In a significant move to boost economic growth and enhance climate resilience, the International Finance Corporation (IFC) has announced a partnership with FirstRand Bank Limited (FirstRand), South Africa’s second-largest bank by balance sheet. This collaboration aims to expand the availability of green building and green home loan finance across the country.
Major Financial Support for Green Initiatives
The IFC will provide a substantial $250 million senior loan to FirstRand to scale up its lending activities towards property developers and home buyers focusing on green buildings. This funding will be specifically allocated to support affordable housing segments and women borrowers. The investment includes an IFC loan of up to $200 million and an additional $50 million from the Managed Co-Lending Portfolio Program, IFC’s syndications platform for institutional investors.
Capacity-Building and Advisory Services
In addition to financial support, the IFC will offer capacity-building initiatives for FirstRand’s appraisers, loan officers, internal teams, and construction partners. The organization will also provide advisory services to assist FirstRand in developing and enhancing its green finance products.
Commitment to Sustainable Financing
Bhulesh Singh, FirstRand Group Treasurer, expressed the bank’s commitment to sustainable financing solutions, emphasizing the focus on green buildings, affordable housing, and women borrowers. “This partnership aligns with FirstRand’s ambition to facilitate growth in home ownership, particularly for low-income customers and women, in a climate-responsible way,” Singh said.
Promoting a Climate-Friendly Housing Sector
Cláudia Conceição, IFC’s Regional Director for Southern Africa, highlighted the broader impact of the partnership. “IFC’s collaboration with FirstRand will not only provide vital funding for housing access but also promote green-certified construction loans and home mortgages in South Africa, fostering a climate-friendly and resilient housing sector,” Conceição stated. She added that this initiative aims to encourage other financial institutions to adopt similar green finance standards.
Performance-Based Incentive
The investment will benefit from a performance-based incentive (PBI) supported by IFC and the German Government’s Federal Ministry for Economic Affairs and Climate Action (BMWK). This is IFC’s first blended finance investment with the BMWK, supplemented by the United Kingdom-IFC Market Accelerator for Green Construction (MAGC) Program. FirstRand will allocate the PBI to eligible developers and buyers involved in constructing or purchasing green-certified homes.
Green Building Certification
Green homes are residential properties that meet specific criteria for reducing water, energy, and materials use under an eligible green building certification program, such as IFC’s EDGE. Green home loans finance the purchase of houses that adhere to these green building standards.
Aligning with South Africa’s Climate Goals
This partnership aligns with South Africa’s commitment under the Paris Agreement to reduce greenhouse gas (GHG) emissions by 42 percent by 2025, with green buildings playing a crucial role in achieving these targets. Since 2020, IFC has invested and directly mobilized $1.5 billion in green and sustainable investments in South Africa through its financial institution partners, focusing on renewable energy and green buildings.
Conclusion
The IFC-FirstRand partnership represents a significant step towards promoting sustainable housing finance in South Africa, fostering economic growth, and advancing climate resilience. This initiative sets a benchmark for other financial institutions to adopt green finance standards, contributing to a more sustainable and resilient future for the housing sector in South Africa.