Before making a decision, the bank wants to assess the carbon-reduction targets of partners in the project, the technology that will be used as well as the impact on people who will be displaced, Fihla says.
Standard Bank’s domestic competitors ABSA, Nedbank and Investec have distanced themselves from the plans. South African shareholder activist group Just Share has said the pipeline would pump enough oil to generate up to 34.3m tonnes of carbon dioxide – about seven times the emissions of Uganda and Tanzania combined. France’s TotalEnergies and the state-owned China National Offshore Oil Corporation (CNOOC) signed the final investment decision for EACOP on February 1.
READ MORE Africa's Great Green Opportunity
Fihla points to Standard Bank’s position as the largest bank in Uganda and says that means that it needs to consider the project carefully. “If you are doing business in a particular geography, you have to be objective and look at all the information.” Still, he told a briefing earlier, the bank is a “small player” in the project, which does not depend on Standard Bank’s participation.
- The bank is waiting for a due diligence report which is being prepared by the project sponsors, Fihla says, adding that it is up to the sponsors whether the report is made public.
- The bank will then commission an independent review of that report, which it will draw on when making its final decision.
- Fihla says he can’t give a timeline as the bank does not control when the sponsors’ report will be completed.
- Standard Bank will consider whether to make its own independent report public, Fihla says, adding that he sees “no reason why not.”
‘Cruel irony’
Standard Bank on 16 March committed to achieving net zero carbon emissions from its own operations by 2040 and from its portfolio of financed emissions by 2050. It will also mobilise between R250bn and R300bn ($16.7bn to $20bn) for sustainable finance by the end of 2026. Still, there is no kind of fossil fuel in which the bank is definitely ruling out investment. It may still make oil and coal investments in some circumstances.
It is a “cruel irony” that Africa has contributed little to historical carbon emissions but is among the hardest hit by global warming, Standard Bank CEO Sim Tshabalala told a briefing. Closing off any future fossil-fuel investment would be a “denial of Africa’s right to sustainable development,” he said.
There is no prospect of the world being able to jump straight into renewable energy reliance, Fihla says. One constraint, he argues, is the amount of copper needed to support renewable power installations. Global copper output would need to increase fourfold to be able to support full renewable reliance, Fihla says. “That’s not going to happen overnight. We want to make a quantum leap but there are massive constraints.”
The bank’s new policy leaves open the possibility of financing new coal mines “only in the Southern African region and only when there is an overall positive environmental impact.” Fihla points to Eskom’s Kusile power station in Mpumalanga as the reason for not ruling out new coal mine investment. The station is expected to be one of the world’s largest coal-fired power plants once completed in 2023.
- The station, he says, is already served by hundreds of trucks loaded with coal per day and, as a new plant, is likely to run for 25 or 30 years. “I was shocked when I saw it.”
- There may be a way to supply the plant with coal which is closer by, so reducing the distances that trucks have to travel. “We think there are possibilities but we haven’t been approached.”
- The bank would consider financing such a supply, and that is the only case where new coal investment might take place, Fihla said.
Bottom Line
The bank will find it hard to square any participation in the EACOP project with its emissions targets.
Understand Africa's tomorrow... today
We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.
View subscription options