Standard Bank’s Fihla gives update on R55bn green finance pledge

Standard Bank, Africa's largest lender, has exceeded its initial green financing target by a year, announcing that it has funded R55 billion worth of renewable energy projects earlier than expected. The bank is committed to achieving net zero carbon emissions from its portfolio of financed emissions by 2050. To provide an update on the progress made in funded projects and discuss developments in its climate strategy, CNBC Africa recently interviewed Kenny Fihla, Chief Executive of Standard Bank CIB. Fihla shed light on the current status of renewable energy projects in sub-Saharan Africa and the challenges faced in connecting these projects to the grid. Fihla explained that while many projects awarded in bid rounds one and two are already connected to the grid, there are transmission network constraints hindering connectivity in regions like the Northern Cape, ideal for solar projects. Limited capacity in transmission lines is delaying the connection of projects to the grid, impacting the pace of renewable energy development. Fihla estimated that projects currently under construction may take between 18 to 24 months to be adequately connected to the grid, significantly contributing to the energy supply. However, he emphasized the need to support power utility ESCOM in expanding the transmission network to facilitate the connection of renewable projects in areas lacking adequate infrastructure. When questioned about risk management in financing these projects, Fihla highlighted the rigorous due diligence conducted by Standard Bank. The bank evaluates various financial scenarios, including potential revenue shortfalls and declining demand, to ensure project viability. Fihla emphasized the importance of structuring lending to mitigate risks and assess the adequacy of returns. He expressed confidence in the digestibility of risks, short tenure of projects, and the quality of project sponsors in managing potential defaults. Moreover, Fihla addressed the role of Standard Bank in supporting small and medium-sized enterprises (SMEs) in accessing renewable energy funding. While government-led initiatives may take time to materialize, Standard Bank has initiatives to cater to different client segments, including SMMEs. Fihla noted the slow loan growth in the SMME space but highlighted the significance of partnering with aggregators to provide electricity to multiple clients. By collaborating with aggregators, Standard Bank aims to unlock energy supply to SMMEs and enhance power security from the grid. In conclusion, Standard Bank's commitment to green finance and renewable energy projects showcases its proactive stance towards sustainability and climate action. By exceeding its green financing target and actively supporting renewable energy initiatives, the bank is contributing to the transition towards a cleaner and more sustainable energy landscape in Africa.