Last week at the UN Climate Talks, the Fair Finance Coalition of Southern Africa (FFCSA) revealed the findings of an assessment of the policies of six public finance institutions (PFIs) in Africa. The institutions assessed by the FFCSA include the Development Bank of Southern Africa, Industrial Development Corporation, New Development Bank, African Development Bank, Export Credit Insurance Corporation, and Public Investment Corporation.
The FFCSA undertook the assessment to urge PFIs to adopt more responsible and sustainable investment policies and practices towards becoming more transparent and accountable. Furthermore, to strengthen the institutional policy ambitions of PFIs to facilitate a just transition to low-carbon economies in Africa. The assessment scores PFIs on eight themes – climate change, power generation, transparency and accountability, human rights, nature, gender, corruption and labor rights.
The policy assessment is titled, “Financing Fairly 2022: Are Public Finance Institutions in Southern Africa financing the Climate Crisis?” It notes that PFIs in Africa, whilst operating using public funds, continue to fund fossil fuels on the continent in spite of the realities of extreme climate impacts faced by Africans and the evidence that fossil fuels are the primary contributor to climate change. The policy assessment reveals that all six PFIs fail to disclose measurable targets for reducing greenhouse gas emissions in line with the Paris Agreement to maintain global temperature rise at 1.5°C.
Of all the banks rated in the policy assessment, the Industrial Development Corporation (IDC) scores the worst on almost all themes and remains the largest investor in the fossil fuel industry in Africa. As of November 2021, the IDC had a total shareholding of $1.5 billion in two coal companies on the continent.
The African Development Bank ranks highest but scores poorly on climate change due to the absence of a clear strategy that details how and when the bank will phase out fossil fuel financing. The full policy assessment can be read here.
The conclusions of the policy assessment note that PFIs need to establish fossil fuel finance exclusion policies and align their policies with the 1.5ºC Paris Agreement. Furthermore, PFIs must improve their level of transparency and can do so by using the Fair Finance Guide Methodology. Members of the FFCSA urge PFIs in Africa to engage and consult with the coalition to strengthen institutional policy ambitions for Africa.
Amy Giliam Thorp, Branch Manager at the African Climate Reality Project, said: "The climate crisis is already here and we are feeling its impacts, especially in Africa with the continent warming faster than the global average. Despite Africa’s vulnerability to the climate crisis, investments in new fossil fuel projects continue unabated. COP27 is the time for concrete and ambitious action. To advance a just transition in Africa, we need finance that is fair for people and the planet. Based on the findings of the Fair Finance Coalition Southern Africa’s policy assessment report, we are calling on Public Finance Institutions in Southern Africa to stop funding fossil fuels and commit to more ambitious sustainability policies, particularly related to climate change, power generation, and transparency & accountability. We need these institutions to urgently align their policies with the 1.5ºC Paris Agreement target and prioritize the development of a fossil fuel finance exclusion policy, that covers both timelines for phasing out of fossil fuels and commits to no further financing for new fossil fuel projects"
Zahra Omar, Attorney at the Centre for Environmental Rights, said: “Public Finance Institutions in Southern Africa are well-aware of the climate emergency and its repercussions for the continent. Still, the FFCSA’s policy assessment shows that none of the six PFIs have concrete policies or plans to adequately tackle this emergency. It is time that PFIs recognize the fundamental role that public finance can play in steering the continent to a more sustainable energy future, and that the financing of and investment in fossil fuels can no longer be a part of it.”
Glen Tyler-Davies, South African Team lead for 350Africa.org said: “If public finance institutions are to improve their policies, it is imperative that they develop them transparently as well as including the people who will be affected by their policies and decisions. Had this been done from the outset, we could have avoided situations where communities suffer the immediate impacts of fossil fuel extraction and burning, and the global impacts of the climate crisis.”