Eskom Holdings power grid/Bloomberg
Oil companies and Norway’s sovereign wealth fund are responding to climate change through steps ranging from planting forests to divesting from fossil fuels.
Monday 15, April 2019
(Bloomberg) --Pension funds in South Africa have a legal obligation to account for the financial effects of climate change on their investments, according to two groups lobbying money managers to pay closer attention to the issue.
Shareholder activists Just Share and environmental law organisation ClientEarth have written to more than 50 funds in Africa’s most-industrialised nation about their duty to savers. The local industry oversees about ZAR 4.2 trillion ($300 billion) in retirement investments.
Legal opinion commissioned by the campaigners shows that failing to meet the requirement on climate change would likely amount to a breach of duty by the board of a pension fund.
South Africa is dependent on coal for almost all of its power generation and with unemployment at about 27 per cent this complicates the debate about reducing this reliance, should it lead to mine closures and job losses.
Tracey Davies, Executive Director for Just Share, said, “The ultimate effects of climate change and the cost of transitioning to a low-carbon economy should form part of money managers’ investment strategies, the primary reason is the fiduciary responsibility for the funds to invest in the long term.”
South Africa’s 2030 energy plan sees coal-generated power dropping to less than 50 per cent of the total, as investment increases in renewables such as wind and solar.
However, South African companies have been highlighting some of the potential costs. Anglo American Platinum said that a planned carbon tax in the country will add cost pressures for marginal and loss-making operations.
Additionally, Sasol wants to be part of the solutio” in terms of what South Africa agreed to in the Paris Accord, co-Chief Executive Officer Bongani Nqwababa. The company, which is held by a number of pension funds, plans to set its own emissions targets next year, Ngwababa said.