As 2021 draws to a close, amid new variants of Covid-19, red lists of countries and the worsening climate crisis, the notion of dealing with the impacts of decisions made with one’s own hands has touched a sensitive chord with many. As the cumulative effects of climate change exacerbate development challenges, the urgency of responding to the crisis is widely recognized.
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 identifies public financial institutions as powerful agents who can tip the scales for change through concerted efforts to discourage new investments in fossil fuels while enabling inclusive decision-making.
The Paris Agreement requires fossil fuel financing to stop to stay within 1.5 ° C of global warming, with funds diverted to climate resilient development. Despite the supposed global goals of a just transition from fossil fuels to a low-carbon society, the fossil fuel industry plans to invest $ 230 billion in the development of new extraction projects in Africa over the course of this year. the next decade, and $ 1.4 trillion by 2050.
These investments not only threaten climate goals, but also risk development goals as the impacts of the climate crisis worsen. These investments also present the risk of stranded assets, carried by countries that will be faced with growing debt. South Africa’s budget could risk up to $ 125 billion if the world aligns with the Paris targets and coal loses value, putting pressure on the public budget away from development goals.
Financial institutions wield a great deal of power in allowing 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 use funds on behalf of the public towards sustainable development, enabling economic growth and poverty reduction to improve quality of life while ensuring a safe environment. With a public trust instead of an incentive for profit, they can be essential change agents to meet the development needs of society while enabling climate resilience.
Despite this mandate, public development finance institutions still consider using public funds for unsustainable projects that threaten social and environmental rights and are incompatible with climate goals. DBSA has already funded the controversial powership project in Ghana and has indicated that it may still consider the project in South Africa. The IDC has been linked to mega-developments such as the Musina Makhado Special Economic Zone, as other countries like China pull out in favor of green, low-carbon energy rather than coal.
The Export Credit Insurance Corporate of South Africa (ECIC) participated in Mozambique’s liquid natural gas (LNG) project, notoriously linked to political instability. These investments are in direct conflict with the ambitions of sustainable development, inclusive and resilient to climate change. Yet, little is known about how these projects are assessed, funded, monitored or how negative impacts are mitigated.
The injustice of the climate crisis is not only that those least at fault are the most affected, but also that they are excluded from decisions that affect them. Political marginalization is an injustice. Consider the communities that would be affected by Shell’s seismic blasting, despite legal challenges, or the communities affected by mining in Mpumalanga ravaged by air pollution.
To what extent have coal workers been included in discussions on a just coal transition, and how far would participation go in disbursing funds for worker retraining? Funding is at the heart of these decisions because it is supposed to include rigorous environmental and social guarantees with the intention of responsible investments.
Fair solutions are those that are democratically developed and where all stakeholders are represented in decision-making, even more so in decisions related to funding. While landmark climate finance deals are hailed, it is time to ensure that space is reserved for participatory decision-making in all institutions mandated with public welfare. Yet financial institutions are the least transparent.
Although they have a public mandate, development finance institutions operate largely outside of the public eye and oversight. In the face of development challenges such as ours, development institutions on behalf of the public have immense responsibility and, as such, accountability.
For years, civil society organizations have lobbied public financial institutions for meaningful transparency, accountability and consultation with relevant stakeholders. It seems impossible to know how harmful and unsustainable projects get the green light. Even with intermittent engagements, emails and editorials, no substantive response has been received other than acknowledging our concerns. Clearly, no structural or coherent change has been observed through policies or commitments regarding fossil fuel investment or public consultation.
Since the cancellation of the Thabametsi coal-fired power plant in 2020, with DBSA having been a potential funder, 350Africa.org has continued to call for a formal bank policy declaring no future fossil fuel investment in addition. to call on the finance minister to divert public funds from fossil fuels. Our 2021 campaign for #StopKarpowershipSA had a petition signed by over 5,000 people with multiple actions across the country.
Despite calls for a response since the petition was handed over and the bank’s promise of increased civil society engagement, we have yet to see a conclusive response on civil society powers or consultation. Questions ranging from the DBSA’s mention of a just transition financial framework to their involvement in Mozambique LNG have remained unanswered. Little progress has been made in obtaining details from the IDC or the ECIC.
Compared to other development finance institutions, DBSA has done relatively well in assessing finance and investment policies against environmental, social and governance standards. The bank has made notable strides towards climate action, such as the recent declaration of net zero made in the middle of this year’s climate talks.
While ambition is welcome, commitments without meaningful consultation serve to further exclude affected groups as previous decisions to finance fossil fuels have done. The transition encompasses questions about how negative impacts will be disbursed and how those affected will be supported. Without transparency and consultation on these commitments, civil society and communities wonder how the transition will endanger fair and equitable results.
Finance is not neutral in the face of the climate crisis. Financial institutions have played a key role in creating the climate crisis by supporting and financing fossil fuels. Public development finance institutions must be accountable and consult the public on project planning and resource disbursement.
Without transparent decision-making, accountability remains elusive as the climate crisis escalates. Increased public scrutiny and meaningful consultation offer real opportunities to put people in a just transition first and ensure that lived experiences are central to democratized public finances.
As citizens, we must challenge development finance institutions on their existing and planned investments in fossil fuels that are not in our best interests and call for inclusiveness 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.