Standard Chartered Bank: Why African businesses are struggling to meet energy transition targets

The urgency to address climate change and the transition to a low-carbon economy has never been greater, with many countries setting targets for reaching net-zero emissions in line with the Paris Agreement. However, a recent study by Standard Chartered Bank, titled 'Zeronomics', reveals that most companies, particularly in Africa, are struggling to meet these targets. In a recent interview with CNBC Africa, Birju Sanghrajka, Head of Commercial, Corporate & Institutional Banking at Standard Chartered Bank, shed light on the challenges that businesses are facing in transitioning to a sustainable future. According to the Zeronomics report, the number of companies committing to net zero has tripled since 2019. While this is a positive development, the study points out that the focus has primarily been on more developed markets, with African companies lagging behind. Only 55% of companies in Africa consider the energy transition a high priority, highlighting the urgent need for increased focus and investment in the region. Sanghrajka emphasized that to meet the annual investment requirement of approximately half a trillion dollars to achieve net-zero emissions, more funding needs to flow into emerging markets like Africa. However, current estimates suggest that only 10% of sustainable finance investment is reaching these markets, indicating a significant gap that needs to be addressed. The failure to mobilize sufficient funding in emerging markets poses a significant challenge to achieving global climate goals. Despite the increasing momentum towards net zero emissions, most companies are not transitioning at the right pace. Sanghrajka cited several reasons for this delay, including the prioritization of short-term survival over long-term sustainability, uncertainties around the benefits of transitioning, and the lack of a level playing field in terms of measurement and rewards for leadership in sustainability. He highlighted the need for clear policy frameworks, mandatory disclosure of emissions levels, and the development of standards for measuring and tracking progress towards net zero. Sanghrajka also addressed the financing gap in sustainable investing, noting that there is a growing interest among high net worth individuals and asset managers in sustainable assets. However, the flow of funds into emerging markets remains limited, with only a fraction of the required investment reaching these regions. The interview underscored the critical need for increased collaboration between the private and public sectors to address the challenges hindering the energy transition in Africa and other emerging markets. As the clock ticks towards the 2050 deadline for achieving net zero emissions, it is clear that concerted and coordinated efforts are required to accelerate the pace of transition and ensure a sustainable future for all.