The built environment is one of the largest emitters of greenhouse gases. Depending on the source you consult, up to 40% of the world’s GHG emissions come from buildings, which makes a transition to an energy efficient and sustainable built environment a significant priority in global efforts to combat climate change and achieve net zero emissions targets by 2050.
In the South African context, this environmental sustainability prerogative to transform the built environment is overlaid by a further social imperative to deliver large numbers of affordable, quality, housing opportunities to addresses the massive, and still growing, housing backlog across the country.
As a bank with an established track record of green building leadership, Nedbank currently has exposure of approximately R25 billion to green-certified properties or buildings with sustainable features. It also partners with a number of property developers in the affordable housing space, to deliver energy- and water-efficient, EDGE-accredited* homes to first-time buyers who desire a greener living experience.
Addressing the housing shortage
According to Genevieve Naidoo, Property Finance Divisional Executive at Nedbank CIB, these and many other investments into green buildings have the dual impact of giving effect to Nedbank’s purpose to use its financial expertise to do good within the built environment sector, while also helping to address the housing shortage. “Nedbank has a long history of funding green and sustainable buildings that improve the quality of life for their occupants, while at the same time reducing carbon emissions and other negative impacts on the environment,” Naidoo explains. “In recent years, we have focused on building our green building leadership position as one of the ways we can make a meaningful contribution to the achievement of the United Nation’s Sustainable Development Goals.”
At the end of 2021, Nedbank cemented this commitment, and its standing as a leading funder of sustainable buildings, when Nedbank Commercial and Investment Banking (CIB) structured and arranged a R1,09bn green residential development bond and listed it on the Sustainability Segment of the JSE, which serves as a platform for raising capital for green, social and sustainable investment projects.
This innovative instrument is a first of its kind from a commercial bank in Africa, and was the result of a collaborative effort with the IFC to develop a blended-finance solution that would enable the scaling up of green building financing, particularly in the residential sector. A unique feature of the bond was the training element. “We identified that, in order to accelerate our green journey, we need to demonstrate the highest levels of excellence in our field,” Naidoo says. “So we negotiated EDGE-expert training through the IFC for both staff and clients.
Green building finance is critical to the successful decarbonisation of South Africa’s built environment, Naidoo says, and this green residential bond delivers on our responsibility in this regard by providing Nedbank clients who are developers and investors in the affordable-housing segment with a compelling funding solution for green-accredited homes in residential developments aimed mainly at low- to middle-income earners.
Naidoo’s sentiments are echoed by Arvana Singh, Head of Sustainable Finance Solutions at Nedbank CIB, who points out that the green residential bond builds on Nedbank CIB’s established reputation as a sought-after funding partner for sustainability-linked funding in a broad cross-section of economic sectors across Africa, notably mining and resources.
Just some of the sustainability-focused deals that Nedbank CIB has been instrumental in concluding in recent months include: structuring an US$80m multicurrency revolving credit facility for Gem Diamonds and Letšeng Diamonds; arranging a R6bn rand guarantee facility for Implats; acting as global coordinator and sustainability facilitator for R10bn rand in debt financing for Harmony Gold; and arranging a US$165m sustainability linked facility in favour of Trafigura, one of the world’s largest independent oil and metal traders.
“The green residential development bond is a prime example of how the capital markets can, and should, be leveraged as a vehicle for impactful sustainable finance,” Singh says. “Not only to move sustainable development forward in all economic sectors, but also to attract investment inflows to the continent, which can help to fuel its economic growth going forward.”