Global investors criticise Sasol over greenhouse gas reduction targets

By David Whitehouse

Posted on Friday, 26 March 2021 17:29
Cooling towers of South African petro-chemical company Sasol's synthetic fuel plant in Secunda, north of Johannesburg. REUTERS/Siphiwe Sibeko

A global alliance of institutional investors has criticised South African energy and chemicals company Sasol for its strategy on reducing greenhouse gas emissions, and called on South African investors to press the company for action.

Climate Action 100+ is led by institutional investors which aims to pressure corporate emitters of greenhouse gases to clean up their act. It represents 545 global investors with $54trn in assets under management. The “net zero company benchmark” which Climate Action published for the first time this month defines nine indicators of success for business alignment with the goal of net zero emissions.

Sasol’s current greenhouse gas (GHG) emission reduction target is “not aligned with the goals of the Paris Agreement, contrary to Sasol’s claims,” the report says. The target is to reduce GHG emissions from South Africa operations by a minimum of only 10% by 2030, from a 2017 baseline of 63.9m tonnes of carbon dioxide equivalent.

  • According to Climate Action’s figures, Sasol’s 2019 emissions exceed those of the whole of Kenya (17.3m tonnes) and Sweden (42.77m tonnes) combined.
  • Sasol does not have any long-term GHG reduction targets beyond 2030, and Climate Action argues that the 10% target is not compatible with the Paris Agreement goal of limiting global temperature increase to 1.5C.
  • South African electricity utility Eskom scored even worse than Sasol, failing to meet all of the criteria in all of the benchmark’s indicators. Eskom did not respond to requests for comment.

Sasol’s Response

A spokeswoman for Sasol responded by saying the report was publicly released before the company was given a full opportunity to comment. Respondents are “not privy to how publicly available information is considered for purposes of scoring.

It is likely that not all the relevant information is considered holistically and that justifiable nuances in governance approaches by corporates are not provided for and considered as part of the assessment.”

“Our view is that the scoring is not representative of Sasol’s performance and context, due to the lack of assessment criteria that takes into account the developing country context Sasol largely operates in,” the spokeswoman said.

Climate Action’s “inflexible binary indicators and responses, without qualifiers, in our view lack the ability to recognise valid and real commitment, context and intent by some corporates, including Sasol, to transition. In this situation investors and stakeholders may be wrongly left to believe that Sasol does not want to transition.”

The company points to the appointment in 2018 of Muriel Dube as a non-executive board member with sustainability and climate change knowledge and experience.

It’s “premature to presume that Sasol will not be aligned with the Paris Agreement and Climate Action 100+ indicators for setting a long-term ambition, especially when these announcements have not been made yet.” The announcements, the spokeswoman said, will be made later this year.

Investor Engagement

Sasol has long struggled to convince investors that it is doing enough to reduce emissions. In November, the company rejected a resolution, filed by the shareholder organisation Just Share and the Raith Foundation, which sought to bind Sasol to publishing environmental performance details in its annual reports.

It was the third consecutive year that Sasol has refused a climate-related shareholder resolution. Climate Action argues that local investors have failed to put enough pressure on the company.

  • Despite the fact South African firms Coronation Fund Managers and Ninety One are members of Climate Action, neither has stepped up to take the role of “lead engager” with Sasol, Climate Action says.
  • The role has therefore been left to two foreign asset managers, Fidelity International and Alliance Bernstein.
  • Coronation told Just Share in a letter that it is “not conclusive that it is more appropriate for a South African manager to be the lead engager with Sasol, which is a global oil and chemicals business”.
  • Climate Action says that Alliance Bernstein and Fidelity International were only able to secure their first meeting with Sasol in the week of November 30, 2020, almost three years after Climate Action was launched.
  • It adds that Sasol’s head office is in South Africa, and that almost all of its GHG emissions are from its South African operations.
  • It is “time for all investors who claim to be committed to climate action – whether members of Climate Action 100+ or not – to raise the bar,” the Climate Action report says.

Bottom line

South African investors in Sasol need to use their strength to apply pressure for deeper greenhouse emissions cuts.

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