Just Share & Aeon Investment Management’s Shareholder Resolution
At Standard Bank’s annual general meeting (AGM) on May 31 2022, we are calling on investors to vote in favour of the Just Share and Aeon Investment Management’s shareholder resolution. The resolution calls on the company:
- By 31 March 2023, to report on its progress, in relation to each relevant country of operation, in calculating its financed greenhouse gas (GHG) emissions* from its exposure to oil and gas;
- By 31 March 2024, to disclose its baseline financed GHG emissions from its exposure to oil and gas; and
- By 31 March 2025, to update its March 2022 Climate Policy to include short-, medium-, and long-term targets for its financed GHG emissions from oil and gas, aligned with the Paris Agreement goal of limiting the global temperature increase to 1.5 degrees Celsius above pre-industrial levels.
As the largest African bank by assets, and Africa’s biggest lender to the oil and gas industry, Standard Bank’s lending, investing and other financial intermediary activities in Africa will influence whether or not the global temperature increase is kept to 1.5⁰C, and whether or not a just transition is achieved. It is also the lead financial arranger of the controversial TotalEnergies East African Crude Oil Pipeline (EACOP). The EACOP is a proposed 1,445-kilometre pipeline to transport oil from Hoima, Uganda to the port of Tanga in Tanzania. Given that it poses serious climate, social and environmental risks, this project faces significant local community and civil society resistance.
Why did Just Share & Aeon file this shareholder resolution?
In 2021, instead of tabling a non-binding advisory resolution co-filed by Just Share, Aeon, Abax Investments, and Visio Fund Management, Standard Bank agreed to do what that resolution required: to publish, in the first half of 2022, a climate strategy and short-, medium-, and long-term targets to reduce its exposure to fossil fuel assets on a timeline aligned with the Paris Goals.
In a May 2021 joint statement, the co-filers and Standard Bank recorded this agreement. Standard Bank also explained in that statement that it had taken “the opportunity to resolve a previous misunderstanding with regard to Standard Bank’s position on shareholders’ rights to propose non-binding advisory resolutions. Standard Bank is not opposed to shareholders proposing non-binding advisory resolutions. The Board will give due consideration to any such resolutions. The Parties agreed to engage in a constructive manner on these matters going forward.”
The March 2022 Climate Policy
Standard Bank’s March 2022 Climate Policy was published as the bank’s attempt to comply with this 2021 commitment.
Having analysed the Climate Policy, Just Share and Aeon noted that it did not contain any short-term or medium-term targets for a reduction in Standard Bank’s exposure to oil and gas. In relation to long-term targets, the Climate Policy does not envisage any reduction in absolute financed emissions from oil and gas until 2040 at the earliest.
Instead, the Climate Policy allows Standard Bank to increase its financing of fossil fuels until at least 2040.
Engagement on the 2022 resolution
In March, Just Share and Aeon shared a draft resolution with the bank, asking that it update the 2022 Climate Policy, by March 2023, to set short-term and medium-term absolute contraction targets for the bank’s GHG emissions from its exposure to oil and gas, i.e. targets which reduce the physical amounts of GHGs emitted into the atmosphere over time, as required by climate science.
Following further engagement, which included the bank’s views regarding feasible timeframes for obtaining financed GHG emissions data from its clients, the co-filers and the bank agreed on the wording for a resolution, which was formally filed on 29 March.
31 March 2022 Notice of AGM
The non-binding advisory resolution, as agreed by the co-filers and Standard Bank, was published in the bank’s 31 March 2022 Notice of AGM. However, the explanatory note to the resolution was not agreed between the parties and had not been seen by the co-filers prior to publication of the Notice of AGM.
The bank’s explanatory note confirms that it has agreed the wording of the resolution with the co-filers, but goes on to state that “[i]n terms of South African law, shareholders cannot propose a shareholder resolution which binds the board of the company even if the resolution is passed by shareholders, nor are there any requirements of South African law, as there are in certain other jurisdictions, for a company to put a non-binding advisory opinion to its shareholders on request or demand. Despite this, the Board has, in the interests of shareholder engagement and exploring shareholder views, resolved to put the above resolutions to the company’s shareholders, as requested by the Requesting Shareholders”.
This view was erroneously expressed by Standard Bank in a manner designed to convey the impression that this is a definitive statement of the law. In fact, the Companies Act, 2008 states, in section 65(3), that:
“Any two shareholders of a company may propose a resolution concerning any matter in respect of which they are each entitled to exercise voting rights.”
Just Share and Aeon’s position in relation to shareholder rights to propose resolutions is well known to Standard Bank. This includes, in accordance with a legal opinion received by Just Share, that directors do not have a unilateral discretion to refuse to table shareholder-proposed resolutions on content-based grounds.
The co-filers expressed their disappointment in the contents of the explanatory note and asked Standard Bank to republish the Notice of AGM without this explanatory note, and instead to provide context for the filing of the resolution, as included in the formally filed resolution.
Following further discussion, the parties agreed instead to publish a stock exchange news service (SENS) announcement, which was released on 13 April 2022, and which set out the context of the non-binding advisory resolution, as well as providing clarity on the parties’ differing views on shareholder rights to file resolutions.
Why shareholders should support the resolution
Just Share and Aeon look forward to high levels of shareholder support for the non-binding advisory resolution at Standard Bank’s 31 May AGM. Shareholders should be particularly concerned about Standard Bank’s plans to increase its financing to oil and gas in the short- to medium-term, which run counter to climate science, and to a wealth of evidence demonstrating that:
- gas is not clean nor climate or environmentally “friendly”;
- gas will not bring economic prosperity or poverty alleviation; and
- the power sector does not require significant quantities of gas for energy security.
Climate science demonstrates that keeping the global average temperature increase to 1.5°C is essential to limit the worst impacts of global heating. This is only possible with immediate, rapid, and large-scale reductions in GHG emissions.
Standard Bank continues to take the view, contrary to a significant and growing body of evidence, that fossil fuels “will likely remain key to ensuring energy security in many African regions.” It also regards gas as a “transition fuel” and states its “commitment to gas financing.”
A recent study by the International Institute for Sustainable Development (IISD) — Gas Pressure: Exploring the case for gas-fired power in South Africa — points out that rapid declines in the cost of renewable energy and battery storage technology have upended the view that gas is a necessary “transition fuel” in the shift away from coal power. The IISD finds that expanding gas usage would be a “very expensive mistake”, and that renewables and storage should be the priority until at least 2030.
A wealth of other evidence demonstrates that rapid and extensive scaling up of renewable energy generation is the most cost-optimal energy pathway for Africa and presents significant economic benefits and opportunities.
For more detail and extensive source material on these points, see Just Share’s analysis of Standard Bank’s 2022 Climate Policy.
*Financed emissions are defined by the Partnership for Carbon Accounting Financials’ (PCAF’s) Global GHG Accounting and Reporting Standard for the Financial Industry as “[a]bsolute emissions that banks and investors finance through their loans and investments.”