To support the construction of green buildings in South Africa, global development institution the International Finance Corporation (IFC) has announced a financing package for Business Partners to help fund environment-friendly industrial and retail sites for the use of small and medium-sized enterprises (SMEs).
The IFC is providing a R600-million ($42-million equivalent) loan package to Business Partners, a South African non-banking financing entity specialised in providing finance, mentorship and support programmes to SMEs.
Business Partners will use the IFC’s loan to finance the construction of certified green commercial buildings in South Africa and/or the renovation of existing commercial buildings to make them more environment friendly, making them at least 20% more energy efficient.
The IFC will also provide financial incentives to Business Partners to partially offset the costs involved in greening and certifying buildings, based on the company meeting certain green building targets in their portfolio.
The incentives will be funded by the IFC-UK Market Accelerator for Green Construction (MAGC) programme, which has been funded by the UK government with the objective to scale up green construction across emerging markets by incentivising financial intermediaries to develop and introduce new green building construction finance products.
“South Africa is one of the world’s most carbon-intensive economies and, as a result, the country’s green economy has huge market potential. Through investments into the development of green buildings by the SME sector, we believe we will not only be playing our part in preserving our environment but also contributing to much-needed economic growth, job creation and energy security.
We are grateful to the IFC for this opportunity to support businesses that make a difference,” said Business Partners MD Ben Bierman.
By developing green buildings, this programme is said to contribute to South Africa’s Nationally Determined Contribution under the Paris Agreement to reduce greenhouse-gas emissions by 42% by 2025 and to decarbonise its electricity sector by 2050.
Conventional buildings account for almost 40% of energy-related greenhouse emissions worldwide owing to a growing urban population and outdated construction practices.
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 notes.
This is the IFC’s first loan in South Africa exclusively dedicated to green lending for commercial properties. The investment will be supported by IFC advisory services to help Business Partners strengthen its green building finance capacity.