The Absa Group has signed an extended agreement with the Multilateral Investment Guarantee Agency (MIGA), an organisation belonging to the World Bank Group, aimed at increasing the financing capacity for climate projects in Africa. As reported by Engineering News, this agreement, which raises capital guarantees to 63.2 billion meticals (one billion dollars), will benefit Mozambique and other African countries, allowing Absa to offer additional financing to its subsidiaries and support the transition to sustainable growth in the region.
“The new agreement strengthens our partnership with MIGA and advances our goal of financing climate projects across Africa, promoting economic activity and sustainability,” said Deon Raju, Absa Group’s chief financial officer.
In 2019, MIGA issued capital guarantees totalling 31.4 billion meticals (497 million dollars) to Absa for risk management in countries such as Ghana, Kenya, Mauritius, Mozambique, Seychelles, Uganda and Zambia. These guarantees allowed the organisation to provide additional funding to its subsidiaries, supporting economic growth and lending in these markets.
The new agreement, signed on 24 June, expands the initial transactions, increasing the additional coverage of cash reserves to around 63.2 billion meticals (one billion dollars). “The additional guarantees should reduce about 16.9 billion meticals (4.9 billion rand) in risk-weighted assets for the Absa Group. This reduction reflects lower risk, improving the bank’s risk profile and allowing it to obtain additional capital resources,” the official statement said.
According to the document, Absa plans to use the additional capacity generated by the agreement to finance climate projects during the term of the guarantees. The institution is committed to increasing financing for those projects in the markets covered by the agreements, both original and expanded.
“The expanded partnership between MIGA and Absa will facilitate greater investment in climate projects across Africa, demonstrating our commitment to sustainable economic growth in the region, even in times of global crises,” emphasised Hiroshi Matano, executive vice-president of MIGA.
Absa has also pledged not to finance new coal projects with terms of more than three years in the markets covered and to completely eliminate its exposure to coal by 2030. “These commitments are in line with our strategy of being an active force for good, supporting a just transition in Africa and reducing fossil fuel financing,” concludes the note.
