Nedbank CIB pioneers the market in Sustainable Finance Solutions
Leading change through sustainable finance helps to create a more sustainable future
The global race to stave off irreversible climate change is well and truly on, and with it is increasing pressure on financial institutions to stop funding greenhouse gas emitting fossil fuel projects, and rather use their immense power and resources to make the world a cleaner, more sustainable place.
South Africa is no exception. Building a new, cleaner world, with less greenhouse gas emissions, requires investing in the green economy. For that, the country needs financial institutions to be ambitious, and progressive.
Enter Nedbank, which has been at the forefront of investing in renewable energy for over 10 years — long before the rest of the world’s financial institutions started to feel the heat from climate activists.
Nedbank’s Head of Sustainable Finance Solutions, Arvana Singh, told the Mail & Guardian that Nedbank’s progressive stance on sustainable development is helping to move South Africa forward towards a greener economy.
Nedbank has helped to add more than 3 500MW to the national grid, by financing renewable energy projects, since 2012. As an early investor in renewables, the bank saw opportunities when many financial institutions were still ploughing money into fossil fuels.
“Nedbank first funded wind projects in India in order to develop our expertise in the financing of renewable energy, well before the launch of South Africa’s Renewable Energy Independent Power Producer Program,” says Singh.
Nedbank has a “strong sustainability inclination” built into its outlook, she says, therefore when opportunities came along to fund renewable energy, the bank was well positioned as an organisation to respond to this.
Nedbank released its energy policy in April this year. It is an ambitious document that shows the bank’s ambitions to disinvest from fossil fuels over time. In terms of this policy, Nedbank will not finance any new coal-fired power stations; will not finance any new oil exploration projects; and will not project finance any new coal mines, regardless of jurisdiction, from 1 January 2025.
Sustainable financing
But banks surely have more to offer society than just funding renewable energy projects. Nedbank knows this, Singh says, and has introduced a range of sustainable finance solutions which enables us to partner with our clients and incentivise key sustainability outcomes.
The bank started off by taking a hard look at the United Nations Sustainable Development Goals, and finding practical ways to thread these throughout its operations and products.
Nedbank came up with a range of innovative offerings, including bonds and loans that have intentional “use of proceeds” and sustainabilitylinked performance targets embedded into them to help drive and incentivise change.
As a result of its innovative “use of proceeds” Sdg-linked bond issue, Nedbank was recognised as the Best Bank for Sustainable Finance in Africa by the prestigious financial magazine, Euromoney, in July 2021.
“We pioneered a number of firsts in this market,” Singh says. The bank is also exploring sustainable finance offerings related to infrastructure, and in particular offers a unique value proposition to consumers buying into green certified developments.
The green economy
“The green economy is low-carbon and resource efficient, and should aspire to be socially inclusive. It’s an economy that should aim at reducing environmental risks and at the same time, aim to progress sustainable development outcomes,” says Singh.
“As high-carbon industries look to transition to low-carbon status this creates opportunities, because you now need bespoke manufacturing
across the supply chain, you need installation of these technologies, clean engineering and green design. This gives rise to an economy that is built around the greening aspects.”
A number of green growth nodes arise from this shift. For example, there’s a growing need for healthier and greener building spaces, Singh says.
“This is becoming a factor, particularly when you have multinational companies looking to lease in South Africa. This could have positive impacts for developers or building owners who are looking to sell or rent out their spaces, due to higher potential probability of lettings. If developers and landlords continue to develop in a manner that’s green, that’s a growth node for that particular part of the economy.”
There are also opportunities in the residential market, particularly residential developments. “There’s a lot of uncertainty around higher utility bills emanating from coal reliant energy sources. That’s playing a role in shifting some consumer patterns and trends and behaviours,” she said.
Another important factor is the European Union carbon border adjustment mechanism, which is set to encourage traders in the EU to trade with partners that have a low-carbon trajectory.
“This could potentially have impacts for the cement, iron, steel and aluminium industries. This means that these industries need to think about how they can transition their carbon footprints. This calls for greener design and cleaner engineering techniques,” says Singh.