A Partnership Approach To ESG

Environmental, social, and governance (ESG) considerations are embedded in our processes at Absa Corporate and Investment Banking. When we partner with our clients, we look at ESG from the twin perspectives of risk and opportunity, ensuring we manage the very real risks faced by the businesses we finance, while also identifying opportunities to finance positive change.

ESG issues are complex, and – due to their nature, and the highly competitive corporate and investment banking space in which we operate – we find that our industry typically falls to the lowest common denominator. Any rules or requirements must be applied by all banks simultaneously, because if one bank is stricter than the others, their clients will simply go elsewhere to get their financing. From a large project finance perspective, that “common denominator” is the Equator Principles, to which all major South African banks are signatories.

Banks currently play three distinct roles when it comes to ESG. One is applying certain checks and balances to the deals we do. Another is our use of sustainability-linked loans, where clients make certain commitments that are linked to their loan agreements to keep them accountable. The third role is around monitoring geopolitical policy shifts – including, for example, the European Union’s Carbon Border Adjustment Mechanism (CBAM), which imposes a carbon cost on imported carbon-intensive goods – and their application in the jurisdictions in which we operate. All of this means walking a long journey with our clients.

Absa has baked ESG into our internal processes, and into our Sustainable Financing models. But whether a particular business’s challenge is around environmental impact, social considerations or corporate governance regulations, the more we know about it, the better we’ll know your business. And then we can walk the journey with you. Our approach has always been to do this early in the process, and to refresh it every year. We don’t want to be applying ESG parameters at the end of the deal.

As this space matures, our next focus area will be small and medium-sized enterprises (SMEs). Big corporates, in general, are on board with ESG requirements, and many have internal processes of their own in this regard. But we need to bring SMEs along on the journey too, and many cannot afford to be fully compliant. That’s what we’re grappling with, as we look to the future: how do we scale the interest in ESG?

Banking, at its core, is about relationships. In any relationship, you need to have conversations – and how you have those conversations is very important.

Our experience in the Sustainable Finance space has taught us that matters of sustainability and ESG are deeply nuanced, and require dialogue, understanding and partnership. An example here is in the mining industry. In some cases, the government has failed in its service delivery to South Africa’s mining communities. The community, who see wealth being generated by the mines, will then turn to the mining company to deliver those services. The mining company will want to support to the community, but it can only give so much – and it cannot take on all the roles of the state. In this case, dialogue is needed to find a way for the business and the community to move forward, so that the mine is still viable and operational and the community still feels like it is being looked after. That’s only possible through dialogue.

* Absa has been named Africa’s Best Bank for ESG 2025 and South Africa’s Best Bank for ESG 2025 by Euromoney.