Frontiers | Financing green buildings in South Africa: the role of financial institutions and green finance incentives

Financing green buildings in South Africa: the role of financial institutions and green finance incentives

• Lindokuhle Mbokane ¹

• Marloes Reinink ²

• Khululekani Ntakana ³

• Lee-Ann Modley ^1*

• 1. Department of Geography, Environmental Management and Energy Studies, University of Johannesburg, Johannesburg, South Africa

• 2. Solid Green Consulting, Johannesburg, South Africa

• 3. Department of Construction Management and Quantity Surveying, University of Johannesburg, Johannesburg, South Africa

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Abstract

The negative environmental impacts of the construction sector are an intensifying concern. Green buildings are one of the initiatives proposed to alleviate these impacts. However, the lack of green financing is a pressing issue that hinders the implementation of such practical initiatives. Despite the growing academic attention to green finance and green buildings, there are few studies on the nexus among these areas and financial institutions. This study investigated the role of financial institutions in funding green buildings, particularly in South Africa. It documented available green funding opportunities, green finance incentives, the criteria used to issue them, and the developments achieved in issuing them. Using document analysis and interviews, this study reviewed 158 documents from actively participating financial institutions (FirstRand, Nedbank, Standard Bank, Absa, and Investec) and conducted four thorough semi-structured interviews with sustainable finance consultants. The results revealed that directly involved financial institutions are driving the green finance market by offering green bonds and green loans accessible to those who hold an Excellence in Design for Greater Efficiencies certificate, which is a symbol of sustainable construction practices. However, there is a glaring need for green insurance. Furthermore, there is a noticeable imbalance in funding for the green building and energy sector. Only FirstRand and Nedbank have made noticeable advancements in funding green buildings, and these buildings have provided illustrative evidence of environmental dividends. Overall, these findings indicate that financial institutions directly engaged in mobilizing green finance tend to prioritize the energy sector over green buildings. This focus is largely influenced by South Africa’s ongoing energy crisis and its commitment to a Just Energy Transition, which helps explain the comparatively slower uptake of green building initiatives in the country. It is recommended that policymakers increase capital for green buildings, enhance the availability of green finance instruments, including green insurance, and ensure the affordability of green certificates to increase the rate of green building adoption.

1 Introduction

The construction sector is one of the sectors that poses a threat to the environment, and its detrimental effects are a growing concern. In a global context, it consumes approximately 30–50% of raw materials, making it the largest consumer of natural resources (Foster, 2020; Vasilca et al., 2021). Furthermore, it is attributed to 36% energy consumption, 16% of fresh groundwater use, and 15% of harvested wood (Nkini et al., 2023). In 2017, it was estimated to emit about 39% greenhouse gases, which increased to 40% in 2023 (Agbajor and Mewomo, 2024). As a result, this excessive consumption prompted a need to shift from conventional to sustainable construction. One practical implementation strategy for the sustainable construction concept is the construction of green buildings (Mahmood et al., 2024). However, funding constraints hinder their adoption.

Green buildings are structures whose construction prioritizes site orientation to access the sun and specific wind patterns for natural cooling and heating, and whose selection of building materials emphasizes recycled materials (Ragheb et al., 2016). The construction phase of a green building involves strategic use of natural resources such as energy and water, while recycled building components are used throughout its life cycle. Its core principles align with sustainability because they are designed to consume minimal natural resources, thereby alleviating pressure on the environment and improving human health. Consequently, minimized resource consumption culminates in lower carbon and water footprints and promotes sustainable development (Wuni et al., 2019).

