All eyes will be on global leaders in November at COP28. With talks centred on restricting global warming to below 2°C and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels, there is likely to be a push from the European Union for deals to phase out CO2-emitting fossil fuels, triple production of renewable energy and halt the building of coal power plants. Tania Swanepoel, head of ESG at Old Mutual Alternative Investments, argues that doing it the right way means leaving no one behind.

Since the advent of the industrial revolution, and the subsequent increases in anthropogenic greenhouse gas emissions that have resulted in the climate change impacts we are witnessing, large industrialised economies in regions like the USA, China, and Europe as well as the United Kingdom, have been the biggest emitters of carbon dioxide.

It follows then that the very same economies who have contributed to the problem have a responsibility to show their commitment to counter climate change and lead the transition away from fossil fuels, as well as invest in those developing- and least developed economies that stand to be most affected. This is why significant money was committed to helping these economies with their Just Transition at COP27 – something that was hailed as acknowledgement of the vast disparity between developed and developing nations when it comes to the impacts of climate change.

But the reality is that very little of the funding that has been promised has been seen on the ground.

In 2022 South African President Cyril Ramaphosa called on parties to honour their pledges because their failure to do so after COP26 in Glasgow and COP21 in Paris had created a lack of trust between developing and developed countries.

There remains a perception that much of the money that was promised is a donation to underdeveloped countries. Emerging economies not only bear the burden of carbon taxes for their development but also endure the disproportionate impacts and costs of climate change.

When funding is committed, it needs to be in the interests of everyone.

Tackling climate change and the Just Transition the right way means leaving no one behind. Is change fast enough? Are we moving in the right direction? These questions will get us nowhere. For our economy, which is still heavily reliant on fossil fuels, the real threat is doing it in a disorderly fashion and coming unstuck due to a lack of planning. We must recognise that the transition and road to decarbonisation need to take place over a time span. Hurrying the transition without due consideration could have a disastrous impact on all South Africans who remain dependent on our major industries such as mining, and coal generation infrastructure.

That’s why we are hard at work in trying to provide a sustainable ecosystem for generations to come.

Old Mutual Alternative Investments, through the African Infrastructure Investment Manager (AIIM) on the equity side and its Infrastructure Debt division, is making a significant contribution to addressing South Africa’s current load shedding crisis and supporting our renewable energy industry. Infrastructure Debt is one of the largest institutional investors in the three Scatec Kenhardt projects in the Northern Cape currently in construction under the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP), which will have a total solar capacity of 540 MW and battery storage capacity of 225MW/1,140MWh, and provide 150 MW of dispatchable power. AIIM’s IDEAS Fund, arguably SA’s largest infrastructure equity fund, has investments in 10 wind farms, 16 solar farms, and 3 off-grid solar power supply companies with a combined capacity of 2GW.

Preparing for climate change at a business level

The reality is that the African continent is largely not the culprit of climate change, yet we are going to be most vulnerable to its impact. The electricity crisis in the country has shifted the priority to renewable energy with the rapid adoption of solar energy and wheeling projects to address the shortage. In addition, the relaxation of regulatory requirements for the licence-free, private generation of power is unlocking various parts of the value chain, enabling businesses to take advantage of these opportunities.

As one of Africa’s leading private alternative investment managers with over R127 billion in assets under management, we proactively seek investment opportunities that create value through positive sustainability outcomes. This means that it is imperative that the companies we are invested have mitigation strategies to ensure resilience to climate change. We work with the boards of companies to ensure that there is a plan in place to assess and manage both physical and transition risks of the business and make sure that this informs business decision-making every step of the way.

In preparing for the impact of climate change, the most important first step is to take it seriously. Understanding how your business is impacted will allow you to have meaningful conversations in terms of business preparation. Look at where your business can have the most material impact in terms of mitigating or adapting to the impact of climate change, and then where you are most vulnerable. Consider forming partnerships with trusted advisors to help assess your risks.

In the run-up to the world’s target of net zero by 2050, start with what you can do in the short term, and then move on to longer-term initiatives. By asking what are the big-ticket items, you can plan and budget accordingly. Crucial for planning is to remember that although we may not have the technology readily available today at a reasonable cost, this is likely to change. For example, green hydrogen – a gas that presents a significant opportunity for SA – should be in place by 2035, if not sooner. What can be done by 2030 given where technology will be then? This insight may influence or shape your company’s decarbonisation plan. Already we have seen that when the advent of technology in renewable energy increases, the cost of making such technology accessible decreases as it comes online. We have already seen this play out in the case of solar photovoltaic panels (PV).

The South African power sector must transition to a lower carbon energy mix, become more resilient through diversified energy sources, and grow the supply of energy. But we must also address climate change by investing fairly and responsibly, and not lose sight of this imperative and critical outcome for the future generations of all South Africans. What should this look like? We need to work towards minimising harm and maximising benefits, with a just transition emphasising the urgent protection and empowerment of those most vulnerable to climate change. We need to invest in reskilling and upskilling programs for workers in the fossil fuel industry, ensuring their meaningful employment in the emerging energy economy. Additionally, fostering innovation and technology development is crucial, not only for achieving sustainability goals but also for stimulating economic growth and job creation. There are gaps in the grant component in international financing that need to be addressed through action, not promise, for any real chance of a just transition. And critically,  urgent private sector participation and investment in renewable energy projects will pave the way for a more inclusive transition.