Johannesburg, South Africa – 27th May 2020: The Industrial Development Corporation (IDC) has been ranked last among its development finance institutions (DFI) peers globally in a new report on the sustainability of DFI’s investment policies. In comparison, the European Investment Bank (EIB) ranked highest out of the six DFIs assessed while the Development Bank of South Africa (DBSA) ranked fourth.
Speaking at the sidelines of the virtual launch of this report, Ahmed Mokgopo the 350Africa.org Campaigner said:
“The report provides damning evidence that the IDC is not doing enough to help South Africa transition to a low carbon economy.
One of the key reasons cited in the report for IDC’s dismal ranking is its failure to disclose its policies publicly. As a public institution, it should hold itself up to the highest standards of transparency and ensure that critical governance information is available to the public. It is commendable that the IDC publishes its list of investments online. This positive step allows for more considered engagement around the IDCs investment practices. What remains necessary are positive policy actions that reflect its commitment towards sustainable, low carbon economic development.
Commercial banks in South Africa have begun to increase their focus on the risks that climate change has on their operations but ironically it is the public finance institutions such as the IDC have failed to publicly account for how they are responding to the climate crisis. Similar institutions globally have specific policies that state how they will combat climate change, the Dutch Development Bank – FMO, for example, has its Sustainability Policy that includes emission reduction targets for both its own emissions and its financed emissions. Moreover, it has a Position Statement on Coal, that excludes financing of coal-based power generation and coal mining. The European Investment Bank (EIB) on the other hand has a Coal Exclusion Policy, that limits the type and technology of projects it can fund.
We as 350Africa.org, therefore, call on the IDC to make public its Environmental and Social as well as its Responsible Investment policies. We also ask the IDC to craft a fossil fuel finance exclusion policy that ends the direct and indirect funding of fossil fuel companies and infrastructure and to instead help set South Africa on the right path to reducing its heavy reliance on coal, a key source of greenhouse gases associated with climate change and environmental degradation.”
The study assessed the finance and investment policies of two South African DFIs, the Development Bank of Southern Africa (DBSA), and the Industrial Development Corporation (IDC) based on the methodology of Fair Finance Guide International (FFGI), benchmarking this with other DFIs from around the world including the African Development Bank (AfDB), Banco Nacional de Desenvolvimento Econômico e Social (Brazilian Development Bank), De Nederlandse Financierings-maatschappij voor Ontwikkelingslanden (Dutch Development Bank), European Investment Fund (EIF), European Investment Bank (EIB), New Development Bank (BRICS Development Bank).
The DFIs were measured against 9 key aspects: Climate Change, Corruption, Gender Equality, Health, Human Rights, Nature, Financial sector, Power Generation, Transparency, and Accountability. The IDC’s failure to disclose its policies resulted in its extremely poor performance in all aspects apart from corruption, where it was commended for its verification of the ultimate beneficial owners of a company, including politically exposed persons.
Leanne Govindsamy, the Centre for Environmental Rights (CER) Programme Head, Corporate Accountability and Transparency said:
“Development Finance Institutions play an incredibly important role in financing a more equitable and just society, one in which the inter-dependence of people and the environment is valued and protected. However, a key component to constructive engagement with DFIs and other stakeholders is a good understanding of their policies and the context within which they operate.
The CER’s Financing Fairly report aims to provide this contextual information. As 350Africa.org engages with the IDC, we hope that their call for policy transparency as well as a fossil fuel exclusion policy, in line with the findings of our report, is taken seriously and acted on with urgency!”
The climate crisis, mostly ignited by the burning of fossil fuels, continues to affect a large majority of the South African population with episodes of flooding, droughts, and food insecurity becoming more frequent. Despite the rising costs of the climate disaster and the pressures it has on both the economy and financial systems, South Africa’s public finance institutions continue to invest in fossil fuels at a rate that implies that the country will not be able to meet emissions reduction targets by 2030.
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Download the FINANCING FAIRLY: Assessing the Sustainability of Investment Policies for Development Finance Institutions in South Africa report here
Find out more about the Industrial Development Corporation (IDC) here: https://www.idc.co.za/