The Covid-19 pandemic has heightened the focus on climate change and financial instruments that promote sustainable economic development.
The pandemic has impeded Namibia’s growth and demanded new approaches to economic development. It has also highlighted the importance of sustainability and environmental, social and corporate governance (ESG) issues.
It is noted that pressure is building on financial institutions and non-banking financial institutions, asset managers and corporates to give more attention to environmental, social and governance (ESG) issues in their day-to-day operations.
We believe that Namibia is primed for a sustainable finance boom, given its potential in the renewable energy space and its ongoing developmental challenges. The fastest and most cost-effective way to address energy supply is through renewable power projects. Further, advances in battery storage technologies, coupled with cost declines, mean renewables are becoming increasingly attractive and viable.
Sustainable finance could help drive Namibia’s recovery from Covid-19 while also incentivising much-needed investments in the green economy and social development.
Partly owing to the impact of Covid-19, we are already seeing a surge in interest in financial products that promote a more sustainable economy. For instance, the pandemic is boosting demand for bonds that fund social projects and this trend is expected to continue. Social bonds, which are used to finance projects focused on delivering positive social outcomes, have come to the fore during the pandemic as investors and corporates seek to make an impact, while also generating attractive returns.
We expect to see a wave of decentralised green energy projects as corporates and municipalities look to secure reliable and affordable supplies while furthering their ESG agendas.
The expansion of the sustainable finance market’s growth is being supported by the establishment of ESG-linked funds, sustainable indices and by an evolving regulatory environment. The sustainable finance market is also being driven by investors who are increasingly gravitating towards ESG-linked assets, partly on the premise that they outperform over the long term.
Standard Bank has recognised that sustainability-linked loans present a growing business opportunity for both the bank and its corporate clients. These instruments incentivise sustainable and responsible corporate behaviour by linking the cost of funding to the achievement of certain predetermined ESG targets.
We seek to partner in funding deals that unlock green projects and that enable social projects that reduce inequality.
*Marco Triebner is Head of Investment Banking at Standard Bank