IFC is joining forces with the Banking Association South Africa (BASA) to help increase climate finance in the country and pave the way for a transition to a low carbon economy.

Under the new agreement, IFC will provide advisory support to strengthen the climate risk assessment, mitigation, and adaptation practices of South Africa’s banks, and help them reduce their exposure to climate change-related risks. The partnership will also promote investment in green, climate-friendly assets, in line with the country’s National Development Plan and its commitments to the Paris Agreement.

The agreement is part of IFC and the World Bank’s “Scaling Up Climate Finance through the Financial Sector” program, launched in 2021, in partnership with Germany’s Federal Ministry of Economic Affairs and Climate Action. Through the program, IFC aims to facilitate at least $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.

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Welcoming the innovative partnership, BASA Managing Director, Bongiwe Kunene, said: “South Africa’s banks remain at the forefront of developments to tackle climate change, transition polluting industries inclusively, support climate-smart agriculture and secure investments in more resilient economic infrastructure.”

South Africa is heavily dependent on coal for its power generation and contributes approximately 1 percent of global greenhouse gas emissions. It has set a target to reduce carbon emissions by 42 percent below business as usual by 2025. The country needs an estimated R1,5 trillion ($84 billion) over the next five years to transition from coal to renewable energy, cut carbon emissions, adopt new green technologies, and support affected communities.

“Climate change presents significant risks and opportunities for the financial sector,” said Adamou Labara, IFC Country Manager for South Africa. “IFC’s partnership with BASA aims to help South Africa’s banks effectively respond and adapt to these challenges and opportunities, while supporting the country in promoting a just transition to an inclusive and climate-resilient economy.”

The partnership will further strengthen sustainable finance in South Africa. BASA is a member of the IFC-facilitated Sustainable Banking Finance Network, a platform for financial sector regulators, governments and industry associations from emerging markets committed to advancing sustainable finance.