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This shouldn’t happen on your watch.

The core concept of ‘unlawful endangerment’ that caused a ripple that radiated through three Umhlanga investment houses last Friday, has its origin in the summons that Shell received on the 5th of April this year. In that summons, lawyer Roger Cox argues on behalf of the claimants (Milieudefensie, 17,200 co-claimants and 6 other organizations (ActionAid NL, Both ENDS, Fossielvrij NL, Greenpeace NL,Young Friends of the Earth NL, Waddenvereniging)) that Shell’s business model poses a threat to the climate goals of the Paris Agreement. It contends Shell is violating its legal duty of care, is endangering human rights and lives, and is therefore acting unlawfully.

The Against Unlawful Endangerment youth march here in Durban engaged Sasol Africa Limited’s shareholders Allan Gray Investment Counsel, Old Mutual Limited and Investec Asset Management.

This memorandum was received and signed by Sharon Halkier (Regional Manager of Kwa Zulu Natal & Eastern Cape at Allan Gray Pty Ltd) on behalf of the Allan Gray Investment Counsel, and Sthembiso Gumede (Operations Manager for Old Mutual Limited). Originally Investec declared “there will not be an appropriate Investec Asset Management representative available in the Durban office”, but COO Sharika Dhebideen gracefully came out to meet marchers and present Investec’s response (page down) to the memorandum:

Memorandum presented to Allan Gray Investment Counsel/ Old Mutual Limited/ Investec Asset Management

By the Youth of Durban, South Africa, together with
Oceans Not Oil, South African Youth Climate Change Coalition, South Durban Community Environment Alliance, FrackFreeSA, Youth for MPA’s, Extinction Rebellion South Africa and Greenpeace local group Durban.

24th May 2019

The issue of climate change and biodiversity loss has become an urgent crisis. We are marching along with thousands of other young people across the globe today, united by the same fundamental concern for our future. We, as potential future investors, appeal to you Allan Gray Investment Counsel/ Old Mutual Limited/ Investec Asset Management as shareholder in Sasol Africa Limited, to understand that you have power to make a difference to our future, and, because Sasol Africa Limited is rated as the 35th worst green house gas emitter globally[1], you are beholden to the youth.

You will be faced with increased civil society opposition to your partnership with Sasol Africa Limited in the imperative to reduce South Africa’s greenhouse gas emissions. Our call to you is to divest from Sasol Africa Limited for the following reasons:

  1. Violations of Section 24 of the Constitution and Social Injury.

South Africa is the world’s 14th largest emitter of carbon dioxide. Sasol is the second-largest emitter of green house gases in South Africa and has been identified as one of the 100 fossil fuel companies linked to 71% of global industrial greenhouse gas emissions since 1988[2]. Yet Sasol has failed to set any GHG emission reduction targets.Sasol’s total GHG emissions were over 67 megatons in 2018, more than the combined GHG emissions of the next 30 biggest emitters on the JSE[3]that publicly disclose their carbon emissions. Sasol is therefore significantly exposed to liability risks.

Sasol has a history of high emissions of toxic pollutants in South Africa, at both Sasolburg (Free State) and Secunda (Mpumalanga).

Sasol has lobbied the government to introduce more lenient emission standards for sulphur dioxide emissions. Sulphur dioxide from Sasol’s coal boilers is a notorious pollutant that causes significant harm to human health and the environment, since it causes acid rain. Studies have linked SO2to low birth weight in infants and an increased risk for gestational diabetes mellitus, stillbirths, and pre-term births. Sasol have brought multiple applications to delay compliance with the country’s minimum emission standards.

Sasol has excreted type zero waste, which is not allowed to be landfilled at all, into the Vaal river from its Secunda plant: vanadium which may affect the central nervous system, with symptoms including headaches, abdominal cramps, diarrhoea and a green colour to the tongue. Another chemical Sasol unlawfully discharges is potassium carbonate, which can cause severe irritation of the gastro-intestinal tract and result in nausea, vomiting and burns. This contamination has posed both environmental risks and infringed on basic human rights.

