Minister Barbara Creecy launches South Africa’s Nationally Determined Contribution

30 Mar 2021

The Minister of Forestry, Fisheries and the Environment, Barbara Creecy, has launched the updated draft NDC for public consultation

The updated draft NDC, the cornerstone of South Africa’s climate change response, was approved by Cabinet on 24 March 2021 to be released for public comment. It is South Africa’s commitment in terms of the United Nations Framework Convention on Climate Change (UNFCCC) and its Paris Agreement to contribute to the global climate change effort. All Parties to the UNFCCC are updating their NDC’s in the run-up to the 26th international climate change conference to be held in Glasgow, Scotland, in November 2021. 

Under the Paris Agreement, all parties are required to deposit NDCs every five years.  South Africa deposited its first NDC with the UNFCCC in October 2015, committing to keeping national greenhouse gas emissions within a range from 389 Mt CO2-eq for 2025 and 2050. 

South Africa remains committed to addressing climate change based on science, equity and sustainable development. Similarly, the present updated NDC draft seeks to balance the three structural components of mitigation, adaptation and means of implementation/support requirements. 

The latest science from the Intergovernmental Panel on Climate Change indicates that more urgent and rapid reductions in emissions are required by all countries.

The UNFCCC has found that the current global effort is not sufficient to avoid dangerous climate change, and all countries are in agreement that more needs to be done, faster. 

The updated mitigation NDC proposes a significant reduction in greenhouse gas emissions (GHG) emissions target ranges up to 2030, with the 2025 target range allowing time to fully implement the national mitigation system, including those elements contained in the Climate Change Bill. It will also allow space for the implementation of IRP 2019 and other key policies and measures, as well as the national recovery from Covid_19.

The 2030 target range (398-440 Mt CO2 e q) is consistent with South Africa’s fair share, and also an ambitious improvement on our current NDC target. The upper range of the proposed 2030 target range represents a 28% reduction in GHG emissions from the 2015 NDC targets. 

Eskom recently released a call for proposals to repurpose Komati Power Station in Mpumalanga with photovoltaic panels and battery storage. Currently, the utility is conducting feasibility studies on repurposing other power stations scheduled for decommissioning including Hendrina, Grootvlei and Camden Coal Power Stations 

In February this year, the Presidential Climate Change Commission representing government, business, civil society and organised labour met for the first time to discuss how the country develops a just transition from our current high emission economy to a low carbon climate resilient economy and society. To do this we must ensure those who are currently dependent on the coal value chain do not carry the transition burden.

Accordingly, the Commission will advise government on ways to unlock new technology, new investment and above all new jobs as we meet our commitments in terms of the Paris Agreement.

The first South African adaptation communication in line with the Paris Agreement outlines five adaptation goals, articulates efforts to be implemented and associated costs for a time period of 2021 to 2030. The adaptation communication will enable support for key sectors that are affected by the impacts of climate change, including human settlements, agriculture, water and energy. It will also affirm the leadership role which South Africa has played in the international climate regime on adaptation.

The updated draft NDC also contains a section on South Africa’s support requirements as a developing country. This includes the costs of both mitigation and adaptation measures and defining the country’s goal for accessing international support.  

With regard to the support requirements for a developing country such as South Africa, the draft updated NDC addresses not only the cost of mitigation and adaptation measures but also outlines the international finance accessed thus far for climate change programmes. While South Africa has accessed about USD2 billion a year in 2018 and 2019, the draft updated NDC proposes access to four times the amount annually by 2030 to meet adaptation and mitigation needs.

South Africa’s updated NDC targets are aligned with planned policies and measures to provide opportunities for accessing large-scale international climate finance to fund low-carbon infrastructure, and also to fund the just transition.

The launch of the updated NDC is the start of a consultation process that will consist of a number of virtual consultations until the end of May 2021 with other government departments through the inter-governmental committee on climate change (IGCCC), broader stakeholders through the National Committee on Climate Change (NCCC) and a number of targeted virtual consultations with interest groups and representative formations including business, labor, civil society, the agricultural and energy sectors.

Direct consultation will be held with the provinces, while written inputs can be submitted to the Department by 30 April 2021.  

Following the integration of inputs from stakeholders, the updated NDC will be tabled with Cabinet for approval before being deposited with the UNFCCC ahead of COP26.

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Cities can change the game: the fight against emissions and air pollution

Fossil fuel bans jump fivefold in 2020

The pandemic has thrown into stark relief the global battle of cities for cleaner air and a better future. The 2021 edition of REN21’s Renewables in Cities Global Status Report, the only stock-taking of cities’ energy transition efforts worldwide, shows that one billion people live in cities with a renewable energy target or policy,[i] The number of cities that have enforced partial or complete bans on fossil fuels jumped fivefold in 2020.[ii]

For the second year, REN21 takes the temperature of how cities worldwide use renewable energy to battle emissions to prevent air pollution and climate change.[iii] More than half of the global population lives in cities, which account for three-quarters of global final energy consumption.  

