“South Africa’s fate – and the fate of the world – is closely tied to the health of our ocean.” – Mathu Joyini, South Africa’s ambassador and representative to the United Nations
Continue reading View moreFollowing are UN Deputy Secretary-General Amina Mohammed’s closing remarks, as prepared for delivery, to the Commonwealth Heads of Government Meeting’s Climate Change Side Event “Keeping 1.5 Alive — the Glasgow Climate Pact and Building Momentum towards the twenty-seventh Meeting of the Conference of the Parties to the United Nations Framework Convention on Climate Change”, in Kigali today:
We are at the mid-point between the twenty-sixth Conference of the Parties to the United Nations Framework Convention on Climate Change (COP26) and COP27. The Glasgow Climate Pact, the main outcome of COP26, laid bare huge gaps on mitigation, on finance and on adaptation as well as the actions that needed to be taken over the course of the coming years to close these gaps through just transitions. Let us be frank, almost sixth months after Glasgow, we are off track. Today we have heard that there is political will behind the Glasgow Climate Pact, and renewed commitment to deliver the Paris Agreement. But, this intent is not translating into action.
Last year, global emissions were at their highest level ever. The nationally determined contributions submitted last year would result in an increase in global emissions of 14% by 2030.
Science tells us that, for us to be on a credible pathway to limit global average temperature rise to 1.5°C, global emissions need to decline by 45% below 2010 levels by 2030.
The battle to keep the 1.5°C goal of the Paris Agreement alive and prevent the worst impacts of the climate crisis will be won or lost this decade. With each passing day of inaction, the pulse of the 1.5°C goal gets weaker and weaker.
At Glasgow, all countries agreed to revise and strengthen their nationally determined contributions. Group of 20 (G20) nations account for 80% of global emissions. Their leadership is needed more than ever to bend the global emissions curve towards 1.5°C. Thanks to the COP26 President Alok Sharma for the continued leadership.
On finance, the $100 billion commitment made over a decade ago remains unmet, and the trillions needed to ensure a low-carbon, climate-resilient future are yet to be mobilised.
Developing countries continue to face extraordinary barriers to accessing the finance they need, particularly to protect themselves from the worst impacts of climate change which are happening now.
This story plays out against a devastating backdrop. According to the Intergovernmental Panel on Climate Change, at 1.5°C of warming, people living in Central and South America, most of Africa, small island developing States and South Asia, are 15 times more likely to die from a climate impact. The recent climate discussions in Bonn did not reflect the reality of this emergency.
We have six months to Sharm el-Sheikh. The window to demonstrate that the countries are taking serious steps, as agreed in Glasgow, has not yet closed. We still have hope that it can be done.
This means countries bringing forwards new and enhanced nationally determined contributions, underpinned by concrete policies. Especially from those that have not yet done so, and those major emitters that are not yet on a 1.5°C pathway. We need to go a step further. And this is why the Secretary-General has called for coalitions of support around key emerging economies to accelerate the transition away from coal.
It means donors providing clarity on when and how the $100 billion promise will be met, as well as providing the road map for the doubling of adaptation finance. It is a handshake that is not only fair but that will also help address the trust deficit. It also means multilateral developing banks playing their part in mobilising the trillions of needed private finance. We need to see concrete progress towards reforming rules around eligibility and burdensome access criteria that many developing countries face.
Local solutions need to be supported. Loss and damage needs to be seriously addressed. Youth need to be taken seriously and meaningfully engaged. We must keep focused on protecting the most vulnerable.
This is why the Secretary-General has called for 100% coverage of early warning systems over the next five years.
One out of every three persons in world is not covered by an early warning system. These persons are predominately in least developed countries and small island developing States. This is unacceptable when we know we have the technology and the tools to achieve this.
Multilateralism is under strain, yet the Commonwealth has the potential to lead the way and provide a model for cooperation. You are a diverse group of countries, spanning many regions of the world, languages, religions and cultures. You include major economies, both developed and developing. You include those already suffering from the impacts of climate in action. And you unite around common values.
So, today, I end with this appeal to you, Commonwealth leaders. Let us not step back from our commitments and revert to the lowest common denominator. We must close the gaps on mitigation, adaptation, finance and on loss and damage with urgency and ambition.
View moreBy Vanessa Mathebula – Quantitative Analyst at Prescient Investment Management
The much-anticipated COP26 is fast approaching. This is the 2021 United Nation’s Climate Change Conference, where each participating country, including South Africa, is expected to set more deliberate and ambitious climate change goals.