2.    GHG Disclosure

Sasol Limited Board has not been transparent in fully disclosing their GHG emissions. Their assurance process excludes the product use and disposal lifecycle emissions – a significant “hot spot” in their GHG accounting and reporting. Sasol’s lack of commitment to product GHG measurements may significantly exclude opportunities for GHG reduction. Their lack of public reporting affects stakeholder information and corporate reputation. Sasol cannot manage what they won’t measure.

  • Endangerment and avoidable harm

Sasol has a business model which poses a threat to the Intergovernmental Panel on Climate Change(IPPC) climate goals of limiting global warming to well below 1.5°C, to prevent a catastrophic and irreversible climate change. Sasol has a social duty of care to take climate action, howeverSasol has a strategic objective to grow an oil-based offshore portfolio in South Africa with the assumption that they can burn all of their proven reserves, along with any additional reserves they discover. Sasol has not reported on how these offshore objectives are measured for their increase in greenhouse emissions.

As shareholder we ask you to question further risking climate change acceleration by oil and gas development when there is full realization that oil, gas and plastic have had an enormous and devastating effect on global seas, air and land. If Sasol’s Durban and Zuluand Basin offshore wells produce the promised 6.3 billion barrels of oil[4], this would contribute an additional 2.721 gigatons of carbon dioxide emission to the atmosphere.The IPPC has warned that nations must stop burning fossil fuels by around 2030 to avoid catastrophic warming. Sasol’s offshore wells may only see production in 8 -10 years time, seriously questioning the logic of ‘transitioning’ to gas after this lengthy delay. By 2027 climate change will be a fully fledged reality and wells in BLOCK ER236 will become stranded assets. Further development of gas infrastructure is incompatible with the IPPC target. So the question remains: is Sasol genuinely committed to a carbon free future within 30 years or are they paying lip service to it?

The youth of Durban, along with support organizations listed above, are concerned about losses to biodiversity and weather extremes increasing in both frequency and intensity. Drought, extreme heat and flooding are occurring more often and it is expected that hurricanes will get stronger. These impacts pose a substantial risk to the vulnerable and poor. Sasol as a corporation, its directors, management, staff and shareholders are knowingly violating their legal duty of care and are endangering human rights, lives and livelihoods. By choosing short-term corporate profits over protection against global damage Sasol is therefore acting unlawfully.  

4.     Impacts of Upstream development 

Sasol’s frontier oil and gas drilling at great depths, in one of the fastest currents in the world is reckless and dangerous. If anything goes wrong, this coastline will never return to what it is now. It is the home to:

Critically endangeredNatal shyshark, leatherback and hawksbill turtles, 
Endangeredscalloped and great hammerhead sharks, loggerhead and green turtle, 
Vulnerable manta ray, raggedtooth shark, whale shark, olive ridley turtle, caspian tern, 
Protected Tiger shark, seventy four Natal wrasse, black oyster catcher, pilot whales, Risso’s dolphin, SA fur seal, sun Antarctic fur seal.
Migrations of humpback and southern right whales, ragged tooth sharks, sardine and the myriad of their associated predators, as well as leatherback and loggerhead nesting.
Environmentally Significant Areasof the Maputaland and St Lucia Marine Reserves, Tugela Banks, The Natal Bite with its crustacean trawl fisheries, Protea Banks, Aliwal Shoal and iSimangaliso Wetland Park World Heritage Site.

The environmental risk is unquantifiable.

Seismic Airgun Blasting

The seismic reconnaissance phase of this project saw the coincidence of the highest ever stranding figures for marine mammals, including unusual deep-water mammals, a dolphin with 2 broken jaws and the first ever recorded mass stranding on the KZN coastline in 2016[5].

