DURBAN – Sasol’s institutional investors, while welcoming Sasol’s climate change report released yesterday, which commits the group to reduce greenhouse gas (GHG) by at least 10 percent by 2030 off its 2017 baseline, said the current disclosures should go further as “its strategic response to climate risk was material to investors, citizens, employees and affected communities”.
Sasol said it is its first report aligned with the recommendations of the Task Force on Climate-related Financial Disclosures1 (TCFD).
Hermann Wenhold, a chief sustainability and risk officer at Sasol, said the group was responding to stakeholder queries for more information on its climate change management approach as a reason for publishing a climate change report.
“We committed to TCFD in 2018, with this year being our first year of enhanced disclosures. We aim to report more detail in subsequent years as our climate change management approach evolves,” the group said.
Sasol is the second-largest emitter of GHG in the country after Eskom, and its Secunda coal-to-liquids plant is the biggest single-point emission source in the world. It said it was reducing its GHG emissions and was aware of the need to develop solutions to the challenge of climate change.
“In South Africa, our climate change strategy takes into account the multiple interwoven challenges that we face, including the issues of inequality, poverty and unemployment, as well as meeting growing energy demands and de-carbonising the economy,” the group said.
The group has set two targets, it wants to reduce GHG emissions in South Africa by 10 percent by 2030, from the 2017 baseline, and the second is a 30 percent energy efficiency improvement by 2030 from a 2005 baseline. “This target – over and above the approximately 13 percent GHG improvement achieved since 2004 – is challenging for a carbon-intensive petrochemicals business with limited alternative energy sources,” the group said.
However, based on its internal analysis, the group believed that it was not only attainable, but necessary.
“Our emission-reduction roadmap, once completed, will assist in realising our three-pillar framework and targets. It will articulate the specific facility-level mitigation initiatives, along with a quantification of the social and economic consequences of the choices we make and the feasibility of integration of technologies into our facilities.
"In doing so, we will also review our target for increased ambition in line with the latest available science and the national context. Inevitably, there will be difficult trade-offs for which we as Sasol are accountable,” the group said.
A statement released by institutional investors yesterday explained why this report is not enough.
The institutional investors include Old Mutual Investment Group, Sanlam Investment Managers, ABAX, Coronation, AEON Investment Management and Mergence Investment Managers.
In what they claim to be “a first for South Africa”, six of the country’s institutional investors, acting on behalf of their clients, co-filed a shareholder resolution for the upcoming Sasol annual general meeting (AGM), seeking greater transparency from the company on how its long-term greenhouse gas emission reduction strategy and executive rewards align with the Paris Climate Agreement
Submitted to the Sasol board on October 21 for voting at the Sasol AGM on November 27, the tabling of the resolution was, however, rejected by the company on the basis that the matters raised in the resolution had ”been addressed and there is no longer any necessity to consider the legality of those resolutions for the upcoming AGM”.
Speaking on behalf of the institutional investors that co-filed the climate risk resolutions, Jon Duncan, the head of responsible investment at Old Mutual Investment Group highlighted the fact that Sasol was a major greenhouse gas emitter, tax payer, employer and provider of liquid fuels, and hence its strategic response to climate risk was material to investors, citizens, employees and affected communities.
“We commend Sasol for reporting its Scope 3 emissions from its end product users, reported at 32 million tons of CO2, and for agreeing to release an ‘emission reduction roadmap’ by November 2020,” he says.
However, while Duncan acknowledged that Sasol and the institutional investors were directionally aligned in respect of the tabled resolutions, he and the investor group believed that the current disclosures should go further, according to the statement.
“Specifically, our concern is that Sasol has not made clear whether the types of disclosures that will be made in the November 2020 roadmap will be aligned to the Paris Climate Agreement, nor how they will be linked to short- and long-term executive remuneration.
"Our view is that a vote on these issues would have allowed Sasol to test shareholder appetite for such disclosures, and if passed, would have provided clarity on parameters for future climate disclosures."
The resolution itself comprises three separate elements, which, if tabled and passed at the AGM, would have required Sasol to:
- Publish in its annual reports – as appropriate – for the year ending 2020 and on an annual basis thereafter, short-, medium- and long-term company-wide quantitative greenhouse gas targets (Scopes 1 and 2) aligned with the goals of Articles 2.1(a) and 4.1 of the Paris Agreement. These targets are to be linked to executive remuneration on both a short- and long-term basis.
- Publish in its annual reports – as appropriate – for the year ending 2020 and on an annual basis thereafter, its Scope 3 greenhouse gas emissions, including the emissions associated with the end use of Sasol’s energy products.
- Include, for the year ending 2022 and on an annual basis thereafter, the Scope 3 emissions in Sasol’s greenhouse gas emissions targets.
“Currently, Sasol’s response on the matter presents some critical questions around the extent to which a company has the discretion to reject a shareholder resolution, both in terms of the Companies Act and the JSE Listing Requirements.
“This has a bearing on the extent to which shareholder resolutions can be used to enable better governance on material environmental and social issues,” Duncan said.
Duncan said the investor group was planning to further engagement with the Sasol board on the company’s environmental disclosures in the coming months.
Sasol’s shares closed 3.65 percent higher at R290.89 on the JSE yesterday.