COVID-19: How the pandemic has highlighted the need for sustainable finance

Standard Bank, one of Africa's leading financial institutions, is making strides in addressing the challenges posed by climate change through its commitment to sustainable finance. In a recent interview with CNBC Africa, Nigel Beck, the bank's representative, highlighted the importance of environmental, social, and governance (ESG) principles in shaping the bank's approach to financing projects. With a reported exposure of 67 billion rent in loans and commitments to coal, oil, and gas, Standard Bank recognizes the need to mitigate the negative impact of carbon-intensive projects while also capitalizing on opportunities for sustainable growth. Beck emphasized the bank's focus on evaluating the social, environmental, and economic impact of each transaction, ensuring that both risks and opportunities are carefully considered. Standard Bank sees climate change as a significant global risk and is actively exploring ways to manage transitional and physical risks associated with environmental challenges. By incorporating ESG criteria into its lending practices, the bank aims to promote sustainable development and drive innovation in green finance. While Standard Bank's lending to the fossil fuels industry currently stands at 4% of its portfolio, with renewables accounting for only 0.8%, Beck explained that the energy mix in Africa necessitates a balanced approach. Acknowledging the importance of energy in economic growth, the bank is committed to a 'just transition' towards a low-carbon economy. As technology advances and costs decline, Standard Bank anticipates an increased focus on financing renewable energy projects in the future. When asked about the pricing of financing based on environmental risks, Beck clarified that the bank does not intend to impose a premium on projects deemed environmentally risky. Instead, Standard Bank offers incentives through sustainable finance products, such as sustainability-linked loans and green bonds, which provide pricing benefits for clients meeting ESG criteria. By aligning financial incentives with sustainability goals, the bank seeks to encourage positive performance and environmental responsibility among its partners. In conclusion, Standard Bank's commitment to sustainable finance underscores its proactive stance on climate change and ESG considerations. By integrating environmental concerns into its business strategy and offering innovative financial products, the bank aims to foster a more sustainable future for Africa's economies. As the global focus on ESG principles continues to grow, Standard Bank's approach serves as a model for responsible and forward-thinking financial institutions.