Conventionally, investors around the world are primarily motivated by investment returns and have little interest in how those returns were generated. In recent times, however, there has been a seismic shift in this attitude – with organisations and individuals increasingly recognising the interdependencies between social, environmental and economic issues. Organisations continue to incorporate ESG principles in their investment strategies; and across the African continent, the Standard Bank Group has been at the forefront of the responsible investing agenda.
The Bank’s commitment to ESG finds expression in its climate policy, which among many other things articulates the approach to gas as a transition-fuel in Africa. Standard Bank believes that a crucial component of balancing economic development and social uplift with a reduction in greenhouse gas emissions lies in developing Africa’s natural gas resources. To reduce greenhouse gas emissions, energy sources with higher emissions, such as wood and coal, will need to be replaced with lower-carbon fuels – such as liquefied petroleum gas for cooking and natural gas for base-load generation.
In Ghana, for example, Standard Bank South Africa and Stanbic Ghana acted as the debt arranger and coordinating bank for a syndicated loan for Genser Energy Ghana Limited to support the construction of a natural gas pipeline and processing facilities. The impact from this project will be far-reaching. The funding will be used to refinance Genser’s existing debt and support the next phase of its expansion, enabling construction of a 105km natural gas pipeline to Ghana’s second-largest city, Kumasi; a gas-conditioning plant in Prestea; and a natural gas liquid (NGL) storage terminal at Takoradi Port.
The transaction will not only support Genser’s energy transition strategy but also contribute to Ghana’s national climate change targets. Furthermore, the availability of cheaper and readily accessible piped natural gas will assist Genser’s customers to transition from imported, trucked diesel and heavy fuel oil (HFO) to local natural gas alternatives, thereby reducing emissions.
This comparatively cheaper and cleaner energy source will also support Ghana’s bid to relocate power plants from coastal regions to reduce line losses and improve the national grid’s energy efficiency. Furthermore, it has potential to position the country as a significant producer and exporter of NGLs.
The Head, Energy and Infrastructure-Stanbic Bank Ghana, Sydney Nii Ayitey Tetteh, put the impact of financing the Genser project in perspective. In his words: “We are committed to partnering with businesses and other relevant stakeholders to find the right energy solutions to improve and drive Africa’s growth. This transaction enables Genser to take gas from the upstream that would otherwise be flared and direct it back into the Ghanaian economy. The processed gas and associated hydrocarbons will be used as fuel for providing power to homes and displace kerosene, other more carbon-emitting fuels as energy sources, and provide natural gas and liquids for the industrial sector. This is imperative for Ghana’s energy transition and climate change goals”.
Standard Bank and its subsidiaries across the African continent have indicated strongly, through the financing of this project and many others, their commitment to finance gas responsibly over the medium- to long-term as a transition-fuel for use in domestic and regional markets, as well as a means of facilitating natural gas for export. The bank is committed to developing a transition finance product framework that will support the use of gas in its specific role as a transition-fuel in Africa. The culmination of this ESG agenda will be reducing emissions intensity while managing gas exposure on the African continent.