Proposed Climate Transition Planning and Disclosure Framework for financial institutions in South Africa

South Africa, like the rest of the world, is under growing pressure to move away from an economy that relies heavily on fossil fuels and high carbon emissions, towards one that is cleaner and more resilient to the effects of climate change. This is called a 'climate transition.' At the moment, South African financial institutions — banks, insurers, asset managers and other investors — do not operate under a standardised national framework that tells them how to plan for or report on the climate risks they face or the role they should play in funding this transition.

The country also faces the challenge of doing this transition in a way that is fair to workers and communities whose livelihoods depend on carbon-heavy industries, which is what is meant by a 'just transition.' South Africa needs to balance cutting emissions, adapting to the effects of climate change that are already happening, and making sure vulnerable people are not left behind. The investment required to do all of this is enormous — estimated at an average of 4.4 per cent of South Africa's gross domestic product (GDP, the total value of everything the country produces) every single year, all the way to 2050. Without a clear framework guiding financial institutions, there is a real risk that money flows in the wrong direction or that institutions are not properly prepared for the financial risks that climate change brings.

Financial institutions are the primary group directly affected by this proposed framework. This includes banks, insurance companies, asset managers and other investors operating in South Africa. They would be expected to develop what are called 'transition plans' — formal strategies explaining how they will manage climate-related risks and align their lending, investment and insurance decisions with South Africa's shift to a low-emission, climate-resilient economy.

Corporates in the real economy — meaning ordinary businesses across all sectors — are also affected, because financial institutions rely on information from these companies to assess climate risks and make informed decisions about where to lend or invest. If companies do not provide credible and standardised information about their own climate exposure and plans, the whole system struggles to function properly.

Regulators, policymakers, industry associations, civil society organisations and academic institutions are also called upon to engage with this process. National Treasury is specifically seeking their input to make sure the framework works in practice and reflects South Africa's real circumstances.

Ordinary South Africans are indirectly affected. The way banks and insurers plan for and respond to climate change will shape where money flows in the economy — which industries get funded, which get wound down, and how workers in affected sectors are supported through the transition.

National Treasury has published a consultation paper — essentially a detailed discussion document — that lays out a proposed Climate Transition Planning and Disclosure Framework for financial institutions. This is not yet a final law or regulation; it is a proposal that the public and stakeholders are being asked to comment on before it is finalised.

The proposed framework is built around three main areas. First, it sets out the conceptual and policy foundations — explaining what transition plans are, why they matter for managing climate-related risks and opportunities, and how international frameworks and global good practices inform the South African proposal. Second, it assesses the South African context — looking at how exposed the local financial system is to climate-related risks and opportunities, and how ready financial institutions currently are to do this kind of transition planning. Third, it sets out specific policy proposals for what a national framework for financial sector transition plans should look like, including core design principles, the key features these plans must have, and the conditions that need to be in place to make implementation work.

A key emphasis of the framework is that transition plans must be credible and effective, not just tick-box exercises. The framework also recognises that it needs to be proportionate — meaning smaller or less complex institutions should not face the same burden as large ones. It seeks to align with international good practice while being tailored to South Africa's specific national circumstances, policy priorities and the realities of different sectors in the economy.

The framework also stresses that financial institutions cannot do this alone. It calls for an enabling environment that includes coherent government policies, economy-wide incentives, standardised and accessible data from companies, and practical guidance to help institutions build the skills and capacity they need. Stakeholders are encouraged to submit specific and practical recommendations on the framework's design, how it should be implemented, how proportionality should work, and what enabling conditions are needed. Comments must be emailed to Vukile Davidson at transitionplanning@treasury.gov.za by no later than Thursday, 10 December 2026.

Climate change is not just an environmental issue — it is a financial one. Banks that lend money to coal mines or carbon-heavy industries face real risks if those industries are forced to scale down or shut down. Insurers face growing claims from floods, droughts and other climate-related disasters. Asset managers investing pension funds and savings on behalf of ordinary South Africans need to understand whether the companies they invest in are prepared for a changing climate. Without a proper framework, these risks can build up quietly until they cause serious financial instability — and when financial institutions run into trouble, ordinary South Africans feel it through job losses, higher borrowing costs, reduced savings and economic slowdowns.

At the same time, South Africa's climate transition also represents enormous economic opportunity. The country needs trillions of rands in investment for renewable energy, climate-resilient infrastructure, and supporting communities that depend on fossil fuel industries. If financial institutions have clear, credible transition plans, they are better placed to direct money towards these opportunities in a way that creates jobs and supports long-term growth.

For ordinary South Africans, a just transition is particularly important. Coal mining communities in Mpumalanga, for example, face a very different future if the economy decarbonises quickly. This framework explicitly recognises that climate change mitigation, adaptation and a just transition are interconnected — meaning the framework is designed to push financial institutions to think about social impacts, not just environmental ones.

If this framework is well-designed and properly implemented, it could help ensure that South Africa's financial sector becomes a genuine engine of the climate transition rather than a barrier to it. If it is poorly designed — too burdensome, too vague, or disconnected from South Africa's real circumstances — it could create compliance costs without meaningful change. That is exactly why National Treasury is asking for public and stakeholder input now, while there is still a chance to shape the final product.