Standard Bank’s environmental and social (E&S) risk assessment process is based on international best practice. The group adopted an environmental and social risk governance standard and policy in 2018, which set out the principles under which we identify, measure, manage and report on E&S risk.
The standard and policy aim to ensure that our operations effectively assess and manage environmental and social risk associated with all business transactions, particularly in relation to commercial and corporate clients, project finance, commercial debt and equity, short-term banking facilities and trade finance. We are currently reviewing the standard and policy, as part of the process of strengthening ESG governance and climate-related risk management across the group.
Our system integrates E&S screening, management and monitoring into our business and credit functions, enabling us to assess, mitigate, document and monitor risks associated with financing and investments. We undertake E&S risk management throughout the transaction process, from the pre-credit stage to post-transaction financial closure.
Standard Bank encourages our clients to meet relevant internationally accepted environmental and social risk standards and to develop action plans to close any gaps between these and their current performance. We work with our clients to assist them to manage their material environmental and social risks and impacts.
Our exceptions list has several general exclusions for which we will not provide banking or lending facilities. It includes global exclusions and regional restrictions.
The group environmental and social risk (GESR) team is responsible for ensuring that environmental, social and related risks are identified, evaluated and managed.
E&S risk screening is applied to all transactions (excluding personal banking) at the pre-credit application stage. We use our E&S screening tool to assess E&S risk for different risk categories of transactions across the Standard Bank Group.
SCREENING INCLUDES ASSESSMENT OF POTENTIAL RISKS SUCH AS:
We apply national laws and standards and our exceptions list when assessing all transactions. In addition, and where applicable, we apply the International Finance Corporation (IFC) Performance Standards and the Equator Principles (an international benchmark) for identifying and managing E&S risk.
Screening new clients and transactions:
Pre-credit committees are responsible for ensuring that E&S risks are identified at application phase. Screening provides an indication of whether to proceed with a transaction, and whether further assessment is required. Screening provides for three levels of assessment for new transactions. These are applied according to the type of financial product, the quantum and tenor of the transaction. Each level of assessment includes E&S risk, sector and client considerations, including the client’s ability to manage E&S risk and historical track record. Risks are rated low, medium or high. All project-related transactions and medium and highrisk non-project related transactions are escalated to the GESR team, which works with business and credit teams to examine and mitigate such risks.
Where appropriate, we undertake enhanced due diligence and ongoing monitoring to ensure risks are properly managed. Approval of transactions rated as high E&S risk require sign-off from the head of GESR.
Screening existing transactions:
Our E&S screening tool is applied by credit managers in regular reviews of existing transactions and clients. This enables any E&S risks that emerge after financial close to be flagged and assessed. Transactions or clients identified as high E&S risk are reviewed annually. Where required, GESR team members engage with clients to gain a better understanding of issues. Where appropriate, we may require implementation of mitigating actions, monitoring and/or reporting requirements by clients.
The scale and scope of due diligence is determined per transaction, as advised by GESR. The level of due diligence is commensurate with the potential level of E&S risk associated with a transaction, with enhanced due diligence undertaken for transactions that represent significant risk to the group, society and environment.
Due diligence may include sector or issue specific questions, direct client engagement and site visits, or engagement of independent external consultants. Due diligence highlights any issues requiring mitigation or management, which are addressed in the financing requirements of a transaction.
We monitor all project-related transactions and medium and high non project-related transactions to ensure clients meet their E&S commitments. The frequency and type of monitoring is determined according to the type of transaction and the level of risk.
High-risk transactions, transactions categorised as Category A and Category B (where appropriate) under the Equator Principles, are monitored more closely. Where necessary, GESR undertakes site visits to ensure that E&S performance is being managed appropriately. In relevant cases, we use independent external consultants to monitor implementation and progress. The GESR team has input into portfolio-wide reviews of specific sectors, such as coal, oil and gas, where E&S risks are considered high.
In cases where clients are not compliant with E&S requirements, we work with them to achieve the necessary standards. If there is no progress toward meeting requirements within agreed timeframes, remedies may include additional monitoring and revised, and/or more stringent action plans; specialist/independent intervention; or re-evaluation of the loan.
We are committed to taking appropriate steps where we discover, or are made aware, that actual or perceived human rights abuses or environmental damage has occurred. This may include disciplinary action, exiting a particular business relationship, or constructive engagement with others to promote better practice.
Targeted areas across the group undertake mandatory training which covers environmental and social risk awareness, Standard Bank’s environmental and social risk management process, and relevant environmental guidelines, standards and requirements. Training includes classroom training and online training using the group’s in-house training platform. We’re investigating ESG tools to assist credit managers, country risk and portfolio risk teams with more ESG risk information that matches well with our portfolio characteristics.
Standard Bank employees who received environmental and social risk training in 2019
The Equator Principles
The group is a signatory to the Equator Principles (EP), a global risk management framework for determining, assessing and managing environmental and social risk in project-related transactions.
