The International Finance Corporation (IFC) has extended a certified green loan to Absa, which is a financial sector player, headquartered in Johannesburg. The banking group will provide a $150 million loan to finance green private sector projects in South Africa. These will include biomass and other renewable energy projects.
The IFC’s green loan is designed to support the green transition in recipient countries. South Africa is the first country in Africa to benefit from the certified green loan. The funding is also expected to support a post-Covid-19 recovery in South Africa. The banking group Absa is increasing its climate financing, with investments focused on renewable energy, making it the choice to receive IFC’s certified green loan.
Absa is one of the financing partners in the South African government’s ambitious Renewable Energy Independent Power Producer Procurement Programme (REIPPP), which was initiated to attract investment from independent power producers. Absa has supported 46 per cent of the clean energy projects developed under REIPPP to date. 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 December 2020, IFC along with Nedbank Limited partnered to increase financing for renewable energy projects in South Africa. As part of the agreement, IFC agreed to provide Nedbank Limited with a loan of up to $200 million to help it expand its green finance operations. Nedbank is Africa’s first carbon-neutral bank and in 2019 became South Africa’s first commercial bank to launch a green bond on the Johannesburg Stock Exchange.
South Africa has set the goals of reducing greenhouse-gas emissions by 42 percent by 2025 and diversifying its electricity production to reduce its reliance on coal by 2050. IFC estimates South Africa’s climate-smart investment potential across renewable energy and urban infrastructure, amounts to $588 billion through 2030. The government plans to more than double the country’s power capacity by 2030, with renewables making up as much as 20 percent of the mix.