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Centre for Environmental Rights

NedbankFinancial Services

Nedbank Group offers wholesale and retail banking services as well as insurance, asset retail banking services as well as insurance, asset management and wealth management. Nedbank is the best performing bank assessed in Full Disclosure 5.

Summary

As of 3 August 2019, Nedbank is the only bank assessed in Full Disclosure 5 that discloses the concentration of carbon-related assets in its loan and finance portfolios, allowing investors to assess the adequacy of the bank’s strategies and the extent of the banks’ exposure to climate-related risks. The bank explicitly mentions the transformation of society within environmental constraints as a material, business matter, and sets out a sufficiently detailed description of how its business strategy might change to address climate-related risks.

In its 2018 Integrated Report, Nedbank noted that it would itself pilot the UNEP Finance Initiative’s methodology for bank-specific application of the Task Force on Climate-related Financial Disclosure (TCFD) Recommendations, which provides encouragement for other South African banks. While the board, through its Transformation, Social, and Ethics Committee, has oversight of climate-related risks and opportunities, the bank could encourage the implementation of its strategy including climate-related performance metrics in remuneration policies.

To improve the reliability of its strategy, Nedbank ought to report on the climate scenarios (including a 2°C scenario) used to inform its strategy, and should disclose more detail on the risks associated with climate change in its mainstream reports, indicating whether the risks and interventions are short-, medium-, or long-term.

Nedbank disclosed its direct and indirect greenhouse gas emissions and has both a short- and long-term target for reducing its contribution to global warming. The bank also has also made a public commitment “not to provide project financing or other forms of asset-specific financing where the proceeds will be used to develop a new coal-fired power plant, regardless of country or technology.”

While there is room for improvement, which includes disclosing the scenarios that inform the bank’s strategies and targets and implementing incentives to encourage climate-risk reduction, Nedbank discloses a number of initiatives that enhance transparency and could significantly reduce its exposure to climate-related risks.

R1 043 912 million
Total assets
0.43% total group lending and finance
Concentration of carbon-related assets
0.7%
Credit loss ratio (%)

Risky Activities:

  • Core area of expertise is in mining and resources, and oil and gas
  • Nedbank was involved in funding the Thabametsi and Khanyisa coal power plants before withdrawing in early 2019, and committing not to fund new coal-fired power plants

Findings

Governance

Is the company a supporter of the TCFD?
No

“In 2019 Nedbank will pilot the United Nations Environment Programme Finance Initiative (UNEP FI) recommendations and methodologies for how banks should report climate change risks as per the Taskforce on Climate-related Financial Disclosures.” – IR2018, p 81

Who has oversight of climate-related risks and opportunities?
Board

Board = Disclosure explicitly mentions that the board is responsible for overseeing climate risk. Board responsibility for “sustainability”, “environmental issues”, or “ESG” is not sufficient.

“Nedbank’s Group Transformation, Social and Ethics Board Committee oversees climate change risks and opportunities.” – CC2019, p 5

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?
Yes

Climate risks are explicitly mentioned as a material or principal risk in the annual or integrated report.

“Transformation of society within environmental constraints” is one of Nedbank’s material matter. This includes climate change. – IR2018, p 37

Has the company outlined the risks and opportunities from climate change?
Limited

Detailed disclosure in CDP with some disclosure in mainstream reports, but limited detail on timeframes and/or impacts provided.

“Climate change – The impacts of climate change include: more natural disasters and increased costs to rebuild (or retrofit) infrastructure where required; increased energy costs, water shortages and quality issues; and increased food prices and shortages. Extreme weather events impact clients, and ultimately insurers through higher claims. The imperative to protect essential ecosystem services provided by our environment, amid growing social and political pressure, lead to certain industries becoming less viable, resulting in potential job losses.” – IR2018, p 37

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

Disclosure of how climate risks and opportunities are incorporated into strategy through efforts such as mitigation, adaptation, resource efficiency, pollution reduction  and transition plans.

“We aim to direct a significant and growing proportion of our funding to help transform the economy at a rate that is commensurate with UNFCCC objectives. Since the African continent is extremely vulnerable to the negative impacts of climate change, our response includes both mitigation and adaptation components, comprising decarbonisation of our lending book in line with the required trajectory and increased funding to enable sustainable development, including provision of modern energy services, clean water and sanitation, climate-resilient infrastructure and sustainable cities.” – CC2019, p 3

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

No disclosure of scenarios in mainstream reports.

A focus of the Group Credit Committee for 2019 and beyond will be “Continuing to monitor the bank’s policies to ensure they evolve with
the amendments in legislation and current trends regarding the use
of scenarios on climate change in risk assessments and the
sustainable finance of state-owned enterprises”. – IR 2018, p 48

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?
Yes

Significant concentrations of credit exposure to carbon-related assets and/or the amount and percentage of carbon-related assets relative to total assets are disclosed.

“Currently 2,13% of our total group lending and finance commitments relate to renewable-energy generation, compared with the 0,43% of total funding of coal- and fossil-fuel based energy generation (including our direct facilities to Eskom).” – IR 2018, p 54

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.

“Extreme weather events impact clients, and ultimately insurers through higher claims.” – IR 2018, p 37 but nothing further

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.

Climate change is categorised as a business risk and reputational risk (IR2018, p 37), which are two of Nedbank’s top 10 risks.

“The board, through the Group Risk and Capital Management Committee, governs risks across the bank’s Enterprise wide Risk Management Framework (ERMF), which includes the risk strategy, policies, procedures, limits and exposures, among others.” – IR2018, p 19

Metrics and Targets

Has the company set GHG emission reduction targets?
Absolute

The company has set an absolute emission reduction target.

“The target was set at a 35% decrease, based on end-of-2013 values, by the end of 2025.” – SD2018, p 21

Is there a long-term GHG emission reduction target?
Yes

There is an absolute or intensity reduction target over five years in duration.

“The target was set at a 35% decrease, based on end-of-2013 values, by the end of 2025.” – SD2018, p 21

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 disclosure includes office paper, commuting and business travel.

https://www.nedbank.co.za/content/dam/nedbank/site-assets/AboutUs/Sustainability/Supporting%20Documents/2018%20Reduction%20Targets%20tables%20and%20graphs.pdf#page=3

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?
Partial

A publicly-available policy addresses either funding of coal mining or coal-fired power.

In 2018, Nedbank undertook “not to provide project financing or other forms of asset-specific financing where the proceeds will be used to develop a new coal-fired power plant, regardless of country or technology. This commitment now includes round 1 of SA’s coal baseload procurement programme.” – IR2018, p 81

Disclosures Considered

  • Integrated Report 2018
  • Sustainable Development Review 2018
  • Addressing Climate Change 2019
  • Remuneration Report 2018
  • Governance and Ethics Review 2018
  • Carbon Disclosure Project (CDP) 2018 Climate Change submission

This report is accurate as of 03 August 2019.

Company Profile

Locations

South Africa, Lesotho, Malawi, Mozambique, Namibia, Eswatini, and Zimbabwe, Angola, Kenya

Key Shareholders

  • Old Mutual Life Assurance Co. (South Africa) Ltd. (22.4%)
  • Public Investment Corporation (SOC) Ltd. (11.4%)
  • Allan Gray (Pty) Ltd. (9.86%)
  • The Vanguard Group, Inc. (2.81%)
  • Coronation Asset Management (Pty) Ltd. (2.75%)
  • Nedbank Group Employee Share Trust (2.21%)
  • Fidelity Management & Research Co. (1.97%)
  • Old Mutual Investment Group (Pty) Ltd (1.42%)