In addition to the pivotal role green buildings play in driving sustainability, there is a nexus between them and the United Nations Sustainable Development Goals (UN SDGs). Given that energy efficiency is pertinent to the design of green buildings, this aligns with SDG 7: Affordable and clean energy, target 7.3, which aims to increase the global rate of improvement in energy efficiency by 2030 (Karimi et al., 2023). Furthermore, the ability of green buildings to be water efficient can assist in achieving SDG 6: Clean water and sanitation, specifically target 6.4 which states that “By 2030, substantially increase water-use efficiency across all sectors and ensure sustainable withdrawals and supply of freshwater to address water scarcity and substantially reduce the number of people suffering from water scarcity” (Wen et al., 2020). Moreover, green buildings are associated with improved air quality, which enhances occupants’ health and contributes to SDG 3, focusing on people’s health and wellbeing (Geith and Goubran, 2024).

Despite the theoretical benefits of green buildings, financial investment is essential to their implementation. Green finance, defined as financial instruments designed and deployed in environmentally friendly projects, distinguishes itself as a mechanism for implementing the green building concept (Fu et al., 2023). It consists of green loans, green bonds, and fiscal investments, inter alia. These financial instruments streamline the adoption of green buildings by providing tax breaks, risk mitigation, cost reductions, and subsidies. Financial institutions are regarded as essential facilitators of green building adoption, as they provide and administer the necessary green finance instruments (Hafner et al., 2020). Against this overarching context, there is growing interest in the point of convergence among green buildings, green finance, and financial institutions.

While literature on the availability and administering of green finance incentives facilitated by the financial institutions is extensively documented in the United States (Li et al., 2021), China (He et al., 2022), Canada (Rana et al., 2021), and Germany (Bertoldi et al., 2021), there is a paucity of studies focusing on the similar subject matter in Africa, particularly in South Africa. Previous studies in a South African context focus on the theoretical nexus between green finance and other pressing environmental issues/components, such as climate change (Ngwenya and Simatele, 2020; Taghizadeh-Hesary et al., 2022) and renewable energy (Chinyamunzore, 2019; Kaluba, 2019). There is a glaring need for country-specific studies that collectively focus on green finance and green buildings. This study fills this research gap by theoretically and systematically mapping the role financial institutions play in administering green finance incentives in the green building domain. It is essential to acknowledge that the primary focus of this study is to descriptively and structurally map the current state of green finance and the role of proactively participating financial institutions in the financing of green buildings in South Africa. Furthermore, it is structured as a descriptive mapping of current practices, rather than as an evaluation of the sector’s overall effectiveness.

This study contributes to the limited literature on green finance in green buildings, particularly in South Africa, by following the proposition made by Agbajor and Mewomo (2024) that future research can focus on the availability of monetary incentives for green buildings and map them. It brings a distinct academic perspective by documenting key active players in the dissemination of green finance for green buildings. Contrary to Ngwenya and Simatele (2020) and Kaluba (2019), who focused on climate change and renewable energy, and only on green bonds, this study provides a detailed description of the various green finance incentives available in South Africa without overlooking the system employed to deploy them and where they are sourced from. Furthermore, this study draws attention to the relationship between green buildings, green finance, and South African financial institutions, a relationship that prior studies have neglected.

This study offers valuable insights for policymakers, financial institutions, and property developers by systematically mapping green finance opportunities in South Africa and the roles of active players in administering green finance incentives. This research identifies market gaps pertaining to the availability of green finance incentives. The key findings suggest that the private sector makes a substantial contribution to financing green buildings, underscoring the need for the government to foster greater private-sector participation. Furthermore, green finance incentives, such as green loans and green bonds, are available in the proactively participating financial institutions (FirstRand, Nedbank, Absa, Investec, and Standard Bank). However, these financial institutions do not offer green insurance. Considering the physical and economic distinctions between green and conventional buildings, these results highlight a need for a green building-specific insurance that caters for its distinct nature.

