48130 - Absa MAGC

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Summary of Investment Information

Project Number

48130

Company Name

ABSA BANK LTD

Date SPI Disclosed

Jun 30, 2023

Country

South Africa

Region

Africa

Projected Board Date

Jun 12, 2023

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Jul 12, 2023

Department

Regional Industry - FIG Africa

Industry

Financial Markets

Previous Events

Approved : Jun 9, 2023
Signed : Jun 29, 2023
Invested : Jul 10, 2023

Sector

Commercial Banking - Housing Finance

Additional Project Attributes

Blended Finance

Project Description

The proposed project is an up to ZAR4.5 billion senior unsecured loan with a 5-year tenor to Absa Bank Ltd (“Absa” or the “Bank”). Proceeds will finance the expansion of Absa’s EDGE-certified (or equivalent green certification that is acceptable to IFC) green building finance portfolio in South Africa (the “Project”). The Project is expected to be supported by the Market Accelerator for Green Construction (“MAGC”) Program as described in the Blended Finance Section.

Associated Advisory Engagement

IFC will also support Absa with advisory services to improve its capacity to originate and manage loans for the development or retrofits of certified green buildings. The full scope of the advisory services will be confirmed after consultations with the Bank. The cost of the advisory service will be partially supported by the MAGC Program.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	227.69
Equity

IFC's loan to the financial institution described in this SII is targeted for on-lending to the following sector(s):

Product Type	Use of Proceeds
Straight Senior Loan	Labeled: Green;Blue;Social-Loans/Bonds

IFC's Definitions of Targeted Sectors can be found here.

Development Impact

Stakeholder effects: Increased access to developer and mortgage finance for certified green buildings. The Project will contribute to increased supply of certified green buildings in South Africa, leveraging Absa’s market position and substantial reach. The growth of Absa’s green building portfolio is expected to reduce GHG emissions. Contribution to market creation: Beyond the Project, IFC anticipates that its systematic engagement at both the sectoral and financial institutions levels, through investment, upstream, and advisory services, will help scale up climate finance, strengthen green finance standards in the country, and encourage replication by other institutions in the country, thus, contributing towards increased environmental sustainability through the demonstration and capacity building channels.

Financial Additionality Financing Structure (tenor, local currency): By providing long term funding in local currency, IFC would be providing resources to Absa to support its loans to developers (supply side) and mortgage loans to home buyers (demand side) for the construction and purchase, respectively, of certified green homes and buildings in South Africa. The IFC investment will also strengthen Absa’s financial sustainability by augmenting its funding base and adding longer tenor local currency liabilities. Non-Financial Additionality Knowledge, Innovation & Capacity Building: IFC plans to provide technical support and in-depth training to relevant Absa staff and stakeholders, deepening the Bank’s capacity to originate and manage loans targeted at certified-green buildings.

E&S Category Rationale / Risks and Mitigation

The Project will support Absa in financing certified green property developments and home loans in South Africa. The E&S risks associated with property development are expected to be medium, while those associated with home loans are expected to be low, therefore the Project has been categorized as FI-2 according to the IFC's Sustainability Policy. The key risks and impacts of the project derive from the Bank's capacity to identify and manage potential E&S risks associated with its lending activities. These risks are typically associated with labor and working conditions, occupational health and safety, pollution prevention and atmospheric emissions, waste and wastewater management, amongst others. Absa has developed and is implementing an E&S risk management system and appointed E&S capacity in line with the E&S requirements for this Project. An assessment of labor practices in relation to Performance Standard 2 and life and fire safety requirements revealed that the Bank meets the respective IFC requirements. As part of this Project, Absa will maintain its ESMS and will develop a clearly defined mechanism to verify the use of proceeds in line with the eligibility criteria for the green property development loans. IFC's investment will not be used to support any coal-related activities or any Higher-risk activities that may include: (a) involuntary resettlement; (b) potential adverse impacts on Indigenous Peoples; (c) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage; or (d) significant occupational health and safety risks. For this Project, IFC's applicable requirements for the green property development loans are the IFC Exclusion List and E&S laws in South Africa, as well as screening against the IFC Performance Standards. Absa will also be required to meet labor and working conditions in line with IFC Performance Standard 2 and IFC's Life and Fire Safety Standards for financial intermediaries.

Absa has an ESMS, which describes the procedures to be followed for evaluating E&S risks and impacts of the types of activities contemplated under this Project. These include E&S screening against the IFC Exclusion List and reputational risk, categorization, E&S assessment against applicable standards, including South Africa laws, contracting, and monitoring. The Bank sets out triggers and criteria for E&S due diligence based on tenor and amount. Consequently, some transactions trigger enhanced due diligence by the E&S credit risk team while most transactions have a streamlined E&S due diligence performed by the commercial teams. Absa presented evidence of ESMS implementation to IFC. Transactions are screened, categorized, and assessed in line with the Bank's procedures. Key E&S risks and impacts are identified, and contractual conditions are set where necessary. Annual monitoring is undertaken by commercial teams, as per the Bank's procedures.

Contacts

For Inquiries About the Project, Contact

Absa Bank Limited
Rolf Van Den Heever
Head of Capital Markets Execution
+27 (0) 11 350 4000
Rolf.VanDenHeever@absa.africa
7th Floor, Absa Towers West 15 Troye Street, Johannesburg, 2001 PO Box 7735, Johannesburg, 2000 SA
www.absa.africa

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