Standard Bank can't stand up to own standards!

Published by MAC on 2020-06-10
Source: Just Share

Standard Bank board: fossil fuel ties brought to light

Shareholders asked to oust climate-conflicted directors at AGM's largest
African bank

Just Share press release

8 June 2020

Cape Town - Seven of Standard Bank’s 18 board members are conflicted on
climate change-related matters by virtue of their ties to the fossil
fuel industry. Fourteen climate justice NGOs [1] from around the world,
led by shareholder activist organisation Just Share, have called on
Standard Bank’s shareholders to vote against the election / re-election
of climate-conflicted directors at the upcoming AGM.

Standard Bank, Africa's largest bank based in South Africa, acknowledges
that “climate risk is recognised as one of the material risks facing the
group”. The bank is a founding signatory of the UN Principles for
Responsible Banking (UNPRB), which “set the global benchmark for what it
means to be a responsible bank”. Principle 1 of the UNPRB (“Alignment”),
commits signatory banks to “align [their] business strategy to be
consistent with and contribute to individuals’ needs and society’s
goals, as expressed in the Sustainable Development Goals, the Paris
Climate Agreement and relevant national and regional frameworks”.

One of the Paris Agreement’s three main objectives is “making finance
flows consistent with a pathway towards low greenhouse gas emissions and
climate-resilient development”. The financing of fossil fuels, in
particular new fossil fuel exploration, extraction and production, is
not compatible with the Paris Agreement.

A large proportion of Standard Bank’s board members have ties to South
African fossil fuel companies, including Sasol (the country’s biggest
carbon emitter after Eskom), Exxaro and BP Southern Africa. Five of the
seven directors with fossil fuel ties are up for election or re-election
at the company’s AGM on 26 June. They are:

Trix Kennealy
Nomgando Matyumza
Priscillah Mabelane
Nonkululeko Nyembezi
Jacko Maree

If all of the directors standing for election or re-election are elected
at the 26 June AGM, directors with fossil fuel ties will represent 42%
of Standard Bank’s independent directors (5/12); 47% of its
non-executive directors (7/15); and 41% (7/17)[2] of the board as a
whole. The seven board members and their ties to fossil fuel companies
are set out below:

Standard Bank independent non-executive director (INED) Trix
Kennealy, as of May 2020 the bank’s lead independent director, is also
an INED at Sasol;
Standard Bank INED Nomgando Matyumza is also an INED at Sasol;
Standard Bank INED Priscillah Mabelane, appointed to the board with
effect from 1 January 2020:
was until 1 June 2020 the CEO and Executive Director of BP
Southern Africa;
is a director of Shell and BP South African Petroleum
Refineries (Pty) Limited (which owns Sapref, the largest fuel refinery
in SA);
is Deputy Chairperson of the South African Petroleum Industry
Association Board of Governors; and
will from 1 September 2020, join Sasol as executive vice
president of that company’s energy business;
Standard Bank INED Geraldine Fraser-Moleketi is also lead
independent director of thermal coal mining company Exxaro;
Standard Bank INED Nonkululeko Nyembezi, also appointed to the
board with effect from 1 January 2020, is CEO and Executive Director of
Ichor Coal N.V., a thermal coal production company operating in South
Africa;
Standard Bank non-executive director Jacko Maree is an INED of the
Phembani Group, an investment company with holdings in Umcebo
Mining (coal), Izimbiwa Coal, South32 and Engen; and
Non-executive director Lubin Wang represents the Industrial and
Commercial Bank of China (ICBC) on the board. The ICBC holds 20% of
Standard Bank’s shares, and is a key player in financial facilitation
for the oil and gas sector in Africa.

Board members with a conflict of interest are required by the
South-Africa Companies Act, 2008 to declare those interests and to
recuse themselves from board meetings during consideration of any matter
in relation to which they are conflicted. Such conflicts include not
only personal conflicts, but also those with “related parties”, which
include other companies of which the board member is a director.

In these circumstances, responsible investors holding Standard Bank
shares are faced with no good options: either these board members will
recuse themselves, creating a corporate governance void when the board
considers some of its most important strategic issues as, by the bank’s
own admission, climate-related matters are; or they will not,
compromising the ability of the board to provide climate-competent
leadership.

Change of heart

In 2019, Standard Bank became the first South African company to table
shareholder-proposed climate change resolutions at its AGM.

In 2020, after engaging with the bank, the RAITH Foundation and Just
Share formally co-filed another resolution – this time asking the bank
to extend its coal financing policies to include its position on oil and
gas financing. This is particularly important in Standard Bank’s case,
as it is one of the biggest oil and gas lenders in sub-Saharan Africa.

To the surprise of the co-filers, Standard Bank refused to table the
2020 resolution. At first, its reason for this refusal was that the
resolution was “premature”. Then, the company secretary provided a
different reason for the refusal: an alleged legal technicality with
regard to the ability of shareholders to vote on climate change-related
matters.

Strikingly, the legal argument provided by Standard Bank’s company
secretary was exactly the same as the one provided by Sasol to
shareholders attempting to table climate resolutions at that company in
2018 and 2019.

Sasol bases its view on a legal opinion which it refuses to provide to
shareholders. It was previously the only company to use this argument -
which has not been tested in court. Furthermore, multiple climate change
shareholder resolutions have already been tabled in South Africa; at
Standard Bank, FirstRand, Nedbank and Absa.

It is in the interest of fossil fuel companies to prevent financial
institutions from limiting financing for fossil fuels. It is also in the
interest of fossil fuel companies to frustrate the tabling of climate
change shareholder resolutions that require better disclosure of climate
risk exposure.

Standard Bank, for example, does not disclose in its company reports
that Stanbic Uganda (a Standard Bank Group subsidiary) is a lead
arranger for financing of the East African Crude Oil Pipeline (EACOP), a
hugely controversial project which will be the world’s longest heated
oil pipeline, stretching 1,445 kilometres from Hoima in Uganda to Tanga
in Tanzania and carrying 216 000 barrels of crude oil a day [3].

Shareholders: call to action

Five of the seven climate-conflicted Standard Bank directors – Ms
Kennealy, Ms Matyumza, Ms Mabelane, Ms Nyembezi and Mr Maree – are
offering themselves for election or re-election to Standard Bank’s board
this year.

The election of Standard Bank’s climate-conflicted board members risks
entrenching a high tolerance for exposure to the fossil fuel industry
for years to come. Climate justice organisations from around the world
have therefore decided to shine a light on this issue, and have written
to Standard Bank shareholders calling on them to vote against the
election of these directors at Standard Bank’s AGM on 26 June.

Refereces:

[1] 350Africa.org (South Africa), Australasian Centre for Corporate
Responsibility (ACCR) (Australia), Africa Institute for Energy
Governance (AFIEGO) (Uganda), BankTrack (Netherlands), Centre for
Environmental Rights (CER) (South Africa), Earthlife Africa (South
Africa), Fundacja "Rozwój TAK - Odkrywki NIE" (Poland), Fund our
Futures, groundWork (South Africa), Just Share (South Africa), Life
After Coal (South Africa), National Lawyers Guild, Environmental Justice
Committee (USA), Rainforest Action Network (USA), Reclaim Finance
(France) and Urgewald (Germany)

[2] After the resignation of Peter Sullivan at this year’s AGM, Standard
Bank’s board will have 17 members.

[3] See letter to the African Development Bank, signed by over 100
NGOs, as well as an article by Yale Environment 360. Further
information is available here.

Contact
Annette Gibson, Just Share, +2782 467 1295