“With their impact at scale, cities are our best bet to plan, develop and build a renewable future. But all too often their potential for transformation remains massively underused,” says REN21’s Executive Director, Rana Adib. “It’s a tough job to turn low-carbon ambitions into reality in built and densely packed environments. National governments must put money, capacity and above all legislative powers into the hands of local authorities.”

Cities must transition to renewables and set end dates for fossil fuels in all sectors

A critical factor for the success of cities’ climate strategies is to rapidly replace fossil fuels with renewable energy in heating and cooling as well as in transport. These sectors are responsible for the biggest share of global emissions, and they are best addressed at the local level.

The report shows that often, purchasing renewable electricity for the city’s own operations is one of the first steps local leaders take. But according to Adib, this is not enough. “Cities like Hamburg, San Francisco and Shanghai show, the more ambitious they are, the more they think of renewable energy everywhere. They impose strict building codes and renewable energy obligations. But most importantly, they set an end date to the use of gas, oil and coal.”

By 2020, 43 cities had done so and enforced fossil fuel bans in heating and/or transport, five times as many as in 2019.[iv] In total, one billion people – about one-quarter of the global urban population – live in cities with a renewable energy target or policy.[v] “But as inspiring as these examples are,” says Adib, “we are still a far cry from what is needed to curb climate change in time.”

A flavour of clean air and clear skies  

Last year’s lockdowns with the sudden disappearance of traffic, the complete alteration of lifestyles resulting in cleaner air and less noisy environments, have given citizens a flavour of how alternatives to packed roads and polluted skies could look.

City leaders are now building on this momentum, moving away from polluting fossil fuels and building clean and resilient energy systems in their place. “Growing citizen support gives Santiago a real mandate to take action against climate change. Our residents demand that the government take bold measures,” explains Isabel Aguilera, Environmental Director for the city of Santiago (Chile).

The race towards renewables is an obstacle course

The Renewables in Cities 2021 Global Status Report also shows that besides emission reductions, many other local benefits await those who take their energy future into their own hands: from the creation of local jobs and welfare to greater quality of life and healthier citizens. “The transition to a zero-carbon economy presents tremendous economic development opportunities for Orlando and the Central Florida region, some that we are already beginning to see stimulate our local economy, improve public health, reduce environmental impacts, and create meaningful high-wage jobs for our residents,” says Mayor Buddy Dyer of the City of Orlando (Florida, USA).

Sometimes, like in recent examples from Japan and the Republic of Korea, city governments can even push national governments to be more ambitious.[vi] But, while the report features encouraging stories from all regions of the world,[vii] the large majority of cities have not yet figured out how to take ambitious action, or they lack the power and resources to do it.

“Provide cities around the world with support”

Even those who seem ready and willing to move forward, run into obstacles. All too often, powerful fossil fuel interests put a stop to cities’ decarbonisation plans.

“It’s a sad fact that wherever in the world cities seek to phase-out fossil fuels, the industry puts a lot of resources into fighting back.

“They take local authorities to court or, as seen recently in the US, convince state policymakers to make it legally impossible for cities to take such decisions at all,” says Adib.

Martina Otto, heading the cities work at the United Nations Environmental Programme, concludes: “There is huge untapped potential. We can both increase the level of ambition and progress in meeting national climate commitments if national and regional governments around the world provide cities with support well beyond the creation of better financial conditions. Getting over territorial boundaries to empower cities means unleashing the power of our strongest allies.”

About REN21 and the Renewables in Cities Global Status Report

REN21 is the only global renewable energy community of actors from science, governments, NGOs and industry. We provide up-to-date and peer-reviewed facts, figures and analysis of global developments in technology, policies and markets. Our goal: enable decision-makers to make the shift to renewable energy happen – now.

The Renewables in Cities Global Status Report is an annual stock-take of the global transition to renewable energy at the city-level. The 2021 edition has been co-authored by over 330 experts and is endorsed by an Advisory Committee of 20 organizations including city networks. 


[i] 1,300 cities worldwide have either a renewable energy target or policy in place. Globally, over 830 cities in 72 countries have binding renewable energy targets and around 800 cities have implemented policies to help advance renewables in their cities.  See table below for more details.

Selected countries with renewable energy targets, net-zero targets and/or policies in cities

 Cities with renewable energy targetsCities with net-zero targetsCities with renewable energy policesCities with renewable energy targets and/or policies  Share of urban population with renewable energy targets and/or policy (%)
Country (#)(% of global total) (#)(% of global total) (#)(% of global total) (#)(% of global total)
United States of America33740.4%11214.1%35744.7%47936.17%28%
Italy597.1%475.9%9712.1%15011.30%47%
Germany617.3%131.6%9011.3%14010.55%40%
United Kingdom9411.3%455.7%243%1067.99%73%
Spain151.8%172.1%627.8%725.43%34%
South Africa70.8%50.6%313.9%342.56%40%
China60.7%81%212.6%251.88%38%
Sweden242.9%243%81%251.88%46%
Netherlands, The81%81%202.5%221.66%43%
Canada151.8%253.1%20.3%161.21%36%
Japan101.2%10312.9%30.4%110.8%40%
Republic of Korea50.6%20.3%10.1%50.4%55%
GLOBAL TOTAL834 796 799 1327 25%

[ii] See data on fossil fuel bans below.

