IFC and the Banking Association South Africa (BASA) have joined hands in a groundbreaking effort to bolster climate finance in South Africa (SA) and facilitate the transition towards a low carbon economy.

Under this transformative agreement, IFC will provide advisory support to enhance the climate risk assessment, mitigation, and adaptation practices of South Africa's banks, helping them reduce their exposure to climate change-related risks.

The collaboration will also encourage investments in green and climate-friendly assets, aligning with the country's National Development Plan and its commitments to the Paris Agreement.

This partnership is a key component of IFC and the World Bank's "Scaling Up Climate Finance through the Financial Sector" programme, launched in 2021 in collaboration with Germany's Federal Ministry of Economic Affairs and Climate Action.

The programme's objective 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 corporates by 2027.

BASA Managing Director Bongiwe Kunene expressed her enthusiasm for this innovative partnership, highlighting that South Africa's banks are at the forefront of efforts to combat climate change, foster sustainable industries, support climate-smart agriculture, and invest in resilient economic infrastructure.

South Africa currently relies heavily on coal for its power generation and is responsible for about 1 per cent of global greenhouse gas emissions. To address this, the country has set a target to reduce carbon emissions by 42 per cent below business as usual by 2025.

To achieve this ambitious goal and transition from coal to renewable energy while adopting green technologies and providing support to affected communities, an estimated R1.5 trillion ($84 billion) is needed over the next five years.

Adamou Labara, IFC Country Manager for South Africa, emphasised significant risks and opportunities that climate change poses for the financial sector. He expressed IFC's commitment to assisting South Africa's banks in effectively responding and adapting to these challenges while contributing to the country's pursuit of an inclusive and climate-resilient economy.

The collaboration will further strengthen sustainable finance in South Africa, as BASA is a member of the IFC-facilitated Sustainable Banking Finance Network. This network serves as a platform for financial sector regulators, governments, and industry associations from emerging markets dedicated to advancing sustainable finance. Together, this partnership aims to make a meaningful impact on the country's journey towards a sustainable and climate-conscious future.

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Source: ILO