Futuregrowth Asset Management, South Africa’s largest specialist fixed-income money manager, said it won’t participate in funding of coal-fired power generation until the industry develops environmentally sustainable methods of operating.
The decision is based on the company’s investment principles, Chief Investment Officer Andrew Canter said Tuesday at a conference on sustainable investment in Johannesburg. Futuregrowth, which has about R170-billion in assets, is owned by Old Mutual.
Coal is burned to produce 90% of electricity in Africa’s most-industrialized economy. State-owned Eskom, which generates 95% of the country’s power, is spending R306-billion to build two coal-fired plants with a combined capacity of almost 9 600 megawatts after underinvestment in new generation caused power shortages on about one hundred days in 2015.
“We had to have a discussion whether we want to fund coal at all, because of the sustainability impact,” Canter said by phone later. “Coal is dirty, but the lights are going off and this was the debate.” The company would rather be “on the right side of history,” he said.
Futuregrowth said at the end of August that it had suspended funding to Eskom, rail and ports operator Transnet, South African National Roads Agency, the Land Bank of South Africa, the Industrial Development Corp. of South Africa and the Development Bank of Southern Africa, citing concerns about how state companies were being run, government infighting and threats to the independence of the Finance Ministry.
The company, based in Cape Town, will only review offering loans for coal-fired power plants if they show signs of moving to newer and more sustainable methods of using the fuel for energy, Canter said Tuesday.