[iii] More than 10,500 cities globally had adopted CO2 emission reduction targets, and around 800 cities have committed to net-zero emissions in 2020 – up sharply from the 100 cities with such commitments in 2019.

[iv] See data on fossil fuel bans below.

[v] See endnote (i) above.

[vi] Local governments in Japan have been instrumental in pushing the national governments to commit to carbon neutrality and/or adopt net-zero targets. As part of the Korean Local Governments’ Action Alliance for Carbon-Neutrality, 226 local governments that had already declared a climate emergency by September 2020, pushed the national government to commit to carbon neutrality by 2050.

[vii] Data has been collected on hundreds of cities, ranging from mega-cities to small and medium size cities and towns. The report features specific case studies on: Adelaide (Australia); Palmas (Brazil); Recife (Brazil); Yaoundé IV (Cameroon); Cocody (Côte d’Ivoire); Rajkot (India); North Lombok Regency (Indonesia); Jakarta (Indonesia); Seoul (Republic of Korea); Dakar (Senegal); Cape Town (South Africa); Malmö (Sweden); Tsévié (Togo); Kampala (Uganda); Oxford (UK); Orlando, FL (USA).

Additional case studies that will be provided as supplements are: Vancouver (Canada) and Heidelberg (Germany).

Data about city-level fossil fuel bans

Summary: There are 66 cities worldwide with a proposed and/or passed fossil fuel bans for heating and cooling and/or transport. In total these 66 cities have 67 bans as 1 city has both a ban for buildings and one for transport. (Note: not all of them have been enforced yet). Regarding enforcement: 4 went into force before 2019, 4 went into force into 2019, and 35 went into force in 2020; for a total of 43 enforced in 2020. 20 will go into force in the future. Plus 4 for which there is no known enforcement date. Date of enactment: 11 were voted before 2019, 37 were voted in 2019, and 13 were voted in 2020. Plus 6 for which we have no date; for a total of 67.

Raw data:

CountryCityBanned technology/fuelBans and restrictions in buildingsVehicle bans and restrictionsPolicy statusYear of enactmentYear of entry into force
AustraliaSydneyCoalX Proposed20182035
AustraliaAustralian Capital Territory (Canberra)N/AX Passed20202025-2045
AustriaViennaOil and gas heatingX Passed20202020
CanadaMontrealOil furnacesX Passed20162017-2021
CanadaVancouverNatural gasX Passed20162030
ChinaHandanCoalX Passed20172017
ChinaTaiyuanCoalX Passed20172017
ChinaXingtaiCoalX Passed20172017
FranceParisoilX Passed20202022
GermanyHamburgOilX Proposed20202021
Netherlands, TheAmsterdamNatural gasX Passed20202020-2040
PolandKrakowCoal boiler, fuelwood in boilers, stoves and fireplacesX Passed20132019
SwedenStockholmCoalX Passed20192022
United KingdomLondonNatural gas banX Passed20192019
United StatesAlameda, CANatural gasX Passed20192020
United StatesAlbany, CANatural gas banX Passed20162020
United StatesBerkeley, CANatural gasX Passed20192020
United StatesBrisbane, CANatural gasX Passed20192020
United StatesBrookline, MAOil and gasX Passed20192021
United StatesBurlingame, CANatural gasX Passed20192020
United StatesCambridge, MANatural gasX Proposed2019N/A
United StatesCampbell, CANatural gasX Proposed2020N/A
United StatesCarlsbad, CANatural gasX Passed20192020
United StatesCupertino, CANatural gasX Passed20192020
United StatesDavis, CANatural gasX Passed20192020
United StatesHayward, CANatural gasX Passed20192020
United StatesHealdburg, CANatural gasX Passed20192020
United StatesLos Altos Hills, CANatural gasX Passed20192020
United StatesLos Gatos, CAStorage; natural gasX Passed20192020
United StatesMenlo Park, CANatural gasX Passed20192020
United StatesMill Valley, CANatural gasX Passed20192020
United StatesMillbrae, CANatural gasX Passed20192019
United StatesMilpitas, CANatural gasX Passed20192020
United StatesMorgan Hilll, CANatural gasX Passed20192020
United StatesMountain View, CANatural gasX Passed20192020
United StatesNewton, MANatural gasX Proposed2019N/A
United StatesOakland, CANatural gasX Passed20192020
United StatesOjai, CANatural gasX Proposed20202020
United StatesPacifica, CANatural gasX Passed20192020
United StatesPalo Alto, CANatural gasX Passed20192020
United StatesPiedmont, PANatural gasX Passed20192020
United StatesRedwood City, CANatural gasX Passed20202020
United StatesRichmond, CANatural gasX Passed20192020
United StatesSan Francisco, CANatural gasX Passed20202020
United StatesSan Jose, CANatural gasX Passed20192020
United StatesSan Mateo, CANatural gasX Passed20192020
United StatesSanta Cruz, CANatural gasX Passed20192020
United StatesSanta Monica, CANatural gasX Passed20192020
United StatesSanta Rosa, CANatural gasX Passed20192020
United StatesSaratoga, CANatural gasX Proposed2019N/A
United StatesSeattle, WANatural gasX Proposed20202021
United StatesSunnyvale, CASolar; natural gas banX Proposed20192020
United StatesWindsor, CANatural gasX Passed20192020
ChinaShanghaiDiesel trucks XPassedN/A2022
ChinaXi’anICE Vehicles XPassed20182019
FranceStrasbourgICE Vehicles XProposed20202025
GermanyStuttgartDiesel vehicles XPassedN/A2020
GreeceAthensDiesel Vehicles XProposed20162018
IndiaDelhiDiesel Vehicles XPassed20152020
ItalyRomeICE Vehicles XProposedN/A2024-2030
Korea, Rep.SeoulDiesel and gasoline vehicles XProposed20202035
Netherlands, TheAmersfoortICE Vehicles XPassedN/A2021
Netherlands, TheGroningenICE Vehicles XPassedN/A2022
SpainBarcelonaICE Vehicles XPassedN/A2020 – 2021
United KingdomBristolDiesel Vehicles XPassed20192021
United KingdomYorkICE Vehicles XPassed20202023
United StatesSan Francisco, CAICE Vehicles XProposed20192030
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Top SRK experts gather to integrate climate change services