Exploratory Drilling

We will hear about the “dilution of effects in seawater” of the severity of the impacts of the hydrocarbons, drilling wastes and cuttings, their toxicity, radioactivity and contamination in relation to the exploration activities, plus the negation of effects of the continual leaks in pipelines. These are toxic substances that cannot be broken down by environmental processes, are mostly water-insoluable and can bioaccumulate up the foodchain. They create the potential harms to health and environmental ‘well-being’ in the sense that this word is used in the environmental right contained in section 24 of the Constitution. 

FPIC

We, the youth and community of Durban and surrounds, did not and do not give our free, prior and Informed consent to Sasol Africa Limited’s application for exploration drilling within Offshore Block ER236, ERM Ref: 0414229 on our coastline. We object to Sasol exploring and drilling in this, the last true South African wilderness and we ask Allan Gray Investment Counsel/ Old Mutual Limited/ Investec Asset Management, as shareholder, if you’ve considered the actual cost of failure, of an oil spill?

Lack of Cost Benefit Analysis

A cost benefit analysis not been undertaken for the Sasol offshore applications and no explanation for this oversight has been provided. The proximity of these potential wells to our environmentally significant areas (the Maputaland and St Lucia Marine Reserves, Tugela Banks; the Natal Bite with its Crustacean trawl fisheries, Protea banks, Aliwal Shoal; iSimangaliso Wetland Park, a World Heritage Site) poses a great risk to our marine commons and heritage, the economic importance of our fisheries, and leisure and tourism industries dependent on functional healthy oceans. The consequences of a blow-out on the tourism, recreation and leisure industries may be significant and you, as shareholder, need to consider dealing with the aspect of compensation to these sectors.

No Oil Spill Contingency Plan

Sasol have not released an Oil Spill Response, Planning and Capacity necessary for public health and welfare, as well as that of the marine and coastal environment. The citizens of South Africa need assurance that incident management is fully informed and has capacity to deal with the latest technology, practices and risks associated with, and due to, the different geological and ocean environments being explored, prior to commencement of drilling. A proper spill response needs to be made public highlighting any deficit of technological expertise or resources or difficulty of effective co-ordination with all government or conservation agencies that have a statutory responsibility for some aspect of offshore oil and gas activities regarding incident management.

  • Gas is not Clean

Sasol continues to squander opportunities to mitigate and forestall impacts of global warming by promoting the use of natural gas as a primary fuel in a decarbonisation context. Claims that natural gas is a clean fuel are absurd and our concern is that methane leakage throughout the supply chain of natural gas doesn’t just deliver climate-distorting methane into our atmosphere, it also endangers people who live and work nearby. It’ll be a decade, and some radical, gas-centric infrastructural developments before liquid natural gas makes any impact on South Africa’s electrical grid. Again ‘transitioning’ to gas after this kind of delay lacks logic. South Africa still has twice the global average of CO2 emissions per person.  We demand a no-carbon portfolio not a low-carbon portfolio.

  • Stranded Asset

A large percentage of Sasol’s emissions come from their coal-to-liquid fuel plant at Secunda. According to data from the Energy Research Centre at the University of Cape Town, for us to meet our very lenient carbon budget of 14-gigatons of carbon dioxide until 2050, the Secunda plant needs to drastically reduce output and close by 2040[6]therefore Secunda is at serious risk of becoming a stranded asset.

The stockmarket value of fossil fuel companies is based on the obsolete assumption that fossil fuel extraction and use can continue without limit. If they are allowed to do this, the global effects will be disastrous. As such, much of the value of these companies is illusory. The energy sources of the future need to be compatible with a stable climate: a fact the investment community has not yet generally accepted, but which it will be confront increasingly as the severity of climate change becomes more obvious.

