The green financing market is gaining traction in South Africa, says law firm ENSafrica natural resources and environment senior associate Mihlali Sitefane.
Green financing promotes the funding of projects that contribute to sustainable development by requiring the integration of social, economic and environmental factors in the planning and implementation of projects, she explains.
Amid the mining industry's unique environmental and social impacts, and the increasing effects of climate change, financial institutions have reviewed their role in facilitating sustainable development as well as re-evaluated criteria for investment decisions.
Consequently, environmental, social and corporate governance initiatives are increasing, driven by certain lenders integrating and implementing requirements pertaining to the long-term environmental prospects of the projects that they finance. These lenders include commercial institution the Bank of China, State-owned finance institution Further, Sitefane cites the DBSA's announcement of the launch of its first green bond in February, and Standard Bank becoming the first bank in South Africa to publish a policy on the funding of thermal coal mining as prime examples of efforts undertaken by financial institutions to facilitate sustainable development.
Given these developments, the mining projects best placed to receive green financing are those that are, besides other aspects, environmentally sustainable; therefore, mining companies may have to voluntarily adopt principles, such as the International Council on Mining and Metals' mining principles, to attract investment.
"Green financing in the mining industry in South Africa is relatively new. However, increasing numbers of companies and investors are becoming aware of the importance of environmental conservation and the need to reduce carbon emissions and carbon footprints in general. Undoubtedly, the availability of green bonds and other green financing instruments will increase in the near future."
ENSafrica natural resources and environment associate Zinzi Lawrence adds that a global call for a transition to a low-carbon economy may require significant resources and, consequently, such investment may not be readily available to midtier and junior miners.
Sitefane agrees, noting that, as companies must go above and beyond legislative requirements to adopt internationally accepted best practice, junior and small-scale miners, which are characterised by undercapitalisation, may be left behind.
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Originally published in Creamer's Media - Global Mining News In Real Time
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