Financing & advocating for the phase-in of renewable power in a coal-based power utility investment

Ninety One is an active investment manager established in South Africa and listed on the London and Johannesburg Stock Exchanges. As part of the fund’s four main channels to progress toward its net-zero investment targets, Ninety One identified engagement with portfolio companies on their transition plans to influence, change and track progress as a key pillar. Engagement can be a long-term process and a company’s willingness to engage and the progress made should be taken into consideration, alongside regional and cultural factors. Typically, before divesting, Ninety One would seek to escalate an engagement. An example is Ninety One’s engagement with Eskom, the South African public utility company that generate 95% of electricity in South Africa and about 45% of the electricity used in Africa, of which 85% is from coal. Eskom has been one of the highest-emitting companies in Ninety One’s corporate portfolio since the inception of Ninety One’s net-zero strategy. As a coal-based power utility, the overarching aim of the engagement is to encourage the responsible phaseout of coal assets, while scaling low-carbon energy alternatives so the entity can be aligned to a low-carbon pathway. The objective of Ninety One’s engagement with Eskom in relation to Transition Finance is threefold: 1. Continue to motivate for a detailed phaseout strategy for the existing coal power plants, including decommissioning and rehabilitation, with relevant KPIs on transition progress. 2. Encourage Eskom to develop a clear and measurable plan to accelerate the amount of renewable power and battery storage available including via own build, partnerships, and power-purchasing agreements (PPAs). 3. Encourage the adoption of a thoughtful Just Transition plan that focuses on job creation, upskilling, and reskilling of coal workers and compensation for affected communities. Taking into consideration the key factors influencing Eskom’s successful transition including leadership and capabilities, policy environment and investor sentiment, Ninety One’s engagement strategy therefore focuses on three spheres of engagement: 1) direct Eskom discussions, 2) collaborative engagement, and 3) policy and advocacy. The case of Eskom highlights the complexity and enormity of the ambition to shift a coal-dependent developing economy to a cleaner, greener future. Ninety One is but one part of the financing and advocacy puzzle and it continues to proudly engage with the company and the broader system to make progress on this urgent agenda.