The findings highlight the compulsory possession of an Excellence in Design for Greater Efficiencies (EDGE) certificate as one of the key requirements for accessing financing for green building at actively participating financial institutions. Moreover, the environmental dividends from the green buildings funded by FirstRand and Nedbank, which in this study are the financial institutions at the forefront of financing green buildings, highlight the significance of adopting the green building concept. These results can encourage more financial institutions to fund green buildings, yielding environmental benefits and contributing to sustainability. In addition, they provide insights into the dynamics of green finance incentives for green buildings, which can be essential to informing green finance policies and providing a roadmap for prospective green building developers.

South Africa is a developing country experiencing rapid urbanization and rising carbon emissions, which are increasing its vulnerability to climate change (Fasanya and Arek-Bawa, 2025). As a developing country, one of its challenges is promoting economic growth without compromising the natural environment. Furthermore, it is committed to international regulations and initiatives that promote sustainable development, such as the UN SDGs and the Paris Agreement (Nascimento et al., 2022). Such commitments, coupled with rapid urbanization, prompt the availability of financial instruments and policies to mobilize sustainable development. The environmental and financial impediments that a developing country such as South Africa faces make it a transferable case, as the insights from this study can apply to other developing countries with similar economic and environmental dynamics. Furthermore, the actively participating financial institutions in this study have branch networks in other African countries, suggesting that the study’s key findings are likely to apply to them.

This study presents four objectives: first, to investigate green funding opportunities in South Africa with a central focus on their key attributes. Second, to identify green finance incentives issued by the directly engaged South African financial institutions. Third, to evaluate the criteria employed by the proactively participating financial institutions in issuing green finance incentives to the green building sector. Fourth, to map the progress made by financial institutions that are actively funding green buildings.

The subsequent sections in this study are as follows. Section 2 outlines the literature review, focusing on the existing literature, the research gap, and the theoretical underpinning. Section 3 describes the research design, data collection, and analysis. Section 4 presents the results of this study, and Section 5 discusses them comprehensively. Section 6 concludes with policy implications, recommendations, limitations, and future research directions.

2 Literature review

2.1 Green buildings and sustainability

Green finance gained popularity following the establishment of the Global Climate Fund in 2010, created by 194 countries to provide financial assistance to developing countries to mitigate climate change and reduce greenhouse gas emissions (Cui and Huang, 2018; Ji and Zhang, 2019). Its prominence in mitigating environmental issues is emphasized by international practices such as the Paris Agreement and the UN SDGs (Ramiah and Gregoriou, 2015). In the context of the Paris Agreement, green finance involves measures to mobilize and allocate financial support to countries and nations that are obligated to meet their climate change commitments and nationally determined contributions (Nawaz et al., 2021). It combines aspects of traditional finance with emerging technologies to achieve sustainability and support the transition to a low-carbon economy (Migliorelli and Dessertine, 2019). Existing studies posit that green finance aligns with the principles of sustainability because it surges the flow of funding towards green projects, including clean energy, clean transportation, energy efficiency, resource efficiency, decarbonization and green buildings, which are regarded as having a positive impact on the environment and reducing carbon emissions (Duroc and Kaddour, 2012; Ahmad et al., 2022; Rasoulinezhad and Taghizadeh-Hesary, 2022).

Some scholars dispute the associated benefits of green finance and argue that it is offered to convey an impression that the economy considers the environment. The argument is grounded in the idea that the foundation of green finance resembles that of capitalism, which focuses solely on profits (Brand, 2012). Similarly, Luo and Balvers (2017) highlighted that the availability of green finance instruments is driven by the financial returns they generate rather than by demand for these instruments. This is substantiated by Dörry and Schulz (2018) and Dziwok and Jäger (2021), who stated that green finance prioritizes financial returns that are greater than administrative costs and the initial investment required by a company. In essence, these studies posit that green finance is promoted not for its association with sustainability and environmental impact reduction, but for the provision of profitable financial instruments and the attraction of new investment clients.