We call on you to divest from Sasol as an effective way of contributing to the massive redirection of investment from funding fossil fuel energy sources to deploying different energy sources that do not alter the climate. As with divestment from apartheid South Africa and the tobacco industry, this choice would make a powerful statement about the kind of future the Allan Gray Investment Counsel/ Old Mutual Limited/ Investec Asset Management wishes to help bring about. It would also help strip the fossil fuel industry of its social license to operate. This license is increasingly undeserved, as fossil fuel companies continue to drive the world toward dangerous climate change and impose social injury on innocent people around the world and in future generations. By selling its holdings before the majority of investors accept that most remaining fossil fuel reserves are unburnable, Allan Gray Investment Counsel/ Old Mutual Limited/ Investec Asset Management can protect itself from the risk that fossil fuel stock values will fall substantially as the world realizes that their reserves are too dangerous to burn.

——————————-

Investec confirmed that the memorandum was noted and acknowledged by the Investec Executive Directors. This is their official response:

Response to memorandum from Youth of Durban, South Africa, together with Oceans Not Oil, South African Youth Climate Change Coalition, South Durban Community Environment Alliance, FrackFreeSA, Youth for MPA’s, Extinction Rebellion South Africa and Greenpeace local group Durban

We thank you for the memorandum highlighting that the youth of Durban are marching on the 24th of May. The Investec group is very cognisant of the risks of climate change and we recognise the need to transition as quickly and smoothly as possible towards a low-carbon global economy. As a distinctive financial institution, we are aware of our broader social responsibility and play a critical role in funding a stable and sustainable economy that contributes to our communities and is mindful of our planet’s limited natural resources. We have a strong focus on financial infrastructure solutions that promote renewable energy and, at the end of March 2019, 92% of our total energy lending portfolio was in clean energy.

As both a lender and asset manager, Investec engages with clients and plays an important advocacy role with stakeholders on a variety of sustainability issues in order to minimise the risks and impacts. Local and international regulation and monitoring authorities, as applicable, guide us in assessing responsible business practice. We satisfy ourselves further by conducting the necessary diligence as part of our commitment to being a responsible corporate. We need to be cautious and orderly in our approach to this transition and ensure we assess a variety of socio-economic and environmental factors relevant to a local context (for example poverty, growth, unemployment and carbon impact). It cannot be done in isolation from the realities of the communities in which we, and our clients, operate.

We recognise the complexity and urgency of climate change and welcome the voice of all stakeholders, including our youth, as we make this transition together to a cleaner low-carbon world in a way that is most responsible for all participants.


[1]Riley,T. 2017. ‘Just 100 Companies Responsible for 71% of Global Emissions, Study Says’. The Guardian. 10 Jul. Available from: https://www.theguardian.com/sustainable-business/2017/jul/10/100-fossil-fuel-companies-investors-responsible-71-global-emissions-cdp-study-climate-change

[2]Griffin, P. 2017. The Carbon Majors Database: CDP Carbon Majors. Report 2017, CDP, Climate Accountability Institute, London, p.7

[3]Crotty, A. 2018, ‘Shareholders Grill Sasol over Greenhouse Gas Emissions’, BusinessLIve, 9 November. Available from: https://www.businesslive.co.za/bd/companies/energy/2018-11-19-shareholders-grill-sasol-over-greenhouse-gas-emissions/

[4]Findlay, K. 2018. Review Of Ocean Economy Activities Within The South African Exclusive Economic Zone With Particular Reference To The Offshore Oil And Gas, Fishing And Mining Sectors. Oceans Economy, Cape Peninsula University of Technology, South Africa, p20.

[6]Kings, S. 2018.‘SA is blowing its carbon budget’. Mail and Guardian, 16 November. Available from: https://www.pressreader.com/south-africa/mail-guardian/20181116/281642486205164

[5]Olbers, J.M. 2017. Marine Strandings: 2016 Annual Report for KwaZulu-Natal. Ezemvelo KZN Wildlife, Pietermaritzburg, South Africa, p34.

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