With the introduction of the Asset Manager’s Net Zero Agreement, fund managers globally are also now able to join the movement. Interested parties can pledge their commitment to playing an active role in supporting similar climate change goals to those of the respective countries by 2050 or earlier. Globally, there are already great initiatives in place, such as green financing solutions (e.g., green bonds), but, given our many macro-economic challenges, where do we stand as a country? Can we realistically move to the same rhythm as the global players?
Committing to advancing the goals of the Paris Agreement shows our willingness to collaborate and play an active role in achieving climate-related goals. However, we might have bitten more than we can chew, especially given the expectations of upping the ante in the upcoming COP26.
Fossil fuels are still a crucial driver of the SA economy
As a country, we rely on fossil fuels. For instance, coal continues to be the primary energy source as it caters for about 77% of South Africa’s energy needs, according to the Department of Mineral Resources and Energy. Furthermore, no material changes in this trend are expected in at least the next two decades. Unfortunately, the coal dilemma stretches wider than the obvious coal mining industry. As per the ripple effect theory, many other industries are, in fact, reliant on fossil fuels.
Aside from the obvious coal mining and electricity-generating companies, transportation (e.g. Transnet as it transports coal) and financial sectors can also be indirectly linked to the coal industry. This, therefore, means that the majority of South Africa’s productive economy can directly or indirectly be linked to fossil fuels.
Admittedly, there are initiatives in place that are meant to shift the country to ‘greener pastures’. However, the transition to these alternative forms of climate-friendly options is relatively slow. For instance, PWC’s Net Zero Economy Index shows South Africa is making minimal progress in decoupling emissions from GDP.
The country’s fundamental developmental challenges remain the main culprit. Not only do we lack the necessary infrastructure to enable such a transition, but the cost implications, especially for an overly indebted country like South Africa, coupled with the politics associated with such decisions, are other hurdles that cannot be ignored. We are, therefore, forced to acknowledge our shortcomings as a country and find ways to engage and promote realistic change.
In line with the Net-Zero goals, if asset managers were to restrict exposure to fossil fuel-linked companies and instruments materially, diversification and bottom-line investment performance would be materially affected. For instance, buying South African government bonds would be a questionable exercise as some of the proceeds are channeled towards assisting state-owned entities closely linked to the coal industry – e.g. Eskom. Bank paper would be questionable, too, as the average investor has no insight into the portion of the bank’s lending activities that are linked to the fossil-fuel industry.
This highlights the challenges we face as a country that still relies heavily on fossil fuels. Therefore, we are left with the question of whether we can materially limit exposure to the affected sectors without introducing any major adverse implications to the bottom line? Probably not! At least not any time soon, given the country’s sluggish progress towards introducing greener alternatives. However, this does not imply that we cannot take smaller strides each day towards having an overall positive impact from a sustainability standpoint.
A net positive contributor approach is a good start
One of the ways we can realistically advance towards achieving our sustainability goals, given the challenges we face, is to adopt a net positive contributor approach to overall Environmental, Social and Governance (ESG) factors. Not only does this enable us to factor climate-related factors into decisions in a less restrictive manner, but it also enables us to consider other sustainability factors, such as the social aspect, which is crucial for a country with a history of inequality like South Africa.
For instance, if we consider Eskom through a purely Net-Zero lens, no investor would touch it. However, once we accept that it is currently the primary producer of electricity, and thus supports economic activity countrywide and employs a notable portion of the country’s workforce, the scale would probably tilt to the positive for such a counter, keeping everything else constant.
At Prescient, we continuously seek to invest in net-positive counters. We assess the overall contribution of a given counter from an ESG risk and opportunity perspective based on our in-house developed ESG risk scoring tool, the Prescient ESG Scorecard. The scorecard is quantitative and free from human biases. The derived scores are based on over 60 metrics and are free from sector and size biases as we also factor sector materiality and adjust certain metrics by the market cap of the given counter. The scorecard output is integrated across investment teams enabling us to play an active role in moving towards sustainability as we tilt our investments towards net positive contributors. Of course, this is nowhere close to where we want to be from an overall sustainability perspective. We, therefore, continue assessing how viable it is for the local market to transition to a comprehensive Net-Zero approach. Until we reach a point where this is possible, we will continue the search for greener alternatives that don’t undermine the economy at the expense of South African society.
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