2.2 Barriers to the implementation of green buildings in emerging markets

The lack of funding for green buildings is one of the most significant challenges to their adoption (Hakkinen and Belloni, 2011; Huo and Yu, 2017). Although certain scholars argue that the costs of green buildings are relatively the same as those of conventional buildings, the technologies used in green buildings are more expensive when compared to traditional buildings, resulting in inflated construction costs (Mulligan et al., 2014; Opoku and Ahmed, 2014; Gupta et al., 2017). Financial institutions are reluctant to fund green projects due to the associated economic risks. When energy-efficient technologies are compared with conventional energy technologies, there is a risk associated with their use because they are relatively new to the market and, therefore, susceptible to malfunction (Kapoor et al., 2020). Moreover, the lack of government incentives demotivates developers from building green buildings, as incentives are essential for offsetting the high construction costs (Kangas et al., 2018). As a result, green finance emerges as a pertinent solution to this impediment.

2.3 The role of green finance incentives

Green finance instruments are pertinent financial vehicles for mobilizing capital towards green building projects. Cost reductions resulting from incentives such as subsidies and tax credits reduce the financial burden of green building projects and are expected to increase project profitability (Liberalesso et al., 2020; Adeleye et al., 2024; Okwandu et al., 2024). Given that green buildings incur higher initial costs, these benefits motivate property developers to build them. While acknowledging the risks associated with green buildings, the issuance of green bonds enhances access to finance. It allows developers to share financial risk with investors, thereby encouraging them to adopt green building concepts (Ibeh et al., 2024). In contrast to conventional loans with market-rate interest rates, green loans are more accommodating because they are associated with lower interest rates and premiums (Alcarva et al., 2026). The inherent benefits of green finance incentives are an important factor in accelerating the adoption of green buildings. Concurrently, understanding their provenance carries greater significance.

2.4 The relationship between the financial sector and green buildings

The financial sector plays a vital role in providing financial instruments to address global environmental issues. It is instrumental in promoting green finance services for projects aligned with environmental protection (Weber and Elalfy, 2019). In the context of green buildings, incentives motivate developers to adopt the green building concept (Dubose et al., 2007). The banking sector offers green finance incentives such as green bonds, green loans, green insurance, green credit, subsidies, and grants, and focuses on project developers, who are the key decision-makers (Diyana and Abidin, 2013; Gou et al., 2013). Project developers encounter challenges in accessing green finance incentives. Some green finance incentives are linked to green building certification, which are reportedly costly for project developers (Okwandu et al., 2024). With some incentives, there is a mismatch between the funds provided and the project’s actual costs, leading to either insufficient funds for project commencement or the wastage of excess funds (Du Can et al., 2014). These studies, highlighting the importance of the banking sector in providing various incentives to construct green buildings, led to the formulation of the research question for this study: What is the role of the South African financial institutions in financing green buildings?

2.5 Research gaps

The concept of green finance is relatively new and has a limited body of literature (Zhang et al., 2019; Debrah et al., 2022). Akomea-Frimpong et al. (2022) assert that green finance in green buildings is under-researched in developing countries. In South Africa, growth in publications on green buildings is slow. Between 2005 and 2012, only three articles on green buildings were published; however, the number increased steadily between 2014 and 2019, averaging 3 publications per year (Akomea-Frimpong et al., 2022). However, in 2022, the number of publications declined from 7 in 2020 to only 2 (Agbajor and Mewomo, 2024). Furthermore, the number of publications on green finance in green buildings in Africa between 2011 and 2021 is only 5, with South Africa, Nigeria, and Kenya as the participating countries (Debrah et al., 2022). Moreover, studies on green finance have focused primarily on other environmental issues; in particular, Ngwenya and Simatele (2020) and Taghizadeh-Hesary et al. (2022) have explored green finance in the context of climate change, while Chinyamunzore (2019) and Kaluba (2019) have examined the green financing of renewable energy. Overall, this indicates limited literature on the green financing of green buildings, particularly in South Africa. Therefore, this study aims to contribute to closing the literature gap by focusing not only on green finance and green buildings in South Africa but also on the role of financial institutions, which were previously overlooked.

