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To build a better South Africa – Environmental Finance

Anél Bosman, group managing executive at Nedbank Corporate and Investment Bank (CIB), describes how the African investment bank is using its financial expertise to promote social development and foster economic equality

Anel BosmanThere’s no denying we are facing challenges in South Africa. Bloomberg data showed we had the highest rate of unemployment of the 38 countries that were measured. In addition, recent riots that rocked South Africa in July 2021, also drove home the importance of our communities. Both during and in the aftermath of those riots, communities were at the heart of the recovery. It is the partnerships between private, public and the community that will really allow us to grow and create growth and job opportunities.

Because South Africa is our home and still the source of the bulk of our revenue, we will continue to invest in South African communities, as demonstrated by investments like the ZAR80 million ($5.6 million) facility provided to Indlu Urban Backyard Housing Development.

This initiative aims to transform neighbourhoods and promote affordable housing in the townships. It also creates new job opportunities with local suppliers and labour contracted for the developments. This model works with communities and land owners to formalise previously informal housing to the benefit of urban low-income labour, as well as those landlords and communities.

As Nedbank, we have a responsibility and opportunity to contribute to building a thriving economy, a well-functioning society, and a healthy environment. Financing is one of the things we do and is central to our commitment to sustainable development because that’s one of the best ways we can respond as a bank and help to co-create a sustainable South African and greater African economy.

We are a very strong player in renewable energy and sustainable finance solutions. We started to invest in a team to do renewable energy finance quite a few years ago before it was the buzzword it has become. We have a leading position in renewables in South Africa, having provided ZAR31 billion in renewable energy financing since 2012, adding more than 3,500MW to the South African electric grid.

But it is not just our renewable investments from our balance sheet that sets us apart. Last year, Nedbank partnered with renewable energy developer, the SOLA Group, to finance an embedded (on-site) photovoltaic solar power generation portfolio for AB InBev’s Breweries, the largest beer producer in the world. This investment played a role in enabling AB InBev to meet its commitment to generating 50% of its energy from renewables by 2020 and 100% by 2025 in the Sub-Saharan Africa context.

We also adopted an energy policy to guide the transition away from fossil fuels, while accelerating efforts to finance non-fossil-energy solutions needed to support socio-economic development and build resilience to climate change, which was a first in South Africa. This policy will see us end all project financing of new thermal coal mines by January 2025, in addition to our existing commitment of not funding any new coal-fired power stations. We have further committed to no longer fund oil or gas exploration projects and, from 2035, not to provide any new funding for oil production. The policy also aims to end all financing of fossil fuels by 2045. This kind of commitment to zero exposure to fossil fuels is a first for South Africa.

South Africa is an economy built on mining, and it continues to have its energy driven by fossil fuels, particularly coal. For us, ESG is absolutely about climate change but we need to strike the balance between growth and climate so that we can also talk to the Social and the Governance of ESG.

As gas can play a critical role in the transition, we will continue to finance natural gas production where it will play an essential role in facilitating the transition to a zero-carbon energy system. We will also continue to finance new gas-fired power generation until 2030, after which, only for the conversion of existing coal or oil-based generation, as back up to renewable projects, or for peaking capacity supporting the transition of the grid to renewable power. Our due diligence on this outlook will be guided by the Equator Principles as well as the Sustainable Development Principles of the International Council on Mining and Metals.

Because South Africa and Africa is our home, we understand this continent better than other banks and investors who are domiciled outside of Africa. As a result of our partnership with Ecobank, a Pan-African bank in which we have taken a 20% stake with a presence in 36 countries across the continent, we have extended our footprint on the continent. This gives us insights and access into these markets. It is important to our clients that we can bring players together across those countries, and create a value add to partners on both sides.