The EP provides a minimum standard for due diligence and monitoring to support responsible decision-making. When we lend or provide advisory services to a client, we are required to evaluate and actively avoid and mitigate any negative social or environmental impacts.
EP Financing Institutions categorise projects proposed for financing based on the magnitude of potential environmental and social risks and impacts (Category A, B or C). GESR provides the categorisation for EP transactions and is involved in ongoing due diligence for all Category A and B projects. GESR applies the EP and associated IFC Performance Standards on Environmental and Social Sustainability and the World Bank Group Environmental, Health and Safety Guidelines (EHS Guidelines) to all relevant project-related financing or transactions irrespective of the level of funding.
In 2019, no active EP deals were terminated due to E&S non-compliance.
Standard Bank is committed to prudent management of the risks arising from climate change, as they relate to our direct operational footprint and our lending activities, and to improving our climate-related disclosures over time.
Climate risk is recognised as one of material risks facing the group. We’re strengthening our ESG governance to ensure adequate oversight and improve our ESG risk management systems, which will embed climate-related risk into risk identification, classification, evaluation, analysis, monitoring and reporting.
We continue to develop our climate related risk strategy and align with the Task Force on Climate-related Financial Disclosures (TCFD) guidelines. Climate change is a complex issue and we are working to ensure that we develop a strategy that’s appropriate to our business, our operating environment, and the group’s commitment to create positive social, economic and environmental impact through our core business activities, and drive Africa’s growth.
We established a TCFD working group in 2019, bringing together governance, environmental and social risk, portfolio risk, stress testing, reporting, real estate services, and research functions across the group, together with our sustainable finance experts and sector teams. The group is participating in the UNEP FI's TCFD pilot programme, as well as working with the Banking Association of South Africa and the National Business Initiative to enhance our data on climate risk. Access to reliable data that is relevant to our areas of operation across the African continent is currently a constraint on our alignment with the TCFD guidelines.
Some of the challenges that we are grappling with include inadequate local and regional climate science information, scarce portfolio-level climate data, and a lack of detailed climate-related risk information associated with our clients. While global climate scenarios are available from the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency (IEA), the adaptation of these into Africa-specific scenarios, taking account of regional socio-political and economic factors, is not yet mature enough to fully support our scenario assessments of climate related risks on our portfolio.
Climate-related risks are referenced explicitly in the group’s environmental and social risk governance standard and policy. We are reviewing our existing standards and processes to ensure that climate-related issues are appropriately incorporated into the group’s strategic decision-making processes and, where appropriate, inform adjustments to risk appetite based on the results of scenario assessments to be performed on the group’s portfolio. Our environmental and social risk screening tool identifies the climate-related risk of a transaction and/or the client at a transactional level. Going forward, we aim to acquire tools to assist us to develop comprehensive climate-related risk data for our clients. Annual client reviews in high risk sectors will also be expanded to include climate-related risk information. We are incorporating climate-related risk, as a component of ESG risk, in client credit ratings and will be establishing guidelines for appetite and risk tolerance levels for climate-related risk. Portfolio risk management committees will use this information to assess sector appetite. Climate-related risk will also be more fully integrated into capital allocation, pricing processes, and asset allocation processes.
We have already concluded several landmark transactions through our newly established sustainable finance unit, through which we incentivise clients to address climate change and its impacts. We intend to scale up this offering going forward. We remain committed to measuring and reducing our direct carbon and water footprint.
Physical risk mitigation requires an improvement in climate adaption and resilience. Our initial focus will be the agricultural sector where we believe climate-related physical risks will impact macro-economic and social factors such as food security. Opportunities to facilitate adaptation and resilience (e.g. flood control, water efficiency, water storage, ecological restoration, etc.) are being sought.
The transition from carbon-intensive activities to low carbon activities presents risks with respect to job losses, skills shortages, technologies, and government policy. The socio-economic impacts of transition risk are not well understood for Africa and scenarios relevant to regional socio-political characteristics need to be developed to understand transition risk. We believe that mitigation includes skills development, availability of resources and appropriate technologies, adoption of appropriate policies and governance processes and a collective will within the communities in which we operate. We will be working with governments and other stakeholders to play our part in a just transition to a lower-carbon economy. Our initial focus has been on two high carbon emitting sectors: energy and mining and metals. Our coal-fired power finance policy and thermal coal mining finance policy are intended to ensure that we only support developments for much-needed sustained economic development in developing countries, and in line with our lending requirements. We will continue to invest in renewable energy projects across the continent. Work is underway to develop a more comprehensive approach to financing fossil fuels, including oil and gas. We are engaging with a range of stakeholders, including our clients, as we develop this policy.
During 2020, as additional policies are finalised these will be made available on our website. Please also check our website for further climate risk disclosures during the course of the year as we continue to work on this important issue.
* Please refer to the metrics section for our climate risk disclosures.
