S Africa’s Nedbank officially halts oil and gas exploration funding

South African bank Nedbank has officially halted all direct funding of new oil and gas exploration projects as part of its commitment to align its business with the Paris climate agreement’s goals.

Other undertakings include not providing any new financing for oil production from 2035, not funding thermal coal mines outside of South Africa, and not financing any new thermal collieries, regardless of jurisdiction, from 2025.

Nedbank will restrict total financing in aggregate for coal mining firms and infrastructure and trade related to thermal coal to less than 1pc of its total advances, with this decreasing to 0.5pc by 2030. The bank will also not provide funding for any new coal-fired power plants, regardless of technology or jurisdiction.

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Zero-carbon energy system

It will however continue to finance natural gas production in cases where it plays an essential role in facilitating the transition to a zero-carbon energy system by 2050. From 2030, it will only provide financing for gas-fired power generation if it is for renewable projects with integrated gas-fired backup supply, or if it is for the conversion of existing coal- or oil-based power generation.

By 2045, the bank aims to have “zero exposure” to all activities related to fossil fuels. “We recognise that meeting the Paris agreement objectives will require, among other things, full decarbonisation of the global energy system by mid-century,”

Nedbank said. “An orderly exit from fossil fuel financing will be necessary well before 2050, given the long lifetimes of the physical assets. By far the most ambitious fossil fuel financing policy of any South African bank”.

Nedbank’s new energy policy

Nedbank also appears to set a global leadership standard by avoiding the standard “net zero by 2050” target of large commercial banks. Nedbank’s new energy policy integrates and supersedes the financing policy on activities related to thermal coal that it adopted in April last year.

It is the only South African bank to have completely excluded the prospect of funding coal-fired power, Just Share said. Other banks have been far less ambitious, opting to fund coal-fired electricity under certain circumstances, depending on the technology, the plant size or the jurisdiction.

“This approach fails to recognise that a rapid and extensive scaling up of renewable energy generation is the most cost-optimal energy pathway for the continent,” it said.