As climate change climbs the rankings of business risk, SRK Consulting recently gathered over 50 of its specialists in a virtual workshop to integrate and strengthen its climate change services.

Organised by SRK’s South African Climate Change Reference Group led by Ashleigh Maritz, Philippa Burmeister and Lisl Pullinger, the two-day event included nine parallel sessions discussing over 20 topics.

“Climate change mitigation and adaptation are placing growing demands on businesses in every sector, and on governments.”

SRK Principal Sustainability Consultant Lisl Pullinger

“It is raising social, environmental and governance risks, and threatening economic activity with a range of possible disruptions across the globe.”

Senior Environmental Scientist Ashleigh Maritz highlighted that SRK’s engineers and scientists have for many years been developing tools to monitor and benchmark these risks, and to address them in client’s operations. Key to these efforts has been SRK’s strategic commitment to collaboration.

“Integration between the various disciplines and skill sets of our professionals is really vital in addressing climate change,” she said, “as destabilised weather patterns have countless impacts on every aspect of social and economic life.”

The company’s focus in continuously developing its range of services is to ‘mainstream’ the consideration of climate change in project planning and execution. Critical fields such as water management, environmental impact, infrastructure capacity, social vulnerability and mine tailings design are demanding more attention than ever.

“Our recent workshop explored many of these vital areas, including greenhouse gas accounting, water stewardship, community adaptation, green mine design, tailings management, climate change impact assessment and disaster prevention and management,” said Principal Scientist in Air Quality and Climate Change Philippa Burmeister.

The company’s extensive service offering helps clients to build resilient infrastructure, by posing a range of climatic conditions or design criteria to assess vulnerability and improve resilience. Clients are also assisted with emergency response plans, and with contingency solutions to minimise the consequences of an event.

“A field of particular interest within SRK is the use of data management tools, which capture data efficiently and automate processes such as greenhouse gas (GHG) calculation,” said Burmeister. “The company also uses advanced computing and data science to predict potential climate-change risks and inform design. We combine this approach with a wide suite of professional services, helping clients generate and apply an effective mitigation and adaptation strategy.”

The success of the South African event has led to SRK planning a global workshop in 2021 that will virtually engage specialists from SRK’s offices on all six continents.

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Climate-influenced weather is key driver of $268B global damage from 2020 natural disasters

“When Natural Disasters and a Pandemic Collide” global annual report explores “connected extremes”

Aon plc (NYSE: AON), a leading global professional services firm providing a broad range of risk, retirement and health solutions, today launches its global Weather, Climate & Catastrophe Insight: 2020 Annual Report. The report evaluates the impact of global natural disaster events to identify trends, manage volatility and enhance resilience. 

The report reveals that the 416 natural catastrophe events of 2020 resulted in economic losses of USD268 billion – 8% above the average annual losses for this century – as costs continue to rise due to a changing climate, more people moving into hazard-prone areas, and an increase in global wealth. Of this total, private sector and government-sponsored insurance programs covered USD97 billion, creating a protection gap of 64%, which is the portion of economic losses not covered by insurance. This highlights the importance of addressing the underserved by ensuring that there is increased access to affordable insurance products in the future.

“The global response to the socioeconomic volatility caused by the Covid-19 pandemic has increased focus on other systemic risks – particularly climate change – and is causing a fundamental reordering of business priorities.”