2.6 Theoretical underpinning of green finance

The Double Dividend hypothesis proposed by Pearce (1991) states that the incentives arising from environmental regulation policies, such as environmental taxes, can improve both environmental and economic conditions. Some scholars argue that this hypothesis is not definite and is subject to interpretation. According to Zhou et al. (2020), green finance, a subset of sustainable finance, is anchored in the double dividend hypothesis. Within the context of green finance, environmental policies call for the provision of green finance incentives- financial mechanisms that reduce negative environmental impacts and enhance financial performance. Figure 1 presents a simplified diagram showing that green finance incentives are likely to result in two dividends (environmental and economic dividends). The presence of green finance incentives promotes the uptake of green buildings, potentially delivering both environmental benefits—such as reduced carbon emissions—and economic advantages, including lower borrowing costs. Although this study does not empirically test the double dividend hypothesis, the progress of actively participating financial institutions in financing green buildings is likely to demonstrate the environmental benefits of green buildings.

3 Research methodology

3.1 Research design

This study aims to provide a deeper understanding of the role of actively participating financial institutions in delivering green finance for green buildings in South Africa. It explores available green funding opportunities in South Africa, the range of green finance incentives offered, the criteria for issuing them, and the progress financial institutions have made in providing these incentives to the green building sector. A mixed-methods research design, combining both qualitative and quantitative data, was employed, in tandem with semi-structured interviews and document analysis, as the research tools. Semi-structured interviews have been used in green building studies. Masia et al. (2020) used interviews to investigate the implementation of green building principles in South African green buildings. Document analysis research was employed to gather financial data on green funding opportunities and to examine the success rates of financial institutions by reviewing the capital allocated to green building projects. Olanrewaju et al. (2024) also adopted a document analysis research method in analyzing Green Building Certificate Systems.

3.2 Data sampling and data resources

3.2.1 Phase 1: identifying active role players

South Africa has 18 major financial institutions (BASA, 2022). Therefore, the initial sample for this study was 18 banks. The annual, integrated, and/or sustainability reports of 18 banks, obtained from their respective websites, were reviewed to determine whether they offer green finance incentives. A total of 97 reports were retrieved and the search string used on the reports was (“green finance” or “sustainable finance” or “climate finance” or “eco-friendly finance” or “carbon finance” or “green bond” or “green loan” or “green credit” or “green insurance” or “fiscal investment” or “fiscal bond” or “sustainable bond” or “sustainable loan” or “sustainable credit” or “sustainable insurance” or “carbon bond” or “carbon loan” or “carbon credit” or “carbon insurance” AND “green project” or “environmentally-friendly project” or “eco-friendly project” or “sustainable project”). The reports covered the period from 2019 to 2024. Of 18 banks, only 5 (FirstRand, Nedbank, Absa, Standard Bank and Investec) mentioned the search string inputs in their reports, resulting in a narrowed sample of 5 banks. The relevance of these banks for this study lies in their membership with the United Nations Environment Program: Finance Initiative (UNEP FI), which unites global financial institutions with the United Nations to shape the future of sustainable finance (Amoah et al., 2022).

Overall, the purpose of this document analysis was to identify financial institutions that are actively participating in the green finance incentives market. Furthermore, to maintain analytical focus on financial institutions with direct insights and relevance and to reduce re

3.3 Data collection

Upon obtaining ethical clearance, emails were sent to the heads of sustainable finance, the heads of ESG (Environmental, Social, and Governance), and senior sustainable finance personnel of the 5 banks. The banks’ websites were used to retrieve the contact details of the relevant personnel within the banks. The email format included an introduction to the primary researcher, the research aims and objectives, a request for participation, and assurances of confidentiality and anonymity. Only four sustainable finance consultants from four financial institutions (FirstRand, Nedbank, Absa, and Investec) responded, indicating interest in participating, and they were comprehensively interviewed. The selection of the participants was based on the following inclusion criteria:

