Climate fund backs continent’s first green bank in South Africa

The Coalition for Green Capital has lauded the approval of a first-of-its-kind-loan from the Green Climate Fund (GCF) to the Development Bank of Southern Africa (DBSA) for the creation of a new Green Bank.

The DBSA Green Bank, called the Climate Finance Facility (CFF), can now launch operations, having secured a loan and operating grant from the GCF. The CFF is modeled on Green Banks created in other countries, but marks the first Green Bank in Africa.

When launched, the CFF is likely to be the first application of the Green Bank concept in a developing nation. This also marks the first time the GCF has funded a Green Bank anywhere in the world.

When operational, the CFF will use its own capital to catalyze multiples of private investment into a range of climate-related markets.

With support from Convergence Finance and ClimateWorks, CGC worked with the DBSA and South Africa-based partners Green Cape to help design the CFF, secure capitalization, and craft the GCF funding application. 

CGC CEO Reed Hundt said, “We at CGC wish DBSA the best of luck in this new enterprise. The world is eager to see the CFF catalyze private clean energy investment in Southern Africa, as green banks have done in other markets. The battle against climate change very much needs reinforcements. CGC is also enormously grateful to Convergence Finance and the Climate Works Foundation for their generous support of this project.”

Andrea Colnes, director of CGC’s international program said, “We are thrilled to see this successful partnership with DBSA  generate this vital and precedent-setting funding from the GCF. We think there’s a clear path for other countries to secure funding and form Green Banks, and interest has already begun to emerge in several developing nations.”

The GCF’s decision is important because it is one of only a handful of projects where GCF funds will flow directly to a local public finance institution.

The DBSA, a “direct access” accredited entity under the GCF, will use these funds to launch the CFF as a dedicated Green Bank program within the local financial ecosystem and tied to local priorities.

The GCF is providing concessional debt capital to the CFF, which will enable the CFF to catalyze additional private investment from local commercial banks and asset managers.

Following the Green Bank model, the CFF will focus its investments to “crowd in” private investment at the project level in green sectors where projects currently struggle to access affordable financing at commercial terms.

In this way, the CFF will offer globally significant proof-of-concept value to middle- and lower-income nations seeking to create local institutions that address market barriers and scale up the high levels of private investment required by Paris climate commitments.

The DBSA has been in close discussions with the Green Bank Network (GBN) — an organization formed to foster collaboration and knowledge exchange among Green Banks —about GBN membership, and the CFF hopes to soon to join the GBN.

DBSA has been invited to speak at the GBN’s flagship event, the Green Bank Congress, on November 29, 2018. CGC serves as the co-secretariat for the GBN.

CGC is a leading expert, advisor and implementer of Green Banks, dedicated clean energy finance institutions that blend multiple sources of capital to catalyze grater investment in GHG reducing technology.

CGC has created multiple Green Bank and related entities, which have driven over $2 billion of investment.

CGC has led Green Bank formation and investment efforts in the US for a decade, and is eager to expand its international activities based on its work in South Africa.

DBSA environment and climate change portfolio for the financial year 2014/2015 was worth approximately US$ 530 million and included renewable energy, energy efficiency, biodiversity and sustainable land management projects..