Opening remarks by Minister Ms Barbara Creecy at the SA Banking Association Sustainable Finance Conference

25 November 2021

Thank You for the opportunity to address you on an issue that has become more critical in recent times. The SA Banking Association conference comes only days since signatories to the United Nations Framework Convention on Climate Change (UNFCCC) delivered the Glasgow Climate Pact which, amongst others, acknowledges that commitments made by countries so far to cut emissions of planet-heating greenhouse gases are nowhere near enough to prevent planetary warming from exceeding 1.5 degrees above pre-industrial temperatures.

When I addressed the 26^th Conference of Parties in Glasgow, I had pointed out that Africa is already facing the full impacts of the climate emergency, even as we struggle to overcome the devastating socio-economic impacts of the COVID-19 pandemic that has exacerbated Africa´s Special Needs and Circumstances. Our sustainable development efforts have been set back, and our message to the international community is clear – we need your support now more than ever before to achieve our climate objectives, in the context of a Just Transition.

The UNFCCC COP26 in Glasgow dealt with no less than 19 finance-related agenda items culminating in a host of both procedural and substantive decisions, including 3 cover decisions known as the Glasgow Climate Pact.

The Pact calls on the global community to do the following:

• Accelerate the development, deployment and dissemination of technologies, and the adoption of policies, to transition towards low-emission energy systems
• Rapidly scale up the deployment of clean power generation and energy efficiency measures
• Accelerate efforts towards the phasedown of unabated coal power and phase-out of inefficient fossil fuel subsidies, and to
• Provide targeted support to the poorest and most vulnerable in line with national circumstances and recognizing the need for support towards a just transition

Africa has no choice but to join the global drive toward limiting greenhouse gas emissions. However, this action must be considered within the context of Africa’s Just Transition toward a low-carbon economy and in a manner that recognises the deep energy poverty across African economies.

I am proud to say that the South African government remains firmly committed to contributing our best effort toward the global cause of addressing climate change. President Cyril Ramaphosa has created the Presidential Climate Commission to research and identify pathways for a Just Transition to a low-carbon economy and a climate resilient and sustainable society by mid-century.

As a country heavily reliant on coal for electricity generation, we need to however ensure that those employed in the coal value chain are not excluded from any planning and policy implementation towards a low-carbon future. Hence, we are committed to ensuring that the transition we have is a just one; that the most climate-vulnerable groups participate in decision-making and that the climate-compatible social and economic development addresses the needs of workers and communities.Transitioning to a lower-carbon economy will undoubtedly require extensive policy, legal, technology, and market changes to address mitigation and adaptation requirements related to climate change.

In this regard, it is important to note that Eskom, our largest greenhouse gas emitter, has committed in principle to net zero carbon emissions by 2050 and has already released a call for proposals to repower and repurpose Komati power station in Mpumalanga. Studies to facilitate similar initiatives are underway for Hendrina, Grootvlei and Camden. This work represents a decisive shift in our energy trajectory and should be welcomed.

The Glasgow Climate Pact also called upon the multilateral development banks, other financial institutions and the private sector to enhance finance mobilization in order to deliver the scale of resources needed to achieve climate plans, particularly for adaptation. It also encourages Parties to continue to explore innovative approaches and instruments for mobilizing finance for adaptation from private sources.

Reorienting capital to more sustainable investments requires a comprehensive shift in how the financial system works. This is necessary if South Africa is to develop more sustainable economic growth, ensure the stability of the financial system and foster more transparency and longevity in the economy. The transition will need to be gradual in order to support economic growth, while gradually transitioning away from a carbon-based economy.

Ladies and Gentlemen,

A number of initiatives have been identified for implementation to promote the greening of the South African economy, as highlighted in the draft Financing a Sustainable Economy Technical Paper 2020-2022 released by National Treasury.

These include:

• Putting a price on carbon, via the carbon tax, and the publishing of offset regulations to enable a reduction of those taxes through climate-positive investments.
• Fiscal allocations, such as those for risk mitigation and job creation projects such as Working for Water and Working on Fire which directly combat the effects of climate change and help build our resilience to events such as wildfires.
• Draft regulations for carbon offsetting.
• Incentivising the sale of vehicles with lower carbon emissions during their operating phase. A key development in this regard in the automotive sector is the announcement by Toyota SA that their eThekwini plant will begin the assembly of a new hybrid modal in the fourth quarter of this year.

Investment in the green economy and green technologies provides strategic advantages for our country and continent. It opens access to new green financing opportunities. Transitioning to a lower-carbon economy will undoubtedly require extensive policy, legal, technology, and market changes to address mitigation and adaptation requirements related to climate change. We need to also be cognisant of the fact that in transitioning, we also need to focus on the social risks associated with the transition particularly in relation to a loss in employment and livelihoods and implications on the development agendas of countries.

Many of our trading partners have adopted mid-century commitment to net zero, with many of the major economies also moving in this direction. These are leading to various forms of climate-related non-tariff barriers and border adjustment taxes. There is growing consumer sentiment, and particularly younger consumers are demanding more environmentally friendly products and services, thus resulting in many of our exports at risk, mineral, automotive or agricultural.

However, with the challenges also come opportunities. These are opportunities which present themselves in sectors such as energy and energy efficiency, the automotive sector, the hydrogen economy, the mining sector with new minerals that will power the green economy, as well as the banking and financial sectors with not only the increased need for capital, but also the development and deployment of a suite of new innovative financing instruments and vehicles.

As a starting point we do need substantial grant financing from both bilateral and multilateral financial mechanisms and institutions for both adaptation and mitigation as they are also crucial in catalysing climate innovation and private-sector participation. High concessional finance including equity investments from multilateral development banks and financial mechanisms can contribute to de-risking and subsequently leveraging private investors.

The financial sector and the banking sector, in particular, should play a key role in mobilizing resources to invest in climate change migration in order to reduce GHG emissions, as well as in climate change adaptation through building resilience. Africa’s financial institutions are well placed as key stakeholders in the evolving global climate finance landscape, helping design solutions and mobilizing private capital for climate action.

As a region, Africa could also attract and channel financial flows towards low carbon and climate resilient development investments by leverage innovative approaches such as sustainability-linked loans (SLL) and green bonds with greater participation of financial institutions.

Carbon markets mechanisms and/or other environmental credits could be another potential source of financing, depending on how international markets for these credits evolve and the how the implementation of the Article 6 market mechanisms unfold post the Glasgow decisions.

Ladies and Gentlemen,

In the face of such a crisis it would be easy to resist change and continue living the way that we have been. However, we need to be brave and pragmatic and seize the opportunities presented before us as we transition to a low-carbon future, and ensure that no one is left behind in this process. The solutions for the problems we face are in your hands.

I thank you