Can I have some beer
with my oil and gold?

The key to unlocking investments into Africa is for industry stakeholders to continue to collaborate responsibly to promote economic growth. The key role of a bank is evolving and now includes also making sure that where we provide funding, the economy and communities benefit. The trick now is building sustainability through the value chain… and it’s important that ‘sustainability’ is not dismissed as a ’nice-to-have’ but rather to see it as a critical part of the funding journey. Already we are seeing shareholder activists are pushing back against projects that don’t take into account environmental and sustainability related issues.

Issues such as climate change are no longer ‘soft’ elements that can be tucked away in a sustainability report somewhere. Shareholders and other stakeholders are demanding that the banking sector adopts a responsible approach to funding of new projects and this is driving a change in behaviour for all sector participants.

The question will remain whether the industry is doing enough with regards to carbon emissions to meet the goals of the Paris agreement on climate change and the scopes listed.

The Paris Agreement’s central aim is to strengthen the global response to the threat of climate change by keeping a global temperature rise this century well below 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius. Additionally, the agreement aims to increase the ability of countries to deal with the impacts of climate change, and at making finance flows consistent with a low GHG emissions and climate-resilient pathway. To reach these ambitious goals, appropriate mobilisation and provision of financial resources, a new technology framework and enhanced capacity-building is to be put in place, thus supporting action by developing countries and the most vulnerable countries, in line with their own national objectives.

• Scope 1 covers direct emissions from owned or controlled sources.
• Scope 2 covers indirect emissions from the generation of purchased electricity, steam, heating and cooling consumed by the reporting company.
• Scope 3 includes all other indirect emissions that occur in a company’s value chain.

The EU formally adopted into law a series of measures that included a binding target for 32% of electricity production to come from renewables by 2030. Achieving this would require at least a 50% reduction in global greenhouse gas (GHG) emissions by 2050, whilst global GDP could triple, and population could grow by more than 2 billion. Performance so far has been mixed, with global emissions increasing c.1% per year since 2015. We expect climate change to fundamentally reshape the Resources industry.

For many companies, the majority of their greenhouse gas (GHG) emissions and cost reduction opportunities lie outside their own operations, as these include Purchased goods and services, Business travel, Employee commuting, waste disposal, Use of sold products, Transportation and distribution (up- and downstream), Investments, Leased assets and franchises. While most of the industry has pledged to reduce operational ‘Scope 1 and 2’ greenhouse gas emissions, it is more difficult tackling those produced by their customers because of the complexities involved.

Green technology will be important to reduce carbon emissions in operations and reduce environmental impacts. The use of minerals and metals that support a transition to low-carbon technologies such as solar panels or wind power will be in demand. Use of water for mineral processing will have to be recycled.

Power supply issues are topical in all countries in Africa and it is encouraging to note that there are a significant number of sizeable diverse renewable power projects being rolled out across the continent. While there has been a major focus on the fields of renewable and more-green energy solutions like gas-to-power, coal will continue to play an important role in our African energy mix in the near-term.

Front-of-mind for all investors is a stable political and regulatory environment and one of the positives we noted at the Mining Indaba earlier this year is that the continent is making positive strides in this regard. The development of an indigenous resources service sector can be challenging due to the capital intensity of the sectors. To address some of these challenges, there is need for international companies to partner with local companies to raise the required capital and in-country capacity building and training. The fiscal framework must also be fair and transparent.