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    Innovation Village | Technology, Product Reviews, Business
    You are at:Home»Banking»IFC provides $236 million loan to support Absa bank’s financing for Green Buildings in South Africa
    IFC Absa bank

    IFC provides $236 million loan to support Absa bank’s financing for Green Buildings in South Africa

    1
    By Staff Writer on July 31, 2023 Banking, Investments

    The International Finance Corporation (IFC) has joined forces with Absa bank, a South African financial institution, to promote the growth of certified green buildings in the country. Through a loan of up to 4.5 billion South African rand (approximately $236 million), the IFC aims to support Absa’s strategy of expanding its green buildings finance portfolio. This initiative will encompass the financing of new certified green buildings as well as green mortgages. By doing so, Absa will enhance accessibility to green building finance for both developers and individual home buyers.

    As part of its climate strategy, Absa plans to utilize the investment to finance environmentally-friendly green buildings certified under the IFC’s Excellence in Design for Greater Efficiencies (EDGE) program, as well as other similar green building certifications. These certifications aim to standardize the design and certification process for resource-efficient and climate-friendly buildings.

    Green buildings present a significant low-carbon investment opportunity due to their potential for electricity savings and reduced water consumption. According to an IFC study, South Africa’s green building demand offers a promising $7 billion investment opportunity from 2016 to 2030. While the supply of green buildings is increasing in the country, the green building market is still in its early stages of development.

    IFC estimates that this project will result in a reduction of over 12,000 tons of emissions annually. Additionally, the investment will contribute to South Africa’s Nationally Determined Contribution (NDC) targets under the Paris Agreement, which aims to achieve a 42 percent reduction in greenhouse gas emissions by 2025.

    “As a responsible corporate citizen, one of our strategic imperatives is to be an active force for good in everything we do, which is key to delivering true long-term value linked to our purpose,” said Punki Modise, Absa Group Chief Strategy and Sustainability Officer. “The loan, which includes a performance-based incentive for clients, significantly enhances the resources we have available to support clients in making environmentally responsible and resource-efficient investments in commercial and residential developments, mainly focused on affordable housing.”

    “Increasing funding for green buildings in South Africa can help the country address power and water shortages and support sustainable economic growth,” said Adamou Labara, IFC Country Manager for South Africa. “IFC’s partnership with Absa will make it easier for developers and individuals to access green building finance and speed the development of environmentally friendly buildings in the country.”

    Under the partnership, IFC will offer performance-based incentives to partially cover the greening and certification expenses for green buildings and mortgages financed by Absa. The benefits of this initiative will trickle down to end users in the form of reduced utility bills, including power and water bills.

    Funding for these incentives comes from the IFC-UK Market Accelerator for Green Construction (MAGC) program, sponsored by the United Kingdom. The goal of this program is to promote green construction in emerging markets by encouraging financial intermediaries, like Absa, to introduce new green building finance products.

    IFC will also provide advisory services to support Absa in enhancing its ability to originate and manage loans for the development or retrofitting of certified green buildings. By leveraging IFC’s expertise, Absa aims to bolster its knowledge and internal capacity to expand its green buildings business segment further.

    This investment builds on IFC’s previous 2 billion South African rand (approximately $124 million) loan to Absa in 2022, which was dedicated to supporting the growth of affordable housing finance in South Africa. The current initiative aligns with IFC’s broader strategy of fostering climate change resilience in the country by investing in inclusive and sustainable projects.

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