What a just transition means for Africa

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Climate justice is not the first thing that comes to mind when talking about climate change. And yet, it is one of the most important aspects of the debate. Climate justice recognizes the disproportionate impact of climate change on low-income communities and developing countries, and simultaneously seeks solutions that address disparities caused by societal injustices as well as environmental destruction.

Garth Napier, MD of Old Mutual Insure

At first glance, decisions and commitments made on climate change have been applauded, however, the impact on developing economies is often not fully understood and can have serious consequences.

Indeed, international benchmarks and conversations around just transition and net zero do not take local contexts and challenges sufficiently into account. And while we must accept that adopting green energy solutions requires pragmatic trade-offs, policy changes, investment and a more supportive regulatory environment, we must ensure that these trade-offs do not penalize developing economies and , more importantly, low-income communities.

As an example, consider a scenario where a reinsurer makes the decision not to insure a coal business. This may make sense in a developed market. However, if this resulted in power generation in South Africa, a large South African mine that supplies Eskom would not be able to insure its assets, which could have disastrous repercussions for the country.

Critique for adding our voice to the dialogues

Developed economies have the resources to invest in renewable energy; emerging and developing markets don’t necessarily have the capital or skills, so when developed economies make decisions like these, it can come at a cost.

It is therefore essential that we ensure that we participate and add our voice to the dialogues that discuss how we can work together as a continent and play our part in designing solutions that work for us.

As we seek solutions to this multi-faceted problem, we need to talk about just transition and what it means for communities across the African continent. Many communities do not have access to basic energy and use firewood as a source of energy. We cannot expect them to bear the brunt of the clean energy transition.

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Need to develop ethical solutions

How to achieve this in a way that takes into account the situation of developing economies?

It is important to note that our economy, along with others on the African continent, can be an important driver for how developed economies can finance the transition in developing economies. We have a very important role to play in showing how other countries can approach it fairly.

It is essential that businesses and governments help ensure a just transition that includes the creation of shared value – a shift to a green, low-carbon economy that does not leave millions of workers and their communities behind. This means that we must develop solutions that are ethical and respectful of human rights.

In South Africa alone, civil unrest in parts of the country and catastrophic flooding in KwaZulu-Natal earlier this year have heightened the urgency for us to act in a more socially responsible, resourceful and inclusive.

Insurance, by its very nature, attempts to manage risks to individuals by grouping them into a shared value type model. We can provide an affordable insurance price to an individual because we have a larger risk pool (risk spread). It is possible to develop a similar model to provide climate-friendly insurance products.

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Level the playing field

Strategic partnerships are also essential to help developing economies in the quest for a just transition.

We already know that there is a big gap between developed and emerging economies when it comes to finance and technology. Not all countries can move at the same speed or start from the same starting point when it comes to carbon emissions. So, how to set different objectives by country and even at Community level?

Technological solutions and their sharing are going to be crucial in helping to solve the energy challenges we face as a continent. The impact that innovation can have and the financing solutions required are all the more relevant as many households turn to alternative energy solutions.

The transfer of skills, knowledge and even intellectual property is also important for the question of financing. Leveling the playing field may mean a desire by owners of innovative but expensive renewable technologies to share their intellectual property more widely – like an open-source economy. This would significantly reduce the cost of technology in this space.

Collaborative effort needed

We believe that by using our resources, we can effectively drive a just transition to a low-carbon economy that also addresses other societal challenges. As a non-life insurer, we have a strong balance sheet and have already made substantial investments in businesses, enabling others to use our capital to generate green energy.

As we play our role as an insurer, we must work with governments, customers, industry and stakeholders to find solutions for Africa, in Africa. Collectively, these efforts should result in a common understanding of what is needed to best ensure a just transition that includes our most vulnerable communities in the most equitable way possible.

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