Sowing the seeds of sustainability with green financing

The debate surrounding the journey to net zero emissions has now firmly landed in Kenya. While the government is set to play a key role in setting the stage for climate action, the spotlight is fast shifting to the private sector, where its essential role is increasingly taking centre stage in driving the transition toward sustainable, eco-friendly practices.

This shift is not only essential for Kenya’s economy but also to align with the global push for a sustainable tomorrow. In the quest to tackle climate change, the private sector’s participation has been met with varied opinions. It’s evident, though, that some forward-thinking companies are taking bold strides. They’re not just embracing the idea of sustainability, but they’re also acting on it.

Take Pan-African lender Absa Kenya for instance. Absa is making a mark in Kenya, sowing the seeds of sustainability with green financing.

“This year alone, we have advanced about Kes60 billion in sustainable finance, comprising components of green finance as well as inclusive finance,” said Absa CEO, Mr Abdi Mohamed, during the release of the bank’s Sustainability Report for the fiscal year ending December 2022.

“We aim to double this figure to more than Kes120 billion in the next two years. You can expect to see us playing an even bigger role in renewable energy, green building, and climate-smart agriculture sectors,” Abdi added.

Green financing for buildings

Absa has been championing sustainability through green financing. In September, Absa was part of a consortium of four banks that offered Safaricom a Kes15 billion sustainability-linked loan to strengthen the telco’s Environmental, Social and Governance (ESG) agenda.

Other participating lenders in the consortium were Standard Chartered, Standard Bank, and KCB. Together, the four banks will finance Safaricom based on its progressive achievement of set milestones across key ESG areas.

The Nairobi Securities Exchange-listed bank says it is increasingly positioning itself to finance the adoption of green building projects.

According to the International Finance Corporation (IFC), green buildings represent a $24.7 trillion investment opportunity by 2030 across cities in emerging economies such as Kenya.

In a panel discussion during the release of the sustainability report, IFC’s Industry Specialist (Climate), Deo Onyango, highlighted the benefits that banks and customers can enjoy by simply embracing green buildings.

Citing IFC’s housing market survey in South Africa and Tanzania, Onyango noted that buyers of green buildings can save up to a month of mortgage and related costs in a year if they buy green buildings compared to customers opting for standard houses.

Absa was the first bank in Kenya to join the Kenya Green Building Society as part of championing green economy initiatives that help reduce pollution while improving people’s lives.

Absa has been championing sustainability through green financing. In September, Absa was part of a consortium of four banks that offered Safaricom a Kes15 billion sustainability-linked loan to strengthen the telco’s Environmental, Social and Governance (ESG) agenda.

Read also: The making of an eco-friendlier tech industry

IFC EDGE standard

The bank also set out to certify its buildings according to the IFC EDGE standard, starting with its WestEnd Headquarters, Bishopgate Head Offices, Queensway Branch, Nkrumah Road Branch, Mombasa Branch, and Kisii Branch.

For houses to qualify as green, however, they must use green energy, and use water efficiently while the construction materials used must be carefully sourced, for instance, by going for recycled steel, Onyango noted.

“By being intentional about it (sustainability finance), you are reducing the risk in your loan portfolio,” Onyango explained.

Recognizing the potential within green financing and the essential shift towards sustainable financial channels, the Kenya Bankers Association (KBA) has pioneered the Sustainability Finance Initiative (SFI). This framework is designed to familiarize players in the industry with ESG aspects of their financing and risk management.

Under the guidance of the SFI, the industry association has developed a training program aimed at enabling banks in Kenya to generate value for the economy, environment, and society.

This initiative offers bankers and financial institutions the opportunity to reap the benefits of this innovative module, fostering a more sustainable and responsible approach to banking and finance. Already 50,000 staff in Kenya’s banking industry have been trained.

“This is probably the largest capacity-building programme in Africa. We see the sustainability space changing rapidly,” said Roselyne Njino, Senior ESG specialist KBA.

Sustainable procurement

Absa’s sustainability report shows that the lender allocated $10 million for climate-smart agriculture in FY22. Additionally, Absa set aside Kes25 billion for climate finance and disbursed Kes15.2 billion through its virtual lending platform, Timiza, to support financially excluded groups.

CEO Abdi noted that the lender’s current portfolio shows that roughly 20 percent of their loans and advances pass the sustainable finance criteria.

“We remain committed to ensuring that we operate our business sustainably, starting with ourselves, but more importantly, in guaranteeing that we continue advancing capital to industries that promote sustainable development,” Abdi explained.

To drive the sustainability agenda across the value chain, Absa has trained over 400 suppliers on sustainable procurement, the report notes. The lender says it is increasingly empowering their suppliers on sustainability and responsible business practices.

In the financial year under focus, women, youth, and PWDs accounted for 10.3 percent of the lender’s supply chain portfolio. Absa’s goal is to achieve 30 percent diversity by 2025.

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