Greg Case, CEO of Aon

“This report highlights the increasing likelihood of ‘connected extremes’ and reinforces that leading organisations of the future will be defined by their ability to manage the global implications of concurrent catastrophic events,” said Case. “In a highly volatile world, risk remains ever present, is more connected and, as a result, is also more severe – and 2020 has underscored this reality. It has also emphasized the need for enhanced collaboration between the public and private sectors, which will be essential to close the rising protection gap and build resilience against natural catastrophes.”

During the year, more than 8 000 people lost their lives due to natural catastrophes. Tropical cyclone was the costliest peril, causing more than USD78 billion in direct economic damage. It was closely followed by flooding (USD76 billion) and severe convective storm (USD63 billion). From a climate perspective, NOAA cited 2020 as the world’s second-warmest since 1880 for land and ocean temperatures at +0.98°C (+1.76°F) above the 20th-century average.

“The world continues to evolve as it is faced with new challenges around natural perils. While many private and public sector entities primarily focus on physical and human hazard risks, an increasing number of global regulative bodies are further pivoting towards how to handle emerging transitional and subsequent reputational risks.”

Steve Bowen, Director and Meteorologist for Aon’s Impact Forecasting team

This is especially true as the financial and humanitarian risks surrounding climate-enhanced events become more evident on a daily basis. Focus at the corporate and federal levels will be critical around investments in risk mitigation, resilience, and sustainability as the landscape around climate change solutions continues to accelerate with renewed urgency. Significant regional events during 2020 included:

  • Costliest year on record for global severe convective storms led by historic U.S. derecho
  • U.S. mainland endured a record-breaking 12 named storm landfalls, including six hurricanes
  • Super Typhoon Goni struck the Philippines as the strongest landfalling storm ever recorded globally at 195 mph
  • Ciara became Europe’s costliest windstorm since Xynthia in 2010
  • Drought conditions reduced agricultural crop yields in Brazil and Argentina, burning 30% of the Pantanal Region
  • The most widespread Yangtze River Basin floods since 1998 caused USD35 billion of economic damage in China’s monsoon season

Exhibit 1: Top 10 Global Economic Loss Events1,2

Date(s)EventLocationDeathsEconomic Loss (USD billion)Insured Loss (USD billion)
June – SeptemberSeasonal FloodsChina28035.02.0
August 21 – 29Hurricane LauraU.S., Caribbean6818.210.0
May 15 – 21Cyclone AmphanSouth Asia13315.00.5
August 8 – 12SCS (incl. Midwest Derecho)United States412.68.3
July 3 – 15Kyushu FloodsJapan828.52.0
November 2 – 13Hurricane EtaCaribbean, U.S.3098.40.7
June – SeptemberSeasonal FloodsIndia1,9227.60.8
September 14 – 18Hurricane SallyUnited States07.03.5
March 22Zagreb EarthquakeCroatia26.10.1
July 30 – August 5Hurricane IsaiasU.S., Caribbean, Canada185.02.7
All other events146 billion67 billion
TOTAL268 billion97 billion

1 Subject to change as loss estimates are further developed

2 Includes losses sustained by private insurers and government-sponsored programs

The full report is available on Aon’s interactive microsite at https://aon.io/2XplYk4. To access current and historical natural catastrophe data, as well as event analysis, please visit catastropheinsight.aon.com.

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Taking stock of Covid-19 through a sustainability lens

If you are reading this, you are well on your way towards surviving one of the most cataclysmic events of our lifetime; one that is forever going to reshape the way we view the world and drive home the importance of prioritising sustainability and all it entails during the years ahead.

The coronavirus, which originated in a wet market in Wuhan, China, in December 2019, has since been declared a global pandemic that has spread across the planet through international travel and global supply chains. At the time of writing, the number of cases worldwide was inching towards the 54-million mark. Additionally, the effects of the virus have reverberated through global financial markets and economies, resulting in the greatest recession since World War II.

The pandemic has also brought to bear the severity of socio-economic inequalities, risks introduced by our unsustainable systems as well as the materiality of fat-tail events. In so doing, it has provided us with an opportunity to redefine a new normal and introduce structural shifts that will help us work towards a sustainable future for all.

Many countries instituted national lockdowns at an early stage in the pandemic, which is a classic example of a suppression approach to pandemic management. The logic underpinning this methodology is to introduce social distancing to entire populations and minimise the number of additional infections reproduced by each confirmed case, thereby slowing the spread. This, ceteris paribus, is a highly effective public health risk management plan. However, in reality all other things are not, in fact, equal. Thus, the coronavirus has brought crucial attention to the social element of environmental, social and governance (ESG) issues.

National lockdowns entail the suspension of economic activity, which results in loss of income and employment, pushing the vulnerable segments of society, already on the precipice of poverty, into a state of destitution. Also, countries encumbered by acute socio-economic inequalities, like South Africa, have had to face the reality that large segments of their populations living in high population density areas and with inadequate access to clean water and sanitation would face a higher risk of exposure to Covid-19. The reality of the plethora of social risks has since powered the rollout of unprecedented global fiscal stimulus packages to soften the adverse economic effects of the pandemic.

