Estimated reading time: 2 minutes

Absa Group Ltd, a leading diversified financial services provider in Africa, has reached new agreements with the Multilateral Investment Guarantee Agency (MIGA), part of the World Bank Group. These agreements aim to release more financial capacity for investments in Pan-African climate finance projects.

In 2019, MIGA provided capital guarantees of $497 million to Absa to aid in managing risks in several countries, including Ghana, Kenya, Mauritius, Mozambique, Seychelles, Uganda, and Zambia. This made Absa the first African banking group to engage in such a guarantee arrangement with MIGA.

The guarantees assist Absa in offering additional finance to its subsidiaries in these markets, thereby enhancing lending and growth opportunities.

A further agreement was signed by Absa and MIGA on 24 June 2024 to augment the original transactions, increasing the cash-reserves cover to approximately $1 billion in the involved markets.

Deon Raju, Absa Group Finance Director said, “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.”

“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.”

Under the new agreement, Absa has committed to increasing its climate finance business growth in the markets specified in the original and expanded agreements. Additionally, Absa has resolved to cease funding new coal projects with a duration of three years or more in these markets and to eliminate coal exposure there by 2030.

These commitments support Absa’s strategic aim to be a proactive force for good in all its endeavours, which aids a Just Transition in Africa and includes a pledge by the Group to cut down on fossil fuel financing.

The additional guarantees are anticipated to bring about a significant reduction in risk-weighted assets for Absa Group by around R11.5 billion. Lowering risk-weighted assets decreases risk, thereby enhancing the Group’s risk profile and equating to securing extra capital resources.

Absa plans to utilise the additional risk-weighted asset capacity produced by this agreement for climate finance throughout the duration of the guarantees.