Report to Society 2019 - Esg reducing our direct environmental footprint

MANAGING CLIMATE RELATED RISK

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.

Short-term actions:

Physical risk

Physical risk is presented by the impacts of climate change, and includes droughts, extreme weather events, and hotter temperatures. We are using global and regional models by the IPCC, IEA and CSIR to identify these risks, and develop ways to improve climate adaption and resilience. Our initial focus is on our existing clients in the agricultural sector, where diversification and medium- to long-term business plans need to include climate adaptation and resilience considerations. We will also be identifying opportunities to finance infrastructure that improves adaptation and resilience, such as flood control, water efficiency and water storage.

Medium-term actions:

Based on an understanding of climate-related risk in our portfolio, we will assess the following sectors:

(climate mitigation)

Agriculture (research and advice to clients, diversification of crops and products, food security, water efficiencies, flood mitigation, changing temperature/ecosystem mitigation)
Water-intensive industries, including mining (water efficiency measures, desalination/water treatment projects)
Urban developments and infrastructure (flood management measures, energy efficiency measures, water efficiency measures)
Coastal developments (rising sea levels, extreme weather events).

Short-term actions:

Transition risk

Transition risk is presented in the transition from carbon intensive activities to low carbon activities, and includes job losses, skills shortages, technology risk, policy and governance risks. Socio-economic impacts are currently not well understood for Africa and scenarios that incorporate local socio-political characteristics are still to be developed. It’s nonetheless clear that transition risk mitigation requires skills development, access to resources and technology, adoption of assertive policies and governance processes and a collective will within the communities in which we operate. We are looking at green financing opportunities that can facilitate just transition.

	Medium-term actions: Based on an understanding of climate-related risk in our portfolio, we will assess the following sectors:
(climate mitigation)	Energy (reduction in coal exposure, emission efficiencies in oil and gas, increase in renewables) Carbon-intensive industries, including mining (energy efficiency measures).

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.


	Scope	Measure	2019	2018	2017
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


	Scope	Measure	2019	2018	2017

Total water consumption	SBSA	kilolitres	627 632	680 559	666 806
Reduction target	SBSA	%	8	6	n/a


	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