were to restrict exposure to fossil fuel-linked companies and instruments materially, diversification and bottom-line investment performance would be materially affected. For instance, buying SA government bonds would be a questionable exercise as some of the proceeds are channelled towards assisting state-owned entities closely linked to the coal industry, such as Eskom. Bank paper would be questionable too, as the average investor has no insight into the portion of the bank’s lending activities that are linked to the fossil fuel industry.
This highlights the challenges we face as a country that still relies heavily on fossil fuels. Therefore, we are left with the question of whether we can materially limit exposure to the affected sectors without introducing any major adverse implications to the bottom line. The answer is, probably not! At least not any time soon given SA’s sluggish progress towards introducing greener alternatives.
However, this does not imply we cannot take small strides each day towards having an overall positive effect from a sustainability standpoint.One of the ways we can realistically advance towards achieving our sustainability goals, given the challenges we face, is to adopt a net-positive contributor approach to overall environmental, social and governance (ESG) factors. Not only does this enable us to factor climate-related factors into decisions in a less restrictive manner, it also enables us to consider sustainability factors such as the social aspect, which is crucial for a country with a history of inequality like SA.
For instance, if we consider Eskom through a purely net-zero lens, no investor would touch it. However, once we accept that it is the primary producer of electricity and thus supports economic activity countrywide and employs a notable portion of the country’s workforce, the scale would probably tilt to the positive for such a counter, keeping everything else constant. headtopics.com
At Prescient we continuously seek to invest in net-positive counters. We assess the overall contribution of a given counter from an ESG risk and opportunity perspective based on our in-house developed ESG risk scoring tool, the Prescient ESG Scorecard. The scorecard is quantitative and free from human biases. The derived scores are based on more than 60 metrics and are free from sector and size biases as we also factor sector materiality and adjust certain metrics by the market cap of the given counter.
The scorecard output is integrated across investment teams, enabling us to play a role in moving towards sustainability as we tilt our investments towards net-positive contributors. Of course, this is nowhere close to where we want to be from an overall sustainability perspective. We therefore continue assessing how viable it is for the local market to transition to a comprehensive net-zero approach.
Until we reach a point where this is possible, we will continue the search for greener alternatives that don’t undermine the economy at the expense of SA society. Read more: Business Day »
Police minister travels to KZN Midlands in hopes to calm tensions ahead of local government elections
National Police Minister, Bheki Cele, is expected to visit the KwaZulu-Natal town of Plessislaer following the murder of a ward councillor candidate last week.
Fill up the Burg with turbines for example
FirstRand to cut funding for new coal power stationsBank announces it wants to be net zero by 2050 and will reduce exposure to fossil fuels Funding how? What are FNB reasons for cutting funding? This move is much much more significant than people realise...Dirty Coal must be replaced ... before it is too late to halt pollution Muhammad Qasim – a man from Pakistan, has been blessed to see Prophet Muhammad SAW many times, and has even had conversation with Allah SWT. No this is not a joke, because many of Qasim’s dreams are coming true. Learn more at -
How will the Covid-19 pandemic end?While nothing is certain, scientists have a lot of evidence on which to build some realistic expectations about how the pandemic will progress over the next year or so. Covid19 pandemic We just need 2 weeks to flatten the curve Would that be similar to how the flu virus comes around year after year after year... It's a Hoax. First pandemic in history to be explained by politicians and a high school drop out, and not real researchers, they have a vaccine made 4rom spike protein n not de virus. No1 has ever seen the virus, bu the vaccine cut a person's genetic material & add something 😂😂
Benni on edge over lack of goalsFailure to score goals by AmaZulu strikers is starting to irritate coach Benni McCarthy. RealNevilleK
Apple security flaw: How do 'zero-click' attacks work?Apple has spent the past week rushing to develop a fix for a major security flaw that allows spyware to be downloaded on an iPhone or iPad.
Zero Dropout Action Summit(SPONSORED) Join us at the first Zero Dropout Action Summit - an urgent, national response to reducing learner dropout. The summit is a launchpad for change, offering a recommended dropout prevention plan and toolkit for schools. I owe you an apology to ever doubt your sincerity and professionalism. It’s was just like a dream to me when I received my first payment. After my second payment it became a reality now after several payments it has become a way of life. Lisamarkdonalld I really appreciate you. You're are just too legit keeping to your words 👏R33,000 profit received in my capitec bank account get in touch with Mrs lethica001 LisaJackson022 you are a trader with so much ambitious goals towards his clients, a woman with love for others. You're honest when it comes to investment Thanks for changing my life financial i will be greedy if I don’t share this guys Contact LisaJackson022 for a success trade
Goals in short supply as SuperSport hold AmaZuluUsuthu, which have yet to find a goal in three matches, created too few chances to deserve a win I wish I contacted earlier Linda__Stouffe this year I'm sharing this to encourage every beginner and Bitcoin lover to get in touch with her she is very legit and God fearing person Linda__Stouffe What a bore