As 2021 draws to a close, amid new Covid-19 variants, country red lists and the worsening climate crisis, the notion of facing the impacts of decisions made out of one’s hands has struck a chord with many. With the compounding effects of climate change exacerbating development challenges, the urgency of responding to the crisis is widely appreciated.
However, increased awareness has not improved the transparency and accountability of key institutions in national efforts towards a more sustainable, just and equitable future. Civil society pinpoints public finance institutions as powerful agents that can tip the scales of change with concerted efforts to discourage new fossil fuel investments while enabling inclusive decision making.
The Paris Agreement necessitates that financing of fossil fuels must stop in order to stay within 1.5°C of global heating, with funds diverted towards climate resilient development. Despite supposed global goals of a just transition away from fossil fuels towards a low-carbon society, the fossil fuel industry plans to invest $230-billion into the development of new extraction projects in Africa in the next decade, and $1.4-trillion by 2050.
These investments not only threaten climate objectives, but risk development goals as impacts of the climate crisis worsen. These investments also pose the risk of stranded assets, carried by countries who will sit with burgeoning debt. The South African budget could risk up to $125-billion should the world align with the Paris targets and coal loses value, a strain on the public budget away from development goals.
Financial institutions hold a lot of power by either enabling or undermining progressive efforts towards a just transition depending on what they fund. Public development finance institutions, such as the Development Bank of Southern Africa (DBSA) or the Industrial Development Corporation (IDC) have a political and constitutional mandate to utilise funds on behalf of the public towards sustainable development, enabling economic growth and reducing poverty to improve quality of life while ensuring a safe environment. With a public mandate instead of a profit incentive, they can be vital agents of change in meeting societal development needs while enabling climate resilience.
Despite this mandate, public development finance institutions still consider using public funds on unsustainable projects that threaten social and environmental rights and are incompatible with climate goals. The DBSA has already funded the controversial powership project in Ghana and has indicated that it could still consider the project in South Africa. The IDC has been linked to the mega-developments such as the Musina Makhado Special Economic Zone, while other countries such as China back out in favour of supporting green and low carbon energy rather than coal.
The Export Credit Insurance Corporate of South Africa (ECIC), has participated in the Mozambique liquid natural gas (LNG) project notoriously linked to political instability. These investments are in direct conflict with ambitions of development that are sustainable, inclusive and climate resilient. Yet little is known about how these projects are evaluated, funded, monitored or how negative impacts are mitigated.
The injustice of the climate crisis is not only that those least at fault are most negatively affected, but also that they are excluded from decisions that affect them. Political marginalisation is injustice. Consider communities who would be affected by Shell’s seismic blasting, despite legal challenges, or mining affected communities in Mpumalanga ravaged by air pollution.
How meaningfully have coal-workers been included in discussions on a just transition from coal, and how far would participation go in the disbursement of funds for reskilling workers? Financing is the crux of these decisions as it is meant to include rigorous environmental and social safeguards with the intention of responsible investments.
Just solutions are ones that are democratically developed and where all stakeholders are represented in decision making, more so in decisions related to financing. With landmark climate finance deals being lauded, this is the time to ensure space is carved out for participatory decision making across all institutions with a mandate for public wellbeing. Yet, financial institutions are the least transparent.
Despite having a public mandate, development finance institutions operate largely outside of the public gaze and oversight. With development challenges such as ours, institutions responsible for development on behalf of the public hold immense responsibility and, as such, accountability.
For years, civil society organisations have been lobbying public financial institutions for increased transparency, accountability and meaningful consultation with affected stakeholders. It appears impossible to find out how harmful, unsustainable projects get the go-ahead. Even with intermittent engagements, emails and op-eds, no responses of substance have been received other than acknowledgement of our concerns. Clearly, no structural or consistent change has been seen by way of policies or commitments around fossil fuel investment or public consultation.
Since the cancellation of the Thabametsi coal fired power plant in 2020, with the DBSA having been a potential funder, 350Africa.org has continued to call for a formal policy from the bank declaring no future investments in fossil fuels in addition to calling on the minister of finance to divert public funds away from fossil fuels. Our campaign in 2021 to #StopKarpowershipSA had a petition signed by over 5 000 people with multiple actions across the country.
Despite calls for a reply since handing over the petition and the bank’s promise of increased civil society engagement, we’ve yet to see a conclusive response on powerships or civil society consultation. Questions ranging from the DBSA’s mention of a just transition finance framework to their involvement in Mozambique LNG have still gone unanswered. Little progress has been made obtaining details from the IDC or the ECIC.
Compared to the other development finance institutions, the DBSA fared relatively well in an assessment of financing and investment policies against environmental, social and governance standards. The bank has made notable strides towards climate action, such as the recent net zero statement made amid this year’s climate talks.
While ambition is welcome, commitments without meaningful consultation serve to further exclude impacted groups as previous decisions to fund fossil fuels have done. The transition encompasses questions of how negative impacts will be disbursed and how those affected adversely will be supported. Without transparency and consultation on these commitments, civil society and communities are left asking how the transition will endanger just and equitable outcomes.
Finance is not neutral in response to the climate crisis. Financial institutions have been key drivers in creating the climate crisis in supporting and financing fossil fuels. Public development finance institutions must be accountable and should consult the public on project planning and resource disbursement.
Without transparent decision making, accountability remains elusive as the climate crisis intensifies. Increased public oversight and meaningful consultation provide real opportunities to put people first in the just transition, and ensure that lived experiences take centre stage in democratised public finance.
As a citizenry, we need to challenge development finance institutions on their existing and planned fossil fuel investments that are not in our best interest and call for inclusivity in their planning for a just transition. As civil society, we will continue the fight for increased accountability and participation, for social and economic justice is climate justice.