South Africa’s five largest banks are increasing their financing of renewable energy and other sustainable activities, but have not meaningfully reduced financing for fossil fuels and other high-emitting activities, says responsible investment nonprofit organisation Just Share.

Its 'How Cool Is Your Bank?' assessment of Absa, FirstRand, Investec, Nedbank and Standard Bank finds a persistent gap between the banks’ climate commitments, where they direct capital and the emissions associated with their portfolios.

The highest-performing bank achieved a score of 59% in terms of their climate commitments and the emissions associated with the portfolios, Just Share says.

The five banks were assessed across five themes, namely fossil fuel exposure; emissions disclosure and targets; governance and strategy; sustainable and transition finance; and nature and biodiversity.

The report examines whether banks are aligning their balance sheets, strategies and governance with the transition they have committed to support.

South Africa’s economy remains deeply reliant on fossil fuels, which makes the transition complex. Banks must manage both the financial risks of transition and the socioeconomic consequences of change.

However, complexity does not make transition optional. The global banking sector faces growing pressure to manage climate risk. In 2025, while 40% of banks globally reduced their fossil fuel funding, the world’s largest banks increased their funding of fossil fuels by more than 27%.

Some banks with the strongest stated climate commitments continue to finance activities that drive climate change, says Just Share.

Additionally, prominent financial sector climate initiatives have weakened or fallen away, including the disbanding of the Net-Zero Banking Alliance.

However, credible pathways for an orderly and just transition exist, the organisation points out.

For South African banks, climate change is not simply an environmental or social issue. It is a material financial risk. As the global economy shifts towards lower-carbon technologies and energy systems, businesses, assets and industries that cannot adapt may face falling demand, higher costs and declining values.

Banks that finance these activities are exposed to these risks through their lending and investment portfolios, Just Share says.

The South African Reserve Bank’s Climate Risk Stress Test found that the transition risk to the South African market could amount to almost R2-trillion between 2013 and 2035.

This risk matters given the scale of the banking sector, which managed about R9.2-trillion in assets as at June 30 this year.

“This gives South Africa’s banks significant influence over the pace and direction of the economic transition. Their financing decisions can help reduce exposure to transition risk, support credible pathways for emissions-intensive sectors and direct capital towards the technologies, businesses and infrastructure needed for a low-carbon, inclusive and resilient economy,” Just Share says in the report.

Its research finds that progress is under way in areas such as sustainable finance and renewable-energy financing. However, these developments have not translated into a corresponding reduction in financed emissions.

Banks continue to finance fossil fuels and other high-emitting activities at scale.

This points to a significant disconnect between what banks say about the transition, where they direct capital and the emissions associated with their portfolios.

“The findings indicate that South Africa’s banks are not yet doing enough to manage climate risk or align their financing with the transition required by the Paris Agreement,” says Just Share.