Development finance institution the International Finance Corporation (IFC) will provide financial services firm Absa with a loan of up to R4.5-billion to support the latter’s strategy to expand its green building finance portfolio, which will include new certified green buildings and mortgages.
This will enable Absa to increase access to green building finance for developers and individual home buyers.
In line with its climate strategy, Absa will use the investment to finance environment-friendly green buildings certified under the IFC’s Excellence in Design for Greater Efficiencies (EDGE) programme, as well as similar green building certifications, which helps standardise the design and the certification for resource-efficient and climate-friendly buildings.
The partnership will help Absa expand its residential and commercial loans and mortgage finance programme for buildings that are environmentally responsible and resource-efficient, and support the development of certified green buildings in South Africa, the organisations said.
“Green buildings represent a significant low-carbon investment opportunity because they can save electricity and reduce water consumption. An IFC study estimates that South Africa's green building demand presents a $7-billion investment opportunity between 2016 and 2030. Although the supply of green buildings in the country is growing, the green building market is still at a nascent stage,” the IFC said.
The IFC estimates that the project will help reduce more than 12 000 t/y of emissions. The investment will also contribute to South Africa’s Nationally Determined Contribution targets under the Paris Agreement to reduce greenhouse-gas emissions by 42% by 2025.
As part of the partnership, the IFC will provide performance-based incentives to partly offset the greening and certification costs for green buildings and mortgages financed by Absa under the project, which will benefit end-users in the form of reduced utility bills, such as power and water bills.
“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,” said Absa Group chief strategy and sustainability officer Punki Modise.
The IFC will also support Absa with advisory services to improve its capacity to originate and manage loans for the development or retrofits of certified green buildings. Absa will leverage the IFC’s expertise to gain further knowledge and enhance internal capacity to expand its green buildings business segment.
“Increasing funding for green buildings in South Africa can help the country address power and water shortages and support sustainable economic growth,” said IFC South Africa country manager Adamou Labara.
“The IFC’s partnership with Absa will make it easier for developers and individuals to access green building finance and speed the development of environment-friendly buildings in the country,” he said.
The incentives are funded by the IFC-UK Market Accelerator for Green Construction programme, which is sponsored by the UK, to scale green construction across emerging markets by incentivising financial intermediaries to develop and introduce new green building finance products.
The investment builds on the IFC’s R2-billion loan in 2022, which is used to support Absa’s growth in affordable housing finance in South Africa. It aligns with the IFC’s strategy to enhance climate change resilience in South Africa by investing in inclusive and sustainable projects, Labara said.