Financial services provider Standard Bank has released its Thermal Coal Mining Policy, making it the first South African bank to publicly release a policy on lending to coal mining projects.

This follows a landmark shareholder vote in favour of a climate-risk-related shareholder resolution which was tabled at the bank’s annual general meeting in May 2019.

The resolution compelled the bank to adopt and publicly disclose a policy on lending to coal-fired power projects and coal mining operations; however, the release of the policy discharged the bank’s obligations in relation to the 2019 shareholder vote.

According to a statement published by the bank on Thursday, the Thermal Coal Mining Policy covers “the provision of financial products and services to thermal coal mining projects (new and expansions) and all associated mine-site activities (from planning, development, processing, rehabilitation and mine closure); as well as the provision of financial products and services to existing and new thermal coal mining corporates involved in the ownership, development and operation of thermal coal mining assets”.

In the policy, Standard Bank also states that it “supports the goals of the Paris Agreement and recognises that climate change is a material risk to its ability to generate value for its stakeholders over time”.

The bank further refers to the historical importance of thermal coal as a source of energy in several African countries, and says it “expects to continue to play a role in the financing of thermal coal mining investments on the continent”, but that “over time, the move towards a diversified energy mix will see the reliance on thermal coal-derived energy reducing”.

The policy, therefore, does not rule out the financing of coal mining operations, other than “Mountaintop Removal mining activities”, which Standard Bank says it will not finance.

The bank says it will consider a number of aspects when evaluating thermal coal transactions, most of which “refer to ensuring that the proponents of the projects are in compliance with relevant laws and regulations”.

The bank emphasises in the statement that it will “consider the energy situation in the region and future energy demand in relation to government energy strategy, climate change, carbon commitments and adaptation plans”, and that it will “endeavour to manage its exposure to thermal coal mining, where practicable, in the countries in which it operates in line with each country’s national energy plan and energy mix . . . as countries implement their national determined contributions to reducing [greenhouse-gas (GHG)] emissions as per the Paris Agreement”.

The Paris Agreement’s goal is to limit global temperature increases to well below 2 °C above pre-industrial levels, and to pursue efforts to limit the temperature increase even further to 1.5 °C above those levels.

South Africa’s current nationally determined contribution is not aligned with the goals of the Paris Agreement, with the country’s current GHG emission reduction commitment rated as “highly insufficient” by Climate Action Tracker.

To put it into perspective, if all government targets were in this range, global warming would reach between 3 °C and 4 °C.