INDUSTRY INSIGHT
at the forefront of green financing Renewable energy, decarbonisation and climate change are among the many factors that impact on transitioning to a green economy. Sustainable and affordable financing options are needed to successfully make this evolution a reality.
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he Development Bank of Southern Africa (DBSA) has rapidly advanced to become one of the crucial catalysts in the transition to a green economy. The DBSA works across sub-Saharan Africa to promote economic and social development, by sourcing and providing largely infrastructure finance. Climate change has become increasingly important and, as such, one of its priority focus areas is climate finance. According to Olympus Manthata, head: Climate and Environmental Finance, DBSA, the ability to mobilise climate finance at scale requires innovative approaches such as the Climate Finance Facility (CFF).
Paris Agreement In 2015, more than 190 countries adopted the Paris Agreement. According to the UN, the agreement includes commitments from all countries to reduce their carbon emissions and work together to mitigate and adapt to the impacts of climate change. South Africa is part of the agreement and, as such, companies from various industries are required to make the necessary changes to help the country reach its targets. Mining companies in South Africa and Africa have responded positively to transitioning to a green economy by outlining specific policies, strategies and targets to reduce their carbon footprint
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and address other environmental issues. These measures have resulted in major players from various sectors such as gold, coal and PGMs establishing multimillion-rand projects directed at decarbonisation, renewable energy and climate change, among others. Financing has been identified as a major stumbling block for planned projects to materialise. As such, sustainable and affordable financing is required. As a result, DBSA brought about its CFF climaterelated lending facility, which is a first in Africa and based on a ‘green banking’ model.
Climate Finance Facility According to Manthata, the CFF uses a blended finance approach, which essentially combines public with private finance, to address market constraints and fill market gaps. These funds are for private projects that have potential but cannot currently attract market-rate capital at scale without credit enhancement. “We bridge this gap and catalyse private funding by co-funding alongside developmental and private sector financial institutions, with the aim to achieve a 1:5 leverage,” Manthata explains. The initial debt funding of R2 billion in use by the DBSA is a rand-denominated facility and directed purely at co-funding private sector projects in South Africa, Eswatini, Lesotho and Namibia – countries in the common monetary union. It brings credit enhancement products in the form of first-loss or subordinated funding and tenor extension of up to 15 years, combined with concessional funding provided by the UN’s Green Climate Fund. The Minerals Council South Africa fully supports initiatives aimed at unlocking the green economy. It is working on its Net Zero 2050 Action Plan and pathway towards achieving the goal of net-zero greenhouse gas emissions. More projects can be expected in future, which are, of course, going to need financing.