• Employee at the identified actively participating financial institutions in South Africa

• Have a degree as a minimum qualification

• Consultant under the Sustainable Finance or related Department

• Head of sustainable finance, senior sustainable finance consultant, Head of ESG, senior ESG consultant, or green finance consultant

• A minimum of 2 years of work experience in the banking sector

• A minimum of 2 years of work experience in the green finance department within the bank

• Worked in more than one green building project

A total of four interviews were conducted with the actively participating financial institutions (see Table 1). The rationale is that this study primarily prioritized depth and analytical richness over participant quantity. The study focused on sustainable finance or related consultants within the directly involved financial institutions because of their contextual familiarity with their green building portfolios. Given the study’s homogeneous participants, one sustainable finance or related consultant from each actively participating bank, serving as the bank’s representative, was deemed sufficient to provide sufficient data. As thematic saturation was not pursued, the interview findings in this study should be regarded as only illustrative.

Demographic profile of the participants

During the online interviews, an interview guideline entailing of four sections (i) demographics of the participants (ii) section on identification of green finance incentives issued by the actively participating financial institutions (iii) criteria employed by the financial institutions in issuing green finance incentives to the green building sector (iv) progress the financial institutions have made in issuing green finance incentives, was followed. The participants responded to the interview questions, and, due to time constraints, they provided a list of publicly available documents for consultation, enabling the collection of extensive data on some of the questions. Table 1 lists the documents consulted. This list served as a guideline for desktop research on Standard Bank, which was not interviewed. In total, 158 documents published from 2019 to 2024 were retrieved from the banks’ websites by searching for the exact names listed in Table 2. Any documents available on the banks’ websites that the interviewees did not explicitly mention were excluded from the list, as it was formulated in accordance with strict guidelines and by personnel well-versed in the study.

Consulted documents about green finance incentives of the actively participating banks

Following the interviews, desktop research was conducted to locate financial data in response to one of the study’s objectives. South African-based green finance databases such as the green economy climate database by GreenCape, the national climate change response database by the Department of Forestry, Fisheries, and the Environment, the green growth knowledge partnership by Green Finance Platform, the Alliedcrowds database, and green economy finance databases by the Western Cape government were consulted. Out of these databases, the green economy climate database by GreenCape and the Western Cape government was selected based on the inclusion criterion below and thus used in this study because it provided financial data on the various green funding opportunities, types of funding opportunities, the companies issuing them, funded sectors, and their contact details.

• South African-based green finance databases

• Contains financial data on various green sectors, including green buildings

• Financial data between 2019 and 2024

• Contain details on the type of funding offered and the registered companies offering it

• Contact details of the companies, for data verification

3.4 Data analysis

A thematic analysis by Braun and Clarke (2006), involving familiarizing oneself with the data, coding, formulating themes, reviewing, defining, and transcribing, was used to analyze both the interview responses and the documents. First, the interview responses were transcribed from the audio recordings to written text and arranged according to the objectives. Second, the transcripts were read multiple times to achieve familiarization. Third, the transcripts were uploaded to Atlas.ti, a software for conducting the thematic analysis. Similarly, the documents were uploaded to Atlas.ti and analyzed alongside the transcripts. Fourth, the data were coded by assigning numbers/symbols to describe specific portions of the data. The different green incentives were coded with the same number/symbol. Fifth, data coding led to the formulation of common sub-themes and themes. The first theme, green finance incentives, was formulated through the amalgamation of the four sub-themes: green loans, green bonds, green mortgages, and green deposits. The coding process and theme development were led by the first author and reviewed by the second, third, and last authors to ensure reliability and credibility. These authors assessed whether the data met the study’s objectives and concluded that they were sufficient. Furthermore, the financial data analysis in this study was conducted in Microsoft Excel, which produced visuals that facilitated straightforward interpretation.

