British International Investment has partnered with FirstRand to launch the facility, which aims to accelerate transition finance projects across Africa to respond to the challenges of climate change.
British International Investment (BII), the UK’s development finance institution, has made its first transition finance investment in partnership with African financial institution FirstRand.
The $150m (€129m) investment, which takes the form of a senior unsecured term loan, will be channelled towards a financing facility that will help to accelerate transition finance projects across Africa in high-emitting sectors.
The aim of the facility is to direct capital towards industries that are economically essential yet hard to abate, helping them to decarbonise while safeguarding jobs and economic growth.
BII said it will provide both capital and technical assistance to establish FirstRand’s transition finance framework (TFF) and practices.
Responding to questions from Impact Investor, Ndaba Mpofu, managing director and head of financial services debt and trade finance, at BII, described the TFF as a set of principles, criteria, and governance structures that guide how capital is allocated to support high-emitting sectors in decarbonising their operations in line with the goals of the Paris Agreement.
“It is centred around how to achieve climate action in sectors where full decarbonisation solutions are not yet viable and the eligibility criteria ensures that investment funds drive material emissions reductions,” he said.
Mpofu explained FirstRand will also use the $150m facility as a dedicated lending line to finance transition projects that meet the TFF criteria through its corporate and commercial banking arms, RMB and FNB.
“Loans will be structured as either transition loans -ringfenced for decarbonisation, or as transition linked loans, [which are] KPI-linked to Paris aligned emissions reduction targets.”
Technical assistance
Mpofu said that as relatively new areas of sustainable finance, transition finance and transition planning will require considerable “technical capacity on climate action within the bank and within the portfolio companies” to ensure “credible and significant greenhouse gas reduction”.
“The technical assistance will support FirstRand’s clients in developing robust transition plans which meet the TFF requirements. Technical assistance will also include support to FirstRand for pipeline development as well as market-building activities to raise awareness of transition finance, given this is such a young area of sustainable finance globally and across the continent,” he added.
Transition finance, a novel asset class
BII said that the collaboration with FirstRand also aims to raise market awareness of transition finance as a viable and scalable solution for climate resilience and to establish it as a novel asset class across Africa.
“We know that a huge amount of capital is required to transition to net zero and inclusive economies and that this cannot be achieved by investing in climate solutions, i.e. [into] sectors or businesses that are already at or close to net zero emissions, alone. With the Climate Policy Initiative estimating that approximately $2.8trn will be required between 2020 and 2030 to meet Africa’s climate prevention targets, financing the transition is crucial,” said Mpofu, explaining that transition finance is designed to support sectors where fully ‘green’ alternatives are not yet technically or commercially viable, enabling companies to embark on credible decarbonisation pathways.
“As a novel asset class, transition finance is defined by principle-based eligibility, Paris alignment, social safeguards, and rigorous impact monitoring. It offers investors transparency, accountability, and measurable climate impact, helping mobilise private capital for the continent’s energy transition,” he added.
