IFC Collaborates with the Banking Association South Africa to Strengthen Climate Finance Initiatives

IFC and the Banking Association South Africa (BASA) have joined hands to enhance climate finance initiatives within the country and facilitate the transition to a low carbon economy.

This collaboration entails IFC’s provision of advisory support to bolster climate risk assessment, mitigation, and adaptation practices among South Africa’s banks, aiding them in minimizing their exposure to climate change-related risks. Additionally, the partnership will actively promote investments in green, climate-friendly assets, aligning with the country’s National Development Plan and its obligations under the Paris Agreement. Together, they aim to drive sustainable and climate-resilient financial practices while advancing the nation’s environmental goals.

IFC and the World Bank’s “Scaling Up Climate Finance through the Financial Sector” program, introduced in 2021 in collaboration with Germany’s Federal Ministry of Economic Affairs and Climate Action, is now entering into a significant agreement with the Banking Association South Africa (BASA). This partnership aims to foster a low carbon economy by strengthening climate finance within the country.

Under this initiative, IFC is dedicated to supporting South African banks in their climate efforts by offering advisory assistance to enhance climate risk assessment, mitigation, and adaptation practices. By reducing their exposure to climate change-related risks, the banks will be better equipped to contribute to sustainable development. Moreover, the partnership endeavors to encourage investments in green and climate-friendly assets, in line with the country’s National Development Plan and its commitments to the Paris Agreement.

The ultimate goal of this collaboration is to facilitate a minimum of $500 million in climate investments by South African banks and at least $300 million in climate-themed bonds issued by South African corporations by the year 2027. Through this innovative approach, South Africa’s banks are taking the lead in addressing climate change, supporting the transition away from polluting industries, promoting climate-smart agriculture, and investing in more resilient economic infrastructure. The BASA Managing Director, Bongiwe Kunene, warmly welcomed this partnership as a crucial step towards creating a sustainable and climate-resilient future for the nation.

With a significant reliance on coal for power generation and accounting for roughly 1 percent of global greenhouse gas emissions, South Africa is taking action to address its environmental impact. The nation has set an ambitious goal of reducing carbon emissions by 42 percent below business as usual levels by 2025.

To achieve this, South Africa recognizes the need for substantial investments. An estimated R1.5 trillion ($84 billion) is required over the next five years to successfully transition from coal to renewable energy sources, curtail carbon emissions, adopt innovative green technologies, and provide support to communities affected by the shift. This comprehensive approach aims to pave the way for a sustainable future, enabling South Africa to contribute significantly to global climate change mitigation efforts.

“Climate change presents significant risks and opportunities for the financial sector,” said Adamou Labara, IFC Country Manager for South Africa. “IFC’s partnership with BASA aims to help South Africa’s banks effectively respond and adapt to these challenges and opportunities, while supporting the country in promoting a just transition to an inclusive and climate-resilient economy.”

The collaboration will play a pivotal role in fortifying sustainable finance in South Africa. BASA is an integral participant in the Sustainable Banking Finance Network, facilitated by IFC, which serves as a platform for financial sector regulators, governments, and industry associations across emerging markets dedicated to promoting and advancing sustainable finance. Through this partnership, South Africa will continue to make significant strides in integrating sustainability principles into its financial sector, fostering responsible and environmentally-conscious practices for a greener and more resilient economy.