Dondo Mogajane is CEO of the Moti Group and the chairman of the GEPF. Photo: Supplied
By Dondo Mogajane
The question of a just energy transition is top of mind in investment circles as leaders and decision-makers increasingly recognise the urgency of the climate crisis. But the term “just transition” points to the heart of the problem – no transition can be ‘just’ so long as it prioritises planet over people, especially in emerging economies such as South Africa.
I recently had the opportunity to attend a pension governance programme at the University of Toronto’s Rotman School of Management, as well the United Nations conference on Principles for Responsible Investment (UNPRI), which brought together more than 3000 delegates from the global investment community. These platforms explored the critical debates taking place about applying responsible investment practices in emerging market contexts where unemployment, poverty and fiscal pressures remain pressing issues.
The uncomfortable truth is that any transition away from carbon-intensive economies will come at a significant cost, both financially and socially. Consequently, emerging markets need to balance their environmental responsibilities with their developmental needs. Policymakers, investors, and companies must all recognise the trade-offs involved, and work towards solutions that are fair, inclusive, and equitable.
In South Africa, our economy is heavily dependent on coal, employing an estimated 120000 breadwinners throughout the coal value chain from mining to power generation, petrochemicals, and logistics. In Mpumalanga, for instance, where jobs and businesses are often scarce, the coal industry is a lifeline for thousands of vulnerable workers and their families, particularly in remote and rural areas.
As a result, we cannot afford to disregard the impact of closing coal mines without first providing viable job opportunities for affected communities. Likewise, we cannot afford to simply ban coal at the expense of having power. Without adequate support, any sudden moves away from coal and fossil fuels would spark devastating job losses and cripple economic development.
When acknowledging the need for sustainable practices while negotiating climate change agreements, emerging economies must therefore also demand fairness.
Meanwhile, many of the world’s leading economies built their wealth on fossil fuels, and they themselves continue to rely on coal-fired plants to supplement their energy needs – especially in the wake of the Russia-Ukraine conflict. As such, these nations cannot simply expect emerging economies to curb their emissions without acknowledging historical inequalities, or the difficulties of their current development paths and fiscal situations.
Instead, the developed economies of the global north must take responsibility and contribute to financing the adaptation and transition processes in developing countries. To accelerate the pace of progress, emerging economies must receive the necessary subsidies and support to create new, low-carbon industries that can replace those centred on fossil fuels.
Simultaneously, business leaders and investors must also play their part by continuing to prioritise environmental, social, and governance (ESG) principles and criteria in making their decisions and allocating capital. With more than 1.2 million active members and a portfolio valued at more than R2.3 trillion, the Government Employees Pension Fund (GEPF) has a particularly major role to play in this regard, with the power to effect meaningful and positive change.
In terms of environment, investors must play a supportive role in driving the shift away from a reliance on coal and fossil fuels to clean energy, while contributing towards broader social and economic goals. We must aim to develop sectors around green technologies, such as solar energy and other clean energy alternatives, while promoting innovative solutions like "clean coal," despite the ongoing debates about its viability.
Regarding our social responsibilities, we must deal with and seek to improve the social conditions of the localities where we are investing. This means considering the social returns of investments in terms of education, health, housing, opportunities and protections for workers, as well as the broader imperatives of black economic empowerment and transformation.
Governance speaks to the importance of being mindful of ESG principles and best practices, being aware of the regulatory environment, fulfilling our fiduciary responsibilities, and ensuring the continued sustainability of the fund. As a defined benefit fund, the GEPF must balance all considerations against delivering the returns needed to fulfil our promise to pension fund members for their retirement, and safeguarding the fund’s strength for the next 100 years.
The task is enormously complex, and there are no simple answers. The only path forward for leaders is to encourage closer engagement and collaboration between all stakeholders, including workers, communities, and businesses, to ensure that any plans carefully consider all needs. Additionally, policymakers must implement sustainable strategies that address the short-term and long-term requirements of people and planet, placing due emphasis on both.
Ultimately, the just transition will not be easy. However, it is possible so long as we remain guided by today’s pragmatism and tomorrow’s hope.
Dondo Mogajane is the CEO of the Moti Group and the chairman of the GEPF
BUSINESS REPORT