The International Finance Corporation (IFC) ( a member of the World Bank Group), has advanced a $150 million loan facility to ABSA to set up Africa’s first certified Green Loan to fund biomass and renewable energy projects in South Africa. This is the first certified loan in Africa that complies with the Green Loan Principles.
Africa’s green transition requires considerable mobilization of fundsJason Quinn, Absa Interim Group Chief Executive
The Green Loan aligns with South Africa’s post COVID-19 economic recovery strategy. The country is hoping to attract investment in renewable energy to boost its COVID-19 economic recovery plan.
This is IFC’s fourth investment dedicated to green finance in South Africa’s financial sector.
South Africa is procuring 6,8GW of new renewable energy capacity over the coming year. This is set to attract over $10 billion in investment for the country and enhance its economic growth objectives.
IFC’s loan advance to ABSA enhances the bank’s strategy to expand its climate finance business and help South Africa meet its greenhouse gas reduction targets.
Green Loan Principles
Absa’s Green Loan complies with the Green Loan Principles, this means lending for green projects will be disclosed, improving transparency, and encouraging other banks to follow the principles. In addition to the loan, IFC will provide technical advice and knowledge sharing to help the bank develop a green, social, and sustainable bonds and loans framework.
“The agreement with IFC bolsters our funding available for green projects and strengthens Absa’s position as a leader in financing renewable projects in South Africa,” said Jason Quinn, Absa Interim Group Chief Executive. Absa is the leader in arranging financing for South Africa’s Renewable Independent Power Producer Program, having structured and arranged financing for approximately 46 percent of projects concluded under the program to date.
“Financial institutions and the private sector have an important role to play in helping South Africa to rebuild greener and more sustainably from the impact of COVID-19,” said Adamou Labara, IFC’s Country Manager for South Africa. “By increasing funding for renewable energy and climate smart projects we can help South Africa strengthen its climate change resilience and increase climate change adaptation.”
South Africa has set the goals of reducing its greenhouse-gas emissions by 42 percent by 2025 and its reliance on coal by 2050. Today, 90 percent of the country’s electricity is generated by coal-fired plants.
IFC estimates that there is a $588 billion investment opportunity in climate mitigation across selected sectors in South Africa between now and 2030. The project with Absa is in line with a climate initiative IFC launched in January 2020 to help financial institutions in South Africa, Egypt, Mexico, and the Philippines to mobilize private sector financing for climate mitigation and adaptation projects and help align financial-sector strategies with Paris Climate Agreement targets.
In South Africa, financial institutions are critical sources of climate finance, with commercial banks currently providing 67 percent of the financing for renewable energy projects.