49205 - FirstRand MAGC

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Summary of Investment Information

Project Number

49205

Company Name

FIRSTRAND BANK LTD

Date SPI Disclosed

May 24, 2024

Country

South Africa

Region

Africa

Projected Board Date

May 17, 2024

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Jul 20, 2024

Department

Regional Industry - FIG Africa

Industry

Financial Markets

Previous Events

Approved : May 17, 2024
Signed : May 24, 2024
Invested : Jul 17, 2024

Sector

Commercial Banking - Housing Finance

Additional Project Attributes

Blended Finance

Project Description

The proposed project consists of an up to US$250 million senior unsecured loan with a 7-year tenor to FirstRand Bank Limited (FRB or the Bank) to support the expansion of the Bank’s EDGE-certified (or equivalent green certification acceptable to IFC) green commercial property finance (CPF) and green home loan (home loans) portfolios, in South Africa (the Project). The Project is expected to be supported by the Market Accelerator for Green Construction (MAGC) Program and the IFC-BMWK Scale Up Climate Finance through Greening the Financial Sector (BMWK) Program as described in the Blended Finance section.

Associated Advisory Engagement

IFC will also provide advisory services to the Bank to improve its capacity to originate and manage loans for the development or retrofits of certified green buildings.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	200.0
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
Syndications	Housing Loans to Individuals
Syndications	Housing Loans to Individuals
Straight Senior Loan	Housing Loans to Individuals

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

Development Impact

The Project has an AIMM rating of Good, based on an AIMM score of 61. On an unadjusted basis (i.e., without likelihood factor), the full potential AIMM score could reach 70. The most significant expected project-level outcome is increased access to climate finance (through green buildings and green affordable housing finance) in South Africa. Beyond the Project, IFC anticipates that its updated systematic engagement at both the sectoral and financial institutions levels, through investments, upstream, and AS, 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.

IFC’s additionality through this Project is both financial and non-financial. Financial additionality takes the form of (i) financing structure by providing a seven-year tenor to enable FirstRand Bank to support its loans to developers (supply side) and mortgage loans to home buyers while improving its maturity mismatch; (ii) resource mobilization. Non-financial additionality includes (iii) knowledge sharing, innovation, and capacity building by providing technical support and in-depth training to FirstRand Bank’s property finance team and other stakeholders to improve the Bank’s capacity to originate and manage loans for the construction of certified green buildings.

E&S Category Rationale / Risks and Mitigation

The Project will support FRB in financing certified green CPF 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 environmental and social (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. FRB has developed and is implementing an E&S risk management system and appointed adequate E&S capacity in line with the E&S requirements for this Project. FRB is an existing IFC client with a satisfactory E&S performance. 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, FRB 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 certified green CPF 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 CPF loans are the IFC Exclusion List and E&S laws in South Africa, as well as screening against the IFC Performance Standards. FRB 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.

IFC will periodically disclose the names, locations and sectors for Category A sub-projects that have been supported by IFC investments through financial intermediaries, subject to regulatory constraints and market sensitivities. The sub-project(s) listed below reflect(s) the status of the portfolio as of July 1, 2020.

IFC will periodically disclose the names, locations and sectors for qualifying sub-projects that have been supported by this IFC investment, subject to regulatory constraints and market sensitivities. Any qualifying sub-project(s) will be disclosed during the annual reporting cycle established with the client.

FRB is an existing client and has implemented an E&S management system. The Bank’s E&S risk management process includes E&S screenings and assessments applicable on the client and on the transaction level. These entail a check against the FRB excluded activities and sensitive activities lists, a regulatory compliance check, and a reputational risk which are done by relationship managers. Where applicable, detailed inhouse E&S risk assessments are done by the Bank’s E&S specialists or through third parties for Equator Principles transactions. E&S risk assessments also entail E&S risk-based categorization, E&S assessment against applicable local standards, and, where applicable, the IFC Performance Standards. Where applicable, identified mitigation measures as well as E&S risk management covenants are included in the legal agreements. Monitoring is conducted post-disbursement to ensure that all appropriate E&S risk management covenants, warranties or conditions included in the loan documentation have been fulfilled and remain current. The Bank is required to complement its existing ESMS with a process to allow the identification of eligible projects under this facility, including screening out of higher-risk activities.

Contacts

For Inquiries About the Project, Contact

FirstRand Bank Limited
Andries Johannes du Toit
Group Treasurer
+27 11 282 4922
andries.dutoit@firstrand.co.za
4 Merchant Place, Corner Fredman and Rivonia Road, Sandton, 2196 South Africa
www.firstrand.co.za

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IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

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Complaints can be submitted to IFC online at www.ifc.org/escomplaints or by email to EScomplaints@ifc.org.

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Complaints may relate to environmental and social harm regarding any aspect of the planning, implementation, or impact of a project or sub-project, and can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of an IFC- or MIGA-financed business activity.

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CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.

This Summary of Investment Information (SII) is prepared by IFC to disclose a factual summary of the main elements of the potential investment. It also includes findings and recommendations related to environmental and social considerations regarding this potential investment. The purpose of the SII is to enhance the transparency of IFC’s activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this SII is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein. It is distributed in advance of IFC Board of Directors’ consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following SII is disclosed in accordance with IFC's Access to Information Policy (AIP) that went into effect on January 1, 2012.

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Title	Anticipated Completion Date
Develop guidelines	06/14/2024

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