The International Finance Corporation has set a loan of up to $150m to support the expansion of climate finance business and help South Africa meet its Green House Gas reduction targets.
South Africa wants to reduce its GHG emissions by 42 per cent in 2025 and its reliance on coal in 2050.
About 90 per cent of the country’s electricity is currently generated by coal-fired plants
At the 24th Conference of Parties to the United Nations Framework Convention on Climate Change, experts submitted that Africa must not be short-changed by climate finance.
The African Development Bank reported that climate change presents a $3tn investment opportunity in Africa by 2030, and that the private sector would be key to green investment and development.
According to a statement on Thursday by IFC, this is the first certified loan in Africa that complies with the Green Loan Principles, which anchors on use of proceeds, process for project evaluation and selection, management of proceeds and reporting.
As announced by the IFC to Absa Bank Limited, the loan will increase funding for biomass and other renewable energy projects in South Africa, supporting the country’s power sector and economic recovery from the Coronavirus Disease.
According to the statement, this means that lending by Absa for green projects will improve transparency and encourage 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 statement read in part.
It quoted Absa Interim Group Chief Executive, Jason Quinn, as saying that Africa’s green transition required 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,” he added.
The IFC Country Manager for South Africa, Adamou Labara, 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.”
IFC, a member of the World Bank Group, has estimated a $588bn investment opportunity in climate mitigation across select sectors in South Africa between now and 2030.
