A conversation on financing sustainable projects in Africa

ALN Academy Talks| Financing sustainable projects in Africa. In this episode, Sonal Sejpal Partner, ALN Kenya and Head of Banking and finance sat down with Oliver Phillips, Associate Director of Sustainable Finance at Standard Chartered Bank to discuss sustainability with a key focus on financing sustainable projects in Africa.

In order to fully understand the concept, it is first important to understand what the term ‘sustainable finance’ means and the scope and objectives that are incorporated with it. According to the European Union (EU), sustainable finance refers to the process of taking environmental, social and governance (ESG) considerations into account when making investment decisions in the financial sector, leading to more long-term investments in sustainable economic activities and projects. In Standard Chartered Bank, this objective involves delivering a net zero state from the bank financing by the year 2050 with alignment to its particular ambitions. This means that the lending book is aligned to achieving net zero with the aim of reducing emissions and promoting a green economy. This can only be achieved by maintaining a complete top-down view of all aspects of any business so as to help manage regulatory and compliance risks while also helping clients adhere to ethical and environmental standards. 

Sustainable finance and ESG cuts across various banking aspects such as trade finance and derivatives, market issuance, project financing and credit facilities for clients and other market trends. Standard Chartered provides an advisory function to the clients at the onset to strategize plans to narrow their criteria for ESG.  In Africa, there is a particular focus on having a ‘just-transition.’ The continent has made significant strides in coming up with strategies aimed at fulfilling the Paris Agreement. However, if this is not done in a responsible and just manner if the climate challenge or climate catastrophe is not dealt with effectively, there is a risk of leaving many people behind and ending up in a world with far more problems.

Financial growth is required to bridge the financial gap that Africa is currently experiencing. Only 10% of the SDGs are funded in Africa, compared to 90% in Europe, underlining the vast imbalance that must be bridged. There is an opportunity for investors to route these funds where they are most needed, such as in Africa, where responsible financing is critical to the continent's overall growth.

Any move to commercialize natural resources must begin with their protection, as there are vital African natural aspects that are often disregarded. Natural forest basins such as the Amazon receive a lot of attention, but the Congo Basin is often overlooked, despite being a massive carbon sink. Monetizing carbon and natural capital more widely have the potential to be extremely beneficial for African governments, corporations, and banks, since it provides a fresh source of debt repayment, particularly at a time when the global economy is in upheaval. Markets in Africa are developing new revenue sources to pay their debt and attract new investors, which increasingly include ESG initiatives. Despite the pitfalls and the challenges in achieving this, there is great potential for monetization of natural resources for the continent. 

Interviewee: Oliver Phillips, Associate Director, Sustainable Finance-Standard Chartered
Interviewer: Sonal Sejpal, Partner and Head of Banking and Finance, ALN Kenya

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