Although these packages have provided the buoyancy required to see us through the immediate challenges, a fundamental shift in the discourse surrounding the risks fragile economic structures pose is translating into the development of a far more robust and well-defined path towards a sustainable future.

Consequently, sustainable investing will be a vital component of a post-pandemic recovery. For instance, there has been an increase in the global issuance of social and sustainability bonds over the past five years. New issuances in response to Covid-19 are also coming to market. A guidance note has been published by the International Capital Markets Association (ICMA) to provide a benchmark for the structuring and reporting standards associated with the new Covid-19 social bonds.

Domestically, the South African Minister of Finance announced plans to amend Regulation 28 of the Pension Funds Act to improve the ease with which retirement funds can finance infrastructure projects to help kickstart economic development.

The establishment of a robust regulatory framework and the dramatic increase in the need for social intervention worldwide will dramatically improve the level of interest in sustainability bonds and help reshape the economy of the future.

Companies adapting to change

Specific sectors and individual firms have been impacted in varying ways by the pandemic. When governments instituted lockdown laws, the spotlight turned to company governance practices and how executives would navigate the crisis.

Corporate boards faced scrutiny from various stakeholder groups that challenged the shareholder-centric model of governance, thereby making the board decision-making process much more multi-faceted. Companies became more cognisant of the central role they play in maintaining the socio-economic well-being of society through sustained value-creation. They also recognised how a well-functioning society puts them in a better position to meet their key performance indicator targets.

As a result, many boards decided to suspend or reduce their dividends and bonuses due to uncertainty regarding the scope and duration of the crisis. From an environmental perspective, working from home policies shed light on the environmental impact of commuting workforces. According to the International Energy Agency, a record drop in emissions is expected for 2020, with a projected 7% decline in energy-related CO2 emissions relative to 2019. Cities across the world have experienced lower smog levels, reduced water pollution and restored biodiversity highlighting the benefits of working remotely.

As such, many companies, like Microsoft, have implemented these policies permanently. Research also shows that infectious disease transmission is precipitated by rising temperatures, loss of biodiversity and other elements of climate change. By acknowledging this interconnectedness, global corporations are now playing a pivotal role in mitigating climate change risks.

Another equally crucial indirect consequence of the pandemic is the shift in focus to the social component of the traditional business model. Corporate culture measures such as employee health and safety and labour practices, including paid sick leave, have become priority areas and subject to intense public scrutiny.

Furthermore, severe supply challenges have also highlighted the risks of globalisation, and many companies have since amended their supply chain management processes to better diversify suppliers and reshore production. These social developments will not only improve working conditions but foster job creation and enterprise development.

Investor awareness on the rise

In light of the pandemic and growing public awareness of the climate crisis, investors across the world are shifting from a morally agnostic investment approach to one that aligns with their ethical concerns. This is evidenced in budding investor appetite for sustainable products, which has resulted in record-breaking flows into ESG funds in 2020.

Companies with strong ESG profiles have shown resilience in this time of crisis by staging a strong recovery post the March market lows.

This has prompted investors to rethink the impact ESG considerations may have on their investment returns. As supporting evidence, the MSCI World ESG Leaders Index has delivered returns in line with the MSCI World Index within a tight tracking error, other than its marginal outperformance in the wake of the March 2020 crash. This is a comforting return profile for the passive but ethically driven, investor.

Sustainable practices, such as strong incident risk management, fair labour practices, stakeholder-conscious boards, and clear decarbonisation pathways, have proven to be factors that drive long-term sustainable returns. To this end, we should witness an acceleration in the incorporation of ESG considerations into traditional valuation and risk models.

Forging a path forward

The turbulence caused by the pandemic and its indirect consequences has emphasised the need for global social change, multi-stakeholder centric business models, and international cooperation on public health and climate change considerations. This provides us with the carte blanche to rebuild a sustainable future for all and a resilient global financial ecosystem. The question is, which side of history do you, as an investor, want to be on?

Jessica Phalafala, Fixed Income Quantitative Analyst, Prescient Investment Management
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MINING|The science of addressing climate change

Climate change is exacerbating many of the risks that mines already face in their daily operations and needs to be factored into planning decisions right from the pre-feasibility stage of projects.

Water management, for example, is becoming more complex as rainfall patterns in many areas start to change in frequency and intensity, according to Philippa Burmeister, principal scientist at SRK Consulting. “This affects mines’ management of their surface water and groundwater resources, as well as biodiversity and wetland management,” she explains.

“Climate change has implications for infrastructure design, as it raises the risk of flooding, water insecurity, and environmental damage.”

