/ 6 July 2021

Report on local financial institutions’ AGMs shows climate pressure is gaining momentum

Without action by 2030
Climate change poses a health risk to our society.

Shareholders are asking tough questions at financial institutions’ annual general meetings (AGMs) in relation to equity, climate change and sustainable development, and  2021 was no different. 

A report by shareholder activist organisation Just Share on the AGMs of seven of South Africa’s biggest financiers — Old Mutual, Standard Bank, Exxaro Resources, Nedbank, JSE Limited, Absa and Sanlam — found that the sector is increasingly showing green shoots of promise, but contentious issues remain.

Rights groups have long warned of “greenwashing” among the world’s biggest contributors to global warming and ecological breakdown as commitments to concepts such as “2050 net-zero emissions” gain momentum, but timelines remain sketchy. 

For example, mining company Exxaro told shareholders that it plans to publish interim targets and to achieve net zero carbon emissions by 2050, in its next integrated report in early 2022.

Standard Bank may have turned a shareholder resolution on climate change down but the institution has committed to announcing its timelines to reduce the risks on fossil fuel assets. It has also partnered with Woolworths to establish the retail sector’s first sustainability-linked loan. 

Despite the promising steps in the right direction, Standard Bank still seems to be maintaining its distance from the reported human-rights violations linked to the controversial East African oil pipeline project in its portfolio. 

In a recent interview with the Mail & Guardian, chief executive Sim Tshabalala said the bank was using its “influence and [the] potential leverage” of funding to ensure due diligence in the planned construction of the world’s longest heated crude oil pipeline in East Africa. 

All seven AGMs were held virtually because of the ongoing Covid-19 pandemic. Just Share said this actually made the annual meetings more accessible, but that they still had limitations. 

The group said it had asked company directors and executives 22 questions about wage gaps and income inequality, diversity and transformation, climate change, and related governance issues. 

“Each of the AGMs we have attended in 2021 is the second virtual AGM for these companies. There have been some noticeable and encouraging improvements in the way these have been held, compared to 2020, but also some ongoing frustrations and barriers to effective engagement,” the organisation said.

At Old Mutual’s AGM, chief executive Ian Williamson said the company should be in a position to publish its first report in alignment with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) “in the next cycle of shareholder reporting at the end of this year”. The TCFD is a framework to help public companies and other organisations disclose climate-related risks and opportunities.

But even with a positive commitment to these disclosures, Old Mutual still had to answer tough questions on projects in its portfolio that have been marred by questionable developments, including the murder of an activist. 

Old Mutual is invested in the Capitalworks fund, which is the majority shareholder in Petmin. At the AGM, shareholders highlighted that Petmin’s Tendele coal mine in KwaZulu-Natal had long been mired in social and environmental controversy.

In 2020, environmental justice activist Fikile Ntshangase, who was opposed to the expansion of the mine, was gunned down in her home. 

In response to questions from Just Share, Khaya Gobodo, managing director for Old Mutual Investment Group, penned a written response after the AGM. He said Capitalworks and Petmin had  undertaken specific actions to improve community relations and decrease tensions, over the past few months.

“Petmin and the Tendele mine have led the drafting and signing of the Somkhele Peace Accord, an agreement by the leaders and stakeholders in and around Mtubatuba, Mpukunyoni and the Tendele mine with the purpose to reduce tensions and bring peace to the area,” Gobodo said, adding that Ntshangase’s tragic murder was still being investigated by the police. 

At the time of Absa’s AGM (and before the controversial Karpowership projects failed to acquire environmental clearance), interim group chief executive Jason Quinn told shareholders that the bank had not yet committee to financing the projects.

“Any commitment remains subject to independent legal, technical, environmental [and] insurance due diligence, as well as credit processes … We are not about to give away our reputation that we have built on one transaction,” Quinn said.

“So we also recognise that aspects of one of these items, the Karpower, in particular, are subject to a court process — we would also not do anything or commit to anything until all of those processes are completed.”

Challenges in a virtual AGM world 

At most AGMs, shareholders are able to ask questions only in written form. Just Share said this was a cumbersome process, made worse by the fact that many platforms have undisclosed word limits, which result in questions being cut off and/or appearing in the wrong order on the screen.

In a note on improving the quality of participation at AGMs, the organisation said there were no technological barriers to verbal question and answer sessions (some companies allow this already), and that all companies should allow verbal questions to be asked.

The shareholder activist organisation believes that the written-only format also makes it difficult to respond to a director’s answer to a question. 

“As most responses are deliberately noncommittal, the inability of the questioner to respond means that these interchanges are frustrating. This may be convenient for the board, but creates reputational issues, and reinforces the perception that AGM engagement is not worthwhile,” Just Share said.