In South Africa and other parts of Africa, ESG is becoming an important part of clients’ business strategy and operations.
And banks, DFIs and private equity firms are increasingly refusing to grant funding for projects unless there is a proven sustainability plan.
“Companies cannot willingly walk away from ESG or ignore it, said Dayo Okusami, partner at Templars in Nigeria.
Templars is focusing mainly on energy transition and climate change advisory work in the ESG space, said Okusami.
“Nigeria is traditionally a producer of crude oil, which is not a fashionable fuel right now. Investors are diversifying or walking away from crude oil entirely.”
So oil and gas companies are reinventing themselves as energy companies.
“We are helping them to explore other forms of energy,” said Okusami.
Webber Wentzel is advising clients on many ESG aspects including biodiversity offsets. If a company sets up a smelter on a piece of ground in South Africa they need to purchase and protect a like for like parcel of land.
And if the land being used had protected vegetation on it they might have to purchase and protect 10 times the amount of land that’s been impacted by their operation, said partner Garyn Rapson.
“South Africa’s environmental laws and health and safety laws are very advanced.”
Bowmans has 60 to 70 lawyers who work on ESG mandates, according to banking and finance partner Jason Wilkinson.
“And we advise governmental and regulatory bodies that are driving sustainable development across the Africa region.”
Charles Douglas, co-head of Bowmans’ M&A practice said the firm often acts for impact investors and private equity firms to ensure the entities they are looking to invest in meet certain criteria, that are often driven by ESG imperatives.
David Jarrel, partner in the firm’s financial services regulatory practice added that South Africa is one of the most pension fund heavy countries in the world.
“And we’ve had a regulation since 2011 which requires pension fund trustees to invest in environmental social and governance considerations as part of their sustainability mix.”
Pinsent Masons South Africa recently entered the ESG space by bolting on local boutique firm Gunn Attorneys, which specialized in this area.
Adam Gunn, now a partner at Pinsents, said the firm is currently focusing on the environmental aspect of ESG.
“This includes helping clients to reduce their carbon footprint.”
Prior to joining up with Pinsents, Gunn acted for a game farm owner who won a land rights use court case, and they are now a Pinsent client.
A mining company wanted to mine on the land and the game farm owner wanted to have it declared a private nature reserve under the National Environmental Management Act.
“The fact that it was a valuable area in terms of its biodiversity attributes helped us win the case,” said Gunn.
“It was already a natural heritage site, and it’s a valuable water resource area.”
Under South African law, mining companies have a right to prospect a mine on anyone’s property, and it’s very difficult to stop them.
“We would like to do more of that kind of work with Pinsents, which is very strong internationally on the real estate side,” said Gunn.
And Webber Wentzel has been briefed on a project by a UK-based client who is planning to set up a very large-scale bamboo forest, with a localized species of bamboo.
“This bamboo forest will suck up huge amounts of carbon,” said Rapson.
The bamboo will be harvested periodically, pelletized and exported and could potentially replace up to 40% of coal worldwide.
This project has far reaching climate change implications, as most coal stations currently use wood pellets as a firing mechanism, and the wood is sourced from large forests.
“This is probably one of the biggest ESG projects in the world and will create a lot of jobs, and we are the legal advisers on it,” said Rapson.
The low carbon bamboo will be pelletized using solar energy, and advanced water technology will be used to grow the bamboo forest and keep it going.
“This project ticks 16 of the 17 UN sustainable development goals (SDGs),” said Rapson.
In Nigeria, among Templars numerous ESG projects, it advised on the $800 million Azura Power natural gas power plant, which went live three years ago.
“The plant is now providing at least 10% of Nigeria’s electricity supply via the national grid,” said Okusami. He said this is the largest private power project in Nigeria to date and covers all aspects of ESG. “Nigeria has a huge electricity problem.”
On the social impact ESG front, Bowmans advised on a huge housing financing project for South African listed mining company Royal Bafokeng Resources.
“They helped all their employees to purchase affordable housing, one of the key aspects being that it was not conditional to the employees staying with the company,” said Wilkinson.
The project was completed in 2014 and cost R2 billion, which the mining company has since recouped in increased productivity, and having the lowest rate of strikes in the sector.
“We are now helping them to take the houses off the national power grid and install solar power,” said Wilkinson.