JOHANNESBURG Reuters - South African banks say they have to keep funding at least some coal projects for now because an immediate halt would put huge political and economic strains on a nation that relies on the most polluted fossil fuels.
The top four banks have initiated to stop financing, with Nedbank and FirstRand respectively having deadlines of 2025 and 2026 to end funding for new thermal coal mines. Both the banking and finance ministries have stopped lending to coal-fired power plants.
But the banks still finance existing coal mines and power stations. Absa and Standard Bank, South Africa's other two leading lenders, left the door open to financing new coal mining or power projects.
Although coal-related lending makes up a small portion of their loan portfolios, the financing is vital for keeping the lights on and tens of thousands of people employed in Africa's industrialized economy.
The state-run electric company Eskom relies mainly on ailing coal powered power stations to supply 90% of South Africa's electricity needs. In 2020, more than 90,000 people worked in coal mines -
What profits We make on fossil fuels are tiny, statement about Alan Pullinger told Reuters.
The easiest thing to say "we're out", he said but he added that such a step would force the already heavily indebted government to step in to prop up the sector.
Accommodation of coal funding is in the spotlight before a U.N. climate conference in Glasgow, Scotland in November.
The fuel is a crucial driver of climate warming emissions, but also a relatively cheap form for solar generation and used by many emerging economies.
South African banks say international conditions demand they support the industry, but they face growing pressure from local investors in the push to curb emissions and fewer insurers are now ready share the risks tied to coal assets.
In 2019, Eskom was the 12th largest emitter of climate warming gases with South Africa accounting for more than 40%.
We are dependent on Eskom, so we can't stop funding Eskom, because we'll shut down our entire economy, said an executive of one of South Africa's top lenders.
Eskom's largest coal suppler is Exxaro miner. Suddenly, the executive said: We can't shut off Exxaro. Nedbank said that efforts to address climate change had to look at the local context. Absa said coal finance would be reduced but the government had to balance macroeconomic and social issues with climate needs.
Wendy Dobson, head of the group corporate citizenship at the Standard Bank, said the bank planned to limit its exposure to climate risk, which would lead to limits on the amount of lending for coal and other fossil fuels.
Taking too hard a line with governments reliant on fossil fuels could prove counterproductive, she added.
Banks were very unlikely to extend new financing to coal projects and should be more explicit about this, said Emma Schuster, climate risk analyst at activist shareholder group JustShare.