Global and South African Financial Institutions Shift Toward Renewable Investments

As the 2023 UN Climate Change Conference (COP 28) approaches in Dubai, both global and South African asset managers, along with financial institutions holding assets exceeding $50 billion, are increasingly adopting policies to cease investments in fossil fuels. Market investors are playing a pivotal role in advocating for a shift towards renewable projects as part of the global movement toward decarbonization.

Efforts toward an accelerated energy transition on a global scale are prompting financial institutions to redirect their investments towards clean energy solutions. More than 200 financial institutions worldwide, including South African banks, have established coal exclusion policies, according to a report by the Institute for Energy Economics and Financial Analysis.

Makwe Masilela of Makwe Fund Managers highlighted the pressure faced by asset managers from trustees and pension funds to prioritize environmentally friendly investments. He noted that while the profits from fossil fuels have historically been lucrative, renewable energy investments are increasingly viewed as providing better returns.

In the context of South Africa’s energy crisis, the government has affirmed a gradual approach to the decommissioning of coal-fired power stations, emphasizing an energy transition that aligns with the country’s needs. Punki Modise, Chief of Strategy & Sustainability at the Association for the Advancement of Black Accountants (ABASA), stressed the importance of focusing on green energy solutions and implementing them gradually to sustain livelihoods.

Despite the challenges, efforts to transition to green energy are underway in South Africa. ABASA has committed over R50 billion in funding for green energy solutions. Additionally, an International Partner Group comprising the United States, the United Kingdom, France, Germany, and the European Union has pledged approximately R164 billion to support South Africa’s Just Transition. This support includes concessional and commercial loans, grants, and guarantees, signaling a global commitment to fostering a sustainable and equitable energy transition.

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