The International Finance Corporation (IFC) will provide Absa Bank a loan of up to $150 million to create Africa’s first certified green loan.
This will support Absa’s strategy to expand its climate finance business and help South Africa meet its greenhouse gas reduction targets. The loan increases funding for biomass and other renewable energy projects in South Africa, supporting the country’s power sector and economic recovery from COVID-19.
The loan is the first certified loan on the continent that complies with the Green Loan Principles. This means lending by Absa for green projects will be disclosed.
This will improve transparency and hopefully encourage other banks to follow the principles. In addition to the loan, the IFC will provide technical advice and knowledge sharing to help the bank develop a green, social and sustainable bonds and loans framework.
Green loan to support Africa’s energy transition
Jason Quinn, Absa interim group chief executive, said: “Africa’s green transition requires considerable mobilisation of funds. 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.”
Absa is the leader in arranging financing for South Africa’s Renewable Energy Independent Power Producer Procurement Programme, having structured and arranged financing for approximately 46% of projects concluded under the programme to date.
Adamou Labara, IFC country manager for South Africa, said: “Financial institutions and the private sector have an important role to play helping South Africa to rebuild greener and more sustainably from the impact of COVID-19. 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% by 2025 and its reliance on coal by 2050. Currently, 90% of the country’s electricity is generated by coal-fired plants.
The Green Loan Principles is a framework of market standards and guidelines meant to provide a consistent methodology for use across the green loan market.