Image: The South African

Nedbank – one of South Africa’s four biggest banks – will cut direct funding of new oil and gas exploration projects with immediate effect.

In a statement released on Thursday, the bank said that it would not directly finance new oil production from 1 January 2035 and would not fund new thermal coal mines from 1 January 2025. The bank added that it would direct investment towards renewable energy sources, with plans to withdraw entirely from fossil fuel extraction activities by 2045.

Nedbank chief financial officer, Mike Davis, stated that Nedbank’s new policy will ensure appropriate support is given to existing energy requirements while the bank arranges an orderly transition away from fossil fuels. “As part of Nedbank’s journey as a purpose-led business, in using our financial expertise to do good, the bank recognizes that meeting the Paris Agreement objectives will require, among other things, full decarbonization of the global energy system by mid-century,” Davis said.

South Africa is the continent’s biggest greenhouse gas emitter and receives most of its power from coal-fired power stations. As some of the biggest lenders on the continent, South Africa’s banks have faced increased scrutiny from environmental activists recently over their decisions to continue financing fossil fuel projects.

Nedbank aims to be at the forefront of managing climate risks and financing innovative solutions to support socio-economic development and build resilience to climate change.

“Failure to address climate change will commit the African continent to a much more challenging and less prosperous future, since Africa is both highly exposed to the physical impacts and often lacks capacity to respond to those impacts,” Nedbank’s new climate policy states.

Reacting to the news, environmental activist organization, Just Share, said Nedbank’s energy policy is the most ambitious of any South African bank and that it understands the implications of the Paris Agreement and climate science.

Nedbank has also committed to provide R2 billion ($141 million) to local renewable power generation, giving impetus to other financial institutions to set their own decarbonization targets.