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Centre for Environmental Rights

FirstRandFinancial Services

FirstRand Limited wholly owns FNB (retail and commercial segment), RMB (corporate and investment banking), WesBank (instalment credit, fleet management, and related services).

Summary

In its 2018 mainstream reports, FirstRand does not identify climate change as a material business risk, nor does it disclose its direct or indirect risks from climate change with sufficient detail, despite the bank’s continued exposure to sectors that face high transitional risks such as the thermal coal industry, mining, and oil and gas.

As part of its strategy to mitigate climate risks, FirstRand reports that it will “manage portfolio risk and assist clients with planning climate resilient businesses, infrastructure and contributing to a water-efficient, lower-carbon economy and society” however, FirstRand fails to provide any detail on its mitigation, adaptation, resource efficiency, pollution reduction and transition plans. While efforts to manage portfolio risk are notable, these efforts should include reducing concentrations of carbon-related assets, or adequate reasons for not reducing reduce exposure to carbon-related assets. FirstRand does not disclose the concentrations of credit exposure to carbon-related assets, nor does it describe how it will mitigate any risk exposure associated with those assets. FirstRand does not describe the climate scenarios (including a 2oC scenario) or time frames used to inform its strategy, making it difficult to assess whether the bank has adequately considered its risks, and the risks to borrowers.

While FirstRand discloses its direct and indirect (including scope 3) greenhouse gas emissions and has an absolute target to reduce its emissions, FirstRand has no publicly available policy on funding high greenhouse gas emitting coal industries.

R1 669 062 million1
Total assets
Not disclosed
Concentration of carbon-related assets
0.882
Credit loss ratio (%)

Risky Activities:

  • Continues to consider thermal coal financing
  • RMB provides specialist financial services to mining, incl. finance for Asanko Gold, Ghana
  • FNB CIB provides mining, oil and gas finance
  1. Interim financial results 30 June 2019, p.8
  2. Interim financial results 30 June 2019, p.8

Findings

Governance

Is the company a supporter of the TCFD?
No

According to its 2018 Integrated Report, the Social, Ethics and Transformation Committee has initiated a project to address the TCFD recommendations. IR2018, p128

Who has oversight of climate-related risks and opportunities?
Not disclosed

Responsibility is not clearly disclosed.

“Ultimate oversight of social and environmental risk and performance of the group rests with the board.” – Report to Society 2018, p 11. But no explicit mention of climate change.

Does the remuneration policy include performance metrics used to measure and manage climate-related risks?
No

Remuneration policy does not include climate-related performance metrics.

Strategy

Does the company identify climate change as a material business risk?
No

Climate risks are not explicitly mentioned as a material or principal risk in the annual or integrated report.

FirstRand does not describe climate-related risks and opportunities in either its 2018 Integrated Report or its 2017 Environmental and Social Risk Report.

The 2016 Climate Change and Energy Report finds: “(…) climate change poses a number of direct risks to FirstRand’s operations, as well as indirect risks to financing activities as a result of risks posed to its clients” – FirstRand, Climate Change and Energy Report 2016, p 2

Has the company outlined the risks and opportunities from climate change?
CDP only

Detailed disclosure, including timeframes and impacts, with timeframes in CDP only.

Does the company describe how its strategy might change to address climate change risks and opportunities?
Limited

Some disclosure of how climate risks and/or opportunities are incorporated into strategy, but with insufficient detail.

“The group’s focus is to operate as a responsible corporate citizen in the management of the environmental impact of its operations and buildings and, as well as an investor and lender, to manage portfolio risk and assist clients with planning climate resilient businesses, infrastructure and contributing to a water efficient, lower-carbon economy and society.” – Report to Society 2018, p 62

Does the company describe the climate change scenarios used to inform strategy and financial planning?
No

No disclosure of scenarios in mainstream reports.

Does the bank describe significant concentrations of credit exposure to carbon-related assets or the amount and percentage of carbon-related assets relative to total assets?
No

No disclosure.

Does the bank disclose their climate-related risks (transition and physical) in their lending and other financial intermediary business activities?
No

Climate-related risks (transition and physical) in their lending and other financial intermediary business activities are not disclosed.

Risk Management

Does the company have a process to manage climate-related risks?
Yes

Climate-related risks form part of company-wide risk management programme or specific climate-related risk management process.

“FirstRand’s environmental and social risk management team forms part of the Enterprise Risk Management business unit. This enables the integration of environmental and social risks and the identify cation, management and mitigation of climate-related risks or opportunities into group risk management processes.” – ESR 2017, p 6

Metrics and Targets

Has the company set GHG emission reduction targets?
Absolute

The company has set an absolute emission reduction target.

“The absolute target is a 20% reduction in South African Scope 1 and Scope 2 emissions (excluding ATMs) by 2020 based on 2015 baseline of 258 926 tCO2e. This target covers 91.8% of FirstRand’s gross global Scope 1 and 2 emissions. This baseline was adjusted and restated in 2016 (248 606 tCO2e) to account for newer and more comprehensive data.” – ESR 2017, p 17

Is there a long-term GHG emission reduction target?
No

There is not an absolute or intensity reduction target over five years in duration.

“The environmental and social risk management team, together with the energy management team, is considering new, longer-term, science-based greenhouse gas emission reduction targets in addition to the short-term targets for energy management.” – ESR 2017, p18

“The group is also considering intensity targets to further examine the progress of carbon emission reductions throughout the group and its performance.” – ESR 2017, p 18

Does the company disclose its GHG emissions?
Scope 1, 2 and 3

Companies report on their Scope 1, 2 and 3 emissions for the current year and at least the previous year.

Scope 3 emissions disclosed include vehicle travel, flights, paper, fuel well-to-tank, and electricity transmission and distribution losses – ESR 2017, p 16

Does the company provide their internal carbon price?
No

No internal carbon price is disclosed.

Additional Information

Does the bank have a publicly-available policy on funding coal mining and coal-fired power?
No

No disclosure or policy not publicly-available.

“FirstRand does not currently exclude the funding of coal-fired power stations.” – ESR 2017, p 14

Disclosures Considered

  • Annual Integrated Report 2018
  • Report to Society 2018
  • Environmental and Social Risk Report 2017
  • Carbon Disclosure Project (CDP) 2018 Climate Change submission

This report is accurate as of 1 August 2019.

FirstRand Limited has since published its Annual Integrated Report 2019, which is not taken into account in these findings.

Company Profile

Principles

  • Not signatory to the Principles of Responsible Banking
  • Not signatory to the Principles of Responsible Investment
  • Not a member of Climate Action 100+

Locations

South Africa, India, London, Guernsey, Kenya, Angola, Shanghai, Namibia, Botswana, Swaziland, Mozambique, Zambia, Lesotho, Tanzania, Ghana, Nigeria, Mauritius

Key Shareholders

  • Public Investment Corporation (8.98%)
  • Remgro Limited (3.92%)
  • Invesco Advisers (2.44%)
  • Allan Gray (2.19%)
  • Fidelity Management & Research Co. (1.99%)
  • The Vanguard Group (1.99%)