The International Finance Corporation (IFC) has provided Africa’s first ever certified green loan to South Africa’s Absa Bank to fund renewable energy projects in the country. 

The IFC, the World Bank’s private investment arm, will lend Absa US$150mn, which the bank will onlend to finance “biomass and other renewable energy projects” in South Africa, an IFC statement says. 

The statement, which does not provide further details on the nature of the projects, says the deal is the first loan in Africa to comply with the Loan Market Association’s Green Loan Principles, a set of high-level standards for environmentally friendly lending.  

Absa will disclose who it lends money to under the arrangement, which the IFC says will improve transparency. The IFC “will provide technical advice and knowledge sharing to help the bank develop a green, social, and sustainable bonds and loans framework,” according to the statement. It is hoped that the deal with encourage other banks to pursue green loans.

“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,” says Jason Quinn, Absa’s interim group CEO. 

The IFC’s country manager for South Africa, Adamou Labara, says: “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.”

The country, which is struggling with a years-long drought affecting all of Southern Africa, wants to slowly reduce its reliance on coal-fired power – but with coal currently delivering around 90% of the country’s energy needs, the transition will require significant investment. 

The IFC, which provides development finance in less-developed countries, believes there is a US$588bn investment opportunity in climate change mitigation measures in South Africa over the next nine years. 

In 2019 the South African government announced an energy plan under which solar and wind power will make up a quarter of the country’s electricity generation by 2030 and also foresees the construction of new nuclear power plants.