PHILIPPA BURMEISTER, PRINCIPAL SCIENTIST, SRK CONSULTING

Water balance

As an example, she highlighted the importance of water balance as a key aspect of tailings dam design. Here, historical rainfall data is a crucial part of the information necessary to ensure dams’ safe operation in the long term. “As rainfall variability and intensity change, the historical data becomes less reliable in guiding design parameters,” she says. “Operations generally are more likely to be disrupted due to severe weather events like floods or droughts. For instance, heavier storm events may increase water volumes seeping into mine workings, requiring more pumping capacity.”

Ashleigh Maritz, senior environmental scientist at SRK Consulting, notes that climate change is also likely to affect the livelihood resilience of mining communities. “As temperatures and rainfall patterns change, traditional forms of livelihood could be threatened, making communities more reliant on the mines for income and corporate social investment.”

Social licence

“The way that a mine engages with their stakeholders and supports communities is therefore critical, as it is vital to maintaining its social licence to operate,” adds Maritz.

She pointed out that an important outcome of climate change is likely to be a scarcity of precious resources like water – which could set mines in direct competition with local communities. Rising average temperatures in some regions may also lead to the geographic spread of communicable diseases like malaria – which may affect employees and surrounding communities.

Impacts on public infrastructure will also have a knock-on effect on mines. More frequent flooding or drought will change municipalities’ planning and investment in water supply or stormwater facilities. This may disadvantage the mines or affect mines’ social license to operate.

 “This will demand not just a technical solution but careful relationship building so that platforms are created for collaborative and long-term answers with buy-in from all stakeholders,” Maritz attests.

Risk and compliance

Burmeister adds that mining clients are increasingly cognisant of climate change risk. Industry standards are evolving – even in advance of national standards or requirements.

“With financial institutions also seeing the potential risks to their investments posed by climate change, they are increasingly stipulating that climate change issues are addressed in planning studies for mining projects.”

Philippa Burmeister, principal scientist at SRK Consulting

To effectively address the varied risks that accompany climate change, she emphasised that solutions need to be integrated. In other words, technical input must be coordinated across a range of professional disciplines. It is crucial that climate change impacts be ‘mainstreamed’ into various technical disciplines if it is to be effectively addressed.

“Our philosophy at SRK is that climate change must be considered by all disciplines in the project team,” she said. “This includes expertise in various facets of engineering, as well as in the natural and social sciences.”

SRK uses a range of quantitative and qualitative methods to investigate clients’ exposure to climate change risk. These include measuring the project’s greenhouse gas emissions as part of its environmental impact assessment and applying climate change models to identify specific project risks posed by predicted changes in climatic conditions.

Innovating for sustainability

SRK is looking at developing site-specific climate change-related rainfall models for its mining clients, to better inform their project and operational planning.

“By integrating SRK’s professional input, we ensure not only that clients are compliant with regulations, but that the many and varied risks of climate change are addressed in their projects,” she says. “This makes them more sustainable and robust in the longer term.”

Maritz noted that the science of climate change modelling is relatively young, leading the company to take an adaptive and dynamic approach – while leveraging off partnerships to develop and apply the power of predictive modelling.

“This assists us in pioneering strategies and tools to manage climate change risks, from initial mine design and operational technical inputs through to social transitioning and mine closure,” she shares.  “While monitoring is being undertaken extensively at most mine sites, the interpretation of the data is critical to identifying trends that could prevent undesirable events.”

Digital and data

A key concern for SRK has been the development of better data processing and analysis capacity for the considerable mine data that is already available. This helps guide decision-making around climate change and the risks it poses.

“SRK recently established a dedicated data services unit that works closely with the climate change team to leverage and evolve the latest digital technologies,” she says. “For instance, as part of an innovation project, the team is developing an interactive mining map of South Africa; this provides a coordinated source of geo-located data on various aspects and stages of mining.”

SRK is also looking at developing site-specific climate change-related rainfall models for its mining clients, to better inform their project and operational planning. To support its ongoing innovation efforts, the company holds an annual innovation conference that fosters collaboration between specialists and opens doors to valuable applications.

www.srk.co.za

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Urgent action needed to clean up the energy system

By John Green, Chief Commercial Officer, Ninety One

As we add impetus to the global move to a cleaner, more sustainable energy system, perhaps the greatest obstacle we face is the enormous financing requirement that this step-change in our economies will face. Experts like the Climate Finance Leadership Initiative tell us that the financing required to clean up our supply-side energy system over the next 30 years is anything between $100trn and $150trn.

If we go with $100trn that amounts to around $3.5trn a year. Achieving this mission is therefore not about marginal change, waiting, over analysing or seeking out the perfect data set. It is about taking meaningful and significant action now.

At previous annual Climate Finance Summits, the key players in the climate finance industry have come together to debate the climate issue. There have always been question marks – is it real? Do we need to take it that seriously? How can we quantify the risk? How can we understand and capture the prospective returns?

At last, I believe this debate is largely over. Everything that is going on in the world now has galvanised all parts of society to take action. We must not underestimate our power to make an impact. In addition, the available investment opportunities are profound and it is increasingly clear that we do not have to sacrifice returns to do the right thing.

