Sasol Scores ‘Own Goal’ as Climate Pressure Mounts in S. Africa

(Bloomberg) --

Sasol Ltd., South Africa's second-biggest polluter, angered some of its investors by refusing to put a resolution on its response to climate change to shareholders and could face legal challenges if it continues to refuse votes on the issue.

Sasol dismissed a request by some investors, including Old Mutual Investment Group, to table the resolution that demanded more clarity on its greenhouse-gas emissions and reduction targets, at its annual general meeting on Nov. 27. That contrasts with Standard Bank Group and FirstRand Ltd., which have become the first South African companies to allow climate-risk resolutions to be voted on by shareholders.

Sasol's decision comes as pressure builds on South African companies to act on climate change in a country that depends on coal for most of its power. South Africa's greenhouse-gas emissions match those of the U.K., which has an economy eight times bigger.

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Sasol dismissed the request citing legal advice that it said found it wasn't obliged to put climate-risk matters to shareholders. It gave no details on the legal opinion. “Ongoing, robust” engagement is a more effective way of understanding shareholder concerns, Sasol said in response to questions on Friday.

‘Own Goal'

At the meeting the company did commit to producing a “road map” on its climate risk mitigation strategy in 2020. It produced its first climate change report earlier this year. Sasol said that as a “significant first step.”

“They scored an own goal,” said Asief Mahomed, chief investment officer of Aeon Investment Management, which backed the resolution along with Old Mutual and four other fund management companies. “We are exceptionally disappointed with the way they handled the process.”

Sasol, which emissions data show is the country's second-biggest polluter after Eskom Holdings SOC Ltd., spurned a similar move last year and investors say they will keep pushing the company for more clarity as environment, social and governance concerns became increasingly prominent in investment decisions.

The right of companies to block resolutions on climate matters “is not tested in court,” said Jon Duncan, head of responsible investment at Old Mutual Investment. “It will need to be contested at some point.”

JSE Ltd., which owns the stock exchange where Sasol has its primary listing in Johannesburg, declined to comment.

Difficult Position

Old Mutual will continue to engage Sasol on the issue in coming months, Duncan said. Companies that backed the resolution were Aeon, Sanlam Investment Managers, Abax Investments, Coronation Fund Managers Ltd. and Mergence Investment Managers.

“We certainly felt there was an opportunity for them to test the waters for their shareholders,” he said. “Sasol are in a very very difficult position.”

The company produces chemicals and fuel, mostly from coal, and is already under pressure from investors after a chemical projects in the U.S. doubled in cost to almost $13 billion, resulting in the resignation of its co-chief executive officers.

At the AGM, new CEO Fleetwood Grobler and Chairman Mandla Gantsho said the pace at which it could reduce greenhouse-gas emissions needed to be balanced with the need not to worsen inequality and unemployment in South Africa.

“It is important to ensure that our activities to reduce greenhouse gas emissions do not exacerbate our current national circumstances,” Sasol said.

To read more about the AGM click here

While the company employs 31,000 people, it also produces 14% of South Africa's greenhouse gas as well other pollutants such as sulfur dioxide that affect communities near its plants.

In a survey of 67 countries, South Africa ranked 55th in terms of its environmental indicators, according to Bank of America Merrill Lynch.

To contact the reporter on this story: Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net

To contact the editors responsible for this story: John McCorry at jmccorry@bloomberg.net, Gordon Bell, Hilton Shone

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