We have undertaken a preliminary assessment of high carbon emitting sectors in our portfolio. The outcomes are currently undergoing internal authentication, using tools available through the TCFD pilot and other credible sources. Our focus is on both physical risk and transition risk. Where we have significant exposure, we will develop short- and medium-term actions to manage this. In the short term, we’ll be working with qualitative assessments of these sectors. In the medium term, we’ll use scenario-planning and stress-testing methodologies to ensure mitigation actions have sustainable outcomes. Management actions will cover risk mitigation and opportunity development.
South Africa ranks among the top 20 countries with the world’s highest carbon emissions. Our short term efforts will therefore focus on South Africa’s energy, mining and heavy industry sectors, identified, alongside urban development, as the high-emitting sectors in our portfolio. We continue to support renewable energy projects across Africa, where these meet our governance requirements.
Standard Bank Group continues to implement climate change adaptation and mitigation measures to decrease our direct environmental impacts.
Electricity remains the major contributor to the group’s direct carbon footprint. In 2019, we concentrated our efforts on reducing purchased electricity consumed in our South African data centres, headquarters, branches, cash centres, automated teller machines, and learning facilities, with a specific focus on air-conditioning, lighting and IT systems.
In 2018 we sought to set a science-based target (SBT) toward reducing our carbon footprint by 2040. We used a model aligned to limit global temperature rises to below 1.5°C. The result yielded a target for Standard Bank operations in South Africa to reduce direct emissions by 79% by 2040 when compared to the 2014 base year.
We’ve invested R28.6 million in increasing our energy efficiency, energy security, and environmental sustainability in South Africa. Our 2019 electricity consumption reduction target was 8GWh. We were able to slightly exceed this target, achieving a reduction of 8.3GWh by:
|Scope 1 Diesel generators||SBSA||Tonnes CO2||1 900||1 153||1 660|
|Scope 1 Fleet vehicles||SBSA||Tonnes CO2||1 600||1 969||2 603|
|Scope 1 Natural gas||SBSA||Tonnes CO2||3 829||3 742||3 363|
|Scope 1 Refrigerants||SBSA||Tonnes CO2||1 895||3 350||3 180|
|Total Scope 1||SBSA||Tonnes CO2||9 224||10 215||10 806|
|Scope 2 (Purchased electricity)||SBSA||Tonnes CO2||197 771||202 586||220 408|
|Total Scope 1 and 2||SBSA||Tonnes CO2||206 995||212 801||231 214|
|Scope 3 Flights||SBSA||Tonnes CO2||21 066||29 107||25 762|
|Scope 3 Rental Cars||SBSA||Tonnes CO2||351||422||412|
|Scope 3 Paper||SBSA||Tonnes CO2||698||353||1 378|
|Scope 3 Waste disposed||SBSA||Tonnes CO2||770||802||669|
|Total Scope 3||SBSA||Tonnes CO2||22 885||30 684||28 221|
|Total emissions||SBSA||Tonnes CO2||229 880||243 485||259 435|
We have put measures in place to ensure that our strategic facilities are water efficient, have a reliable source of water when there is an interruption to supply from the municipality and water wastage is minimised.
Since 2016, we’ve installed water meters in our strategic facilities, to enable accurate monitoring of water usage and benchmarking across locations and against industry benchmarks. For facilities with high usage, we’ve set targets to reduce and prioritise water reduction efforts.
In 2018, we set a target to reduce water usage by 110 000 kl (16%) at metered sites in South Africa by 2021. In 2019, we prioritised sites displaying high-use and sites at significant water risk, for installation of back-up water storage tanks and water efficiency projects, including low-flow bathroom taps and showers. We also developed a water saving guideline to aid our building managers toward improving efficient technology, water security and water recapture and reuse. We succeeded in reducing water consumption in our facilities by 15 760 kl. We improved our CDP score for water management from C in 2018 to B- in 2019.
|Total water consumption||SBSA||kilolitres||627 632||680 559||666 806|
We effectively manage our waste and what is sent to landfill sites, by reducing, reusing and recycling. Our waste includes paper, which is mostly recycled, and hazardous and wet waste from our canteens and restaurants, which is mostly sent to landfill sites. In our efforts to reduce our waste to landfill, we installed a composter at one of our facilities in 2018, that converts wet waste to compost for use in our gardens. The trial facility reduced waste generated at the facility by more than 2 400 kg per month. The technology is being rolled out to other facilities with high wet waste quantities.
At the on-site coffee shops in our group head office facilities, we’ve introduced biodegradable and compostable paper cups and moulded fibre lids, and we’re using coffee bean grounds in the gardens. We’re working toward reducing plastic food packaging, bottles and cups, and replacing polystyrene cups.
|Scope||Total (kg) 2019||Total (tonnes) 2019||Total (kg) 2018||Total (tonnes) 2018|
|General waste||SBSA||1 288 255,90||1 288.26||1 365 234.4||1 365.2|
|Recyclable waste||SBSA||240 982,05||240.98||170 308.2||170.3|
|Hazardous waste||SBSA||1 124||1.12||1 379||1.3|
|Waste to landfill||SBSA||1 289 379,90||1 289.38||1 366 613.4||1 366.6|