World Bank's investment arm The International Finance Corporation (IFC) and two investment funds managed by IFC Asset Management Company have picked a 4.99 percent stake in Federal Bank (FBL) for Rs 916 crore ($126 million).
The equity investment is expected to help Federal Bank strengthen its ESG portfolio, with increased green portfolio financing for projects including energy efficiency, renewable energy, climate smart agriculture, green buildings, and waste management, IFC said in a statement on July 29.
The investment also marks IFC’s first in India aligned to the Greening Equity Approach, which will enable FBL—an IFC partner for over a decade—to reduce its exposure to coal and increase its climate lending, it added.
IFC will also consult with the bank on developing a new Environmental and Social Management System (ESMS) that will be applied to its entire portfolio. To further strengthen FBL’s environmental and social sustainability (E&S) capacity, IFC will also implement an E&S technical advisory program.
“This move is in line with IFC’s strategy to support green growth by spurring investments to build back better and greener, seizing the opportunities to help India meet its climate goals and build a greener, resilient future,” said Roshika Singh, Acting Country Manager for IFC in India in a statement. “The investment is also expected to create tens of thousands of jobs, with micro, small and medium-sized enterprises gaining access to much-needed financing, which will also help ensure an inclusive recovery,” she added.
The investment is part of IFC’s initiative to support FBL’s commitment to environmental, social and governance (ESG) standards while strengthening its Tier 1 capital adequacy ratio (CAR) and expanding its micro, small and medium-sized enterprises (MSME) and climate finance portfolios – key for growth opportunities as the country recovers from the pandemic.
The asset management company also said that the initiative is in line with the World Bank Group (WBG) Climate Change Action Plan and is working to align investments with the goals of the Paris Agreement, intensifying support to help clients decarbonize, and deploying standards and tools to catalyze private sector financing for the climate.
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