Absa Group Ltd, one of the largest diversified financial service providers in Africa, has concluded further agreements with the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group, freeing up additional financial capacity for investments in Pan-African climate finance projects.
In 2019, MIGA issued capital guarantees of US$497 million to Absa in support of managing certain risks in countries including Ghana, Kenya, Mauritius, Mozambique, Seychelles, Uganda and Zambia. Absa was the first African banking group to enter into this type of guarantee transaction with MIGA. The guarantees help Absa to provide additional financing to its subsidiaries in the participating markets, supporting lending and growth.
Absa and MIGA signed an agreement on 24 June 2024 to expand on the initial transactions, increasing additional cash-reserves cover to approximately US$1 billion in the participating markets.
“The expanded agreement builds on a market-leading transaction between Absa and MIGA. It strengthens our partnership and advances our common goal of financing climate projects across Africa that enhance economic activity as well as sustainability,” said Deon Raju, Absa Group Finance Director.
“MIGA is excited to expand our partnership with Absa to facilitate greater investment in climate projects across Africa,” said Hiroshi Matano, MIGA Executive Vice President. “The agreement underscores our commitment to supporting sustainable economic growth in the region during these turbulent global crises.”
As part of the agreement, Absa committed to increasing climate finance business growth in the markets covered in the (original and expanded) agreements. In addition, Absa agreed to not fund any additional coal projects with a tenor of three years or more in the participating markets and to reduce coal exposure in these markets to zero by 2030.
The commitments are aligned to Absa’s strategic priority of being an active force for good in everything we do, which supports a Just Transition in Africa and commits the Group to reducing fossil fuel financing.
The additional guarantees are expected to result in an incremental reduction of approximately R11.5 billion in risk-weighted assets for Absa Group. A reduction in risk weighted assets reflects lower risk, which improves the Group’s risk profile and is equivalent to securing additional capital resources.
Absa’s intention is to deploy the additional risk-weighted asset capacity generated through the agreement for climate finance over the duration of the guarantees.