Environmental, social and governance (ESG) concerns are an increasingly important factor worldwide for banks when they invest in large projects. In the Southern African region with its rich mineral deposits, this trend has added importance. Mining companies extract minerals from the ground, and their activities routinely give rise to public concerns about the pollution of water sources, adequate land for agriculture, and fair community participation in mining projects. South African law accepts that the directors of corporations such as banks have fiduciary obligations to act in the best interests of shareholders.Given the importance of mining activity to economies in Southern Africa an important question aligned to this fiduciary duty is this: Are banks when conducting business obliged to act in the best interests of stakeholders affected by the activities of the mining companies they fund? The trite response is that banks have recognised their obligations to communities through their commitment to SRI (socially responsible investment) practices and internal ESG processes that ensure that their funding decisions result in no harm to communities.This paper sets out to critically consider the effectiveness of ESG principles implemented by South Africa’s banks when they fund mining projects in the SADC region. There are internal differences in ESG principles between banks, and a variety of funding methods to which the principles are applied. The study evaluates the ESG frameworks used by each bank and, given the significant market share, aggregates this information to present a picture of the effectiveness of these frameworks. The approach taken is a critical one, meaning that what is presented in bank annual reports and sustainability reports is not merely accepted, but (to the extent possible) internal ESG risk frameworks are interrogated for adequacy of application by banks when funding mining projects. The effectiveness of the implementation of internal ESG procedures by banks is then measured against available evidence. This evidence includes the effects of mine project funding decisions of banks on ESG categories as ascertained from public information. After consideration of the evidence, observations and conclusions are provided on the analysis. In the closing section, recommendations are provided on areas for possible focus to improve the effectiveness of ESG principles used by banks in the SADC region.
Authors and Publishers
Advocacy and research organisation, aiming to monitor corporate and state conduct in the extraction and beneficiation of natural resources in Southern Africa region, in particular assessing to what extent these efforts contribute to sustainable development”.
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