The Green Climate Fund (GCF) has awarded $55.6 million to the Development Bank of Southern Africa (DBSA) for the establishment of a ZAR2 billion Climate Finance Facility (CFF).
The GCF is a global fund set up as a funding mechanism of the United Nations Framework Convention on Climate Change to support developing countries in responding to climate change.
While the CFF is a debt facility that aims to address market constraints in the private sector and play a catalytic role with a blended finance approach in increasing climate-related investments in Southern Africa.
The CFF will co-fund projects and businesses that mitigate or adapt to climate change. Once implemented, this will potentially be the first green bank concept adapted for developing countries, certainly for Africa.
The DBSA will provide R650 million and declared that to be in advanced discussions with a local institution for the balance.
The CFF is designed to enable private sector financial institutions to scale up climate finance by crowding in capital. Read more: Climate adaptation solutions to be accelerated
It will focus on infrastructure projects and businesses that mitigate or adapt to climate change and will concentrate on two main instruments, being credit enhancements and tenor extension to projects and businesses that are commercially viable but not yet bankable in the private sector.
In addition to South Africa, the facility will also extend financing to the common monetary area, which includes Namibia, Swaziland and Lesotho.
“We are very excited about the Climate Finance Facility. It is an innovative financial product that enables us to crowd-in third-party investors and increase our financial support for climate-friendly projects,” says Patrick Dlamini, chief executive of the DBSA.
“Through this initiative, the DBSA will be able to support eight of the United Nations’ 17 Sustainable Development Goals and in the process, support the South African government in terms of their proposed Nationally Determined Contributions emanating from the Paris agreement,” says Paul Currie, chief investment officer at the development bank.