Following the United Nations (UN) COP 26 international climate change conference in Glasgow in 2021, countries around the world have received ambitious targets required for the low-carbon transition. Securing adequate financing for renewable energy projects is key to this process and major banks are instrumental enablers. Lenders themselves have become increasingly hesitant to grant loans to fossil fuel projects, displaying rather, an increased appetite for lending to green energy projects. In the African energy landscape, several banks have reaffirmed their commitment to financing the continent’s energy transition.
The African Development Bank
Multilateral financial institution the African Development Bank (AfDB) – a financial provider to African governments and private companies – has prioritized green growth in its portfolio, recognizing the impacts climate change continues to have on Africa. By incorporating a climate-informed focus into all of the financial institutions’ investments, the Bank aims to secure African countries and stakeholders with access to adequate financing in the transition to a clean energy future.
Aligned to the Bank’s 2013- 2022 Corporate Strategy, AfDB’s Climate Change and Green Growth Department is centered around two objectives, namely, the achievement of inclusive and sustainable growth and the financing of climate change projects. Facilities such as the AfDB’s Green Bond program have already accelerated green project developments across the continent. Accordingly, the bank has positioned itself as a key facilitator in Africa’s energy transition.
ABSA Bank Ltd
In partnership with the World Bank’s International Finance Corporation (IFC), Absa Bank Ltd., has received a loan to the tune of $150 million to support Absa’s progressive strategy to expand its climate finance business. Moreover, the loan will serve to contribute to South Africa’s efforts in achieving its greenhouse gas (GHG) reduction targets, via Absa.
Currently, Absa Bank is a leader in the financing of South Africa’s Renewable Independent Power Producer Program, having structured financing for 46% of projects concluded under the program, to date.
Standard Bank is a key financial institution in sub-Saharan Africa, actively involved in financing green energy transition projects. The bank recently issued its first local Tier 2 capital qualifying green bond to finance renewable energy projects in South Africa. The new ten-year bond listed on the Johannesburg Stock Exchange (JSE), will be used to finance renewable energy projects in South Africa. The R1.4 billion bond is the third issued under Standard Bank’s Sustainable Bond Framework established in February 2020.
The IFC has partnered with South Africa’s Nedbank Group for the purpose of financing key renewable energy projects in South Africa.
The strategic partnership is aimed at enabling the country to transition to cleaner forms of power, reduce GHG emissions, and to create jobs in the renewable energy sector.
The IFC is providing Nedbank with a loan of up to $200 million for green finance operation expansion goals and to grow its climate portfolio.
This initiative is part of the IFC’s broader aim to develop South Africa’s climate finance market by funding renewable energy projects.
The South African government aims to reduce GHG emissions by up to 42% by 2025 and to diversify its energy mix in order to further reduce reliance on coal, by 2050.
FirstRand Merchant Bank
Head of Sustainable Finance and Environmental, Social and Governance (ESG) advisory at First Rand Merchant Bank, Nigel Beck, has remarked that global investors are placing pressure on South Africa’s top lenders and firms such as SASOL to reduce the carbon intensity of their portfolios- it is essential that the sector responds and transform in line with progressive global energy trends. As of 2022, FirstRand Merchant Bank has committed to achieving net zero emissions by 2050, which would include both its operational emissions and the financing of strategic energy projects.