To this point I would like to share a personal experience that has given me hope in humanity’s ability to achieve the de-carbonisation mission. Our firm, Ninety One, has its African hub in Cape Town, which experienced a dramatic water crisis in 2018. After three consecutive years of drought, with rainfall two standard deviations below the norm, the city faced the approach of Day Zero: the day on which the taps would run dry. But Day Zero never came. Not because the rains came, but largely because the community took action. Water consumption dropped by almost 60% from 1.2bn litres per day to approximately 500m litres per day. The community understood the threat and acted. The crisis was averted.

My messages from this experience are relevant to all of us. 

The climate crisis is real. It is not distant science; it is not average world temperatures that never affect us; it is not an academic debate about whether divesting is right or wrong. It is here. 

This example shows us that action can make an impact and that action starts with each of us asking ourselves what we need to do. If we take positive action we can face down this challenge.

In our view too much of the decarbonisation debate and consequential implementation has focused on negative action. How do we divest? What should we exclude? How should we screen? But negative action is not enough; positive action is critical to achieving decarbonisation. As investors, positive action takes the form of the allocation of capital to businesses, assets and projects that deliver a decarbonisation outcome. This is not that difficult to achieve and could be a very significant driver of future returns.

The bad news is that progress in this regard has not been sufficient. The United Nations’ Principles for Responsible Investment, a leading proponent of investment to combat climate change, has confirmed that of the approximately $100trn in global investment assets only $1.3trn is allocated to positive action strategies. The ShareAction and Asset Owners Disclosure Project estimate that the world’s 100 largest pension funds are investing only 1% of their assets in low carbon solutions. In 2018, the Climate Policy Initiative estimated a total of $579bn was invested to finance decarbonisation. This falls well short of the $3.5trn per annum we need.

So there is a lot for us all to do. For all of the asset owners, pension funds, sovereign funds, insurance companies, and individuals: consider whether you are doing enough to allocate capital specifically to investments that will support and benefit from decarbonisation. Exclusion is not enough! 

For the asset consultants: do you have clear advice frameworks for pension funds who want to allocate more to positive action investment strategies? Have you considered these strategies and the role that they can play in fund portfolios fully? 

A leading consultant recently suggested that on return prospects alone, a sample fund should be allocating up to 10% of their assets to positive action investment strategies. Asset consultants are a critical part of this mission, and they need a strong view on how investment positively supports decarbonisation. 

For asset managers, the challenge will be to do more, and better. We have to understand and price climate and sustainability risk into all of our investments. We have to engage smartly to drive change constructively and effectively. We have to reject box-ticking in favour of substance and develop investment strategies dedicated to positive action.

This is the kind of change that happens once in a generation in our industry. In the 1970s and 1980s, we saw a decline in direct ownership of equities by individual investors in favour of funds. In the 2000s we saw the rise of diversification evidenced by a decline in home bias, as well as the growth of alternative investment strategies.

In the coming years and decades, the defining issue will be to mobilise finance for the challenge of climate change.

Financing decarbonisation is critical to our future as humanity. It is not going away. It will not cease to be relevant until climate change ceases to be relevant.

The good news is that, as was our experience as residents of Cape Town, if we all do our part, this is Mission Possible – not Mission Impossible.

I conclude with this quote by David Attenborough: “This is not about saving our planet – it’s about saving ourselves. It’s not all doom and gloom, there is a chance for us to make amends…all we need is the will to do so.”

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2020 SAEEC Conference: 4-6 November 2020 (Livestream event)

We are striving towards achieving the world’s agreed climate change goal of 2030, and our programme this year promises to deliver.

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VIDEO | How we can turn the tide on climate change

TED TALK | Christiana Figueres | Chris Anderson | including UN Secretary-General Antonio Guterres, Al Gore, Katharine Hayhoe, Jimmy Kimmel and Yuval Noah Harari, among others.

Witness the unveiling of Countdown, a major global campaign to cut greenhouse gas emissions. TED has partnered with scientists, policymakers, organisations, activists and more to create an initiative that everyone in the world can be part of.

This talk was presented at an official TED conference

ABOUT THE SPEAKERS

Chris Anderson | Head of TED After a long career in journalism and publishing, Chris Anderson became the curator of the TED Conference in 2002 and has developed it as a platform for identifying and disseminating ideas worth spreading.

Christiana Figueres | Stubborn optimist Christiana Figueres is an internationally recognised leader on global climate change.

Check out http://countdown.ted.com to learn how you can get involved — and help turn the tide on climate.

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VIDEO | Greta Thunberg

The disarming case to act right now on climate change

TEDxStockholm

In this passionate call to action, 16-year-old climate activist Greta Thunberg explains why, in August 2018, she walked out of school and organized a strike to raise awareness of global warming, protesting outside the Swedish parliament and grabbing the world’s attention. “The climate crisis has already been solved. We already have all the facts and solutions,” Thunberg says. “All we have to do is to wake up and change.”

This talk was presented to a local audience at TEDxStockholm, an independent event. 

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