3.5 Reliability of the data

Certainty of data is posited as an essential part of qualitative research (Paulo et al., 2019). In this study, research participation was limited to participants in sustainable finance or related departments with a specialization in green buildings. Furthermore, the participants were required to possess a higher education qualification, experience in the banking sector, and experience in the green building domain. The participants were also required to have worked on green building projects. Regarding the document analysis, the documents consulted included the list of documents provided during the interviews to ensure uniformity of information. It is essential to note that the titles of some documents from each bank differ, but the information they contain is similar. At Absa, the green finance incentive issuance framework is referred to as the ‘Sustainable finance issuance framework’. In contrast, at Investec, it is called a ‘Sustainable and transition finance classification framework’. Moreover, documents spanning 6 years (2019–2024) were reviewed to consider any developments in information during this period.

3.6 Data limitations

This study acknowledges the non-probability design and the small interview size as limitations. The findings from the interviews and document analysis in this study do not represent the entire banking sector in South Africa and are to be regarded as illustrative. Furthermore, it is important to note that the financial data should be considered indicative rather than definitive, as no statistical tests were conducted to validate them. In essence, this study is exploratory in nature and should not be interpreted as definitive.

4 Results

4.1 Green funding opportunities in South Africa

According to the 2022 Green Finance Database, compiled by GreenCape and the Western Cape government, the current status of green funding opportunities in South Africa stands at 144. The prominent sectors offering significant opportunities are sustainability, green infrastructure, and energy, with over 96 companies offering opportunities in these areas. The least funded sectors are waste and water, as well as sanitation, with an average of 46 funding channels (see Figure 2). Furthermore, the most offered green finance incentives by the 144 funding channels are debt and equity, with an average of 93 companies providing them. Green funding, in the form of grants and working capital, appeared to be the least offered, with an average of 21 companies issuing it. The companies that provide green funding are categorized into development finance institutions (DFI), government, commercial/private sector, and other (see Figure 3). Approximately 40% of the funding channels originate from the commercial/private sector category, while 38% of the companies are development finance institutions. Only 13% of the companies are government-based.

Regarding green infrastructure, most (43%) of the funding opportunities emerge from the commercial/private sector. Development finance institutions also offer many funding opportunities, accounting for 38% of funding channels (see Figure 4). The government contributes the least, at 2% of the funding opportunities. Within the commercial/private sectors, private equity (36%), followed by corporate banks (22%) and venture capital (22%), provides the most funding opportunities for green infrastructure.

4.2 Green finance incentives issued by the actively participating financial institutions towards green buildings

The provision of green finance incentives by the actively participating financial institutions is fragmented and disproportionately distributed. Instruments such as green bonds and green loans are offered by all five actively participating financial institutions in this study. However, only FirstRand, Nedbank and Absa offer incentives such as green mortgages and green deposits. Green insurance is at a disadvantage because neither bank offers it.

The directly involved financial institutions have achieved significant growth in issuing green finance incentives. Interviewee 1 highlighted that “FirstRand prides itself on funding green buildings”. In 2022, FirstRand issued two sustainability bonds towards green buildings and affordable housing and introduced green deposits for green buildings (Interviewee 1; FirstRand, 2023a). They further mentioned that the bank issued two additional green bonds in 2023, targeting green buildings (ecoEnergy home loans) and renewable energy. Interviewee 2 outlined that Nedbank became the first South African bank to issue a green bond. The first green bond, issued in 2019, was towards renewable energy projects, while the first green bond targeting green buildings was issued in 2021. A document analysis of Nedbank reports revealed that, to date, the bank has issued 9 green bonds: 7 for renewable energy and 2 for green buildings (Nedbank, 2024).

In 2020, Standard Bank issued its first green bond, worth US$200 million, through a private placement with the IFC (Standard Bank Group, 2022a,b). This became the first offshore green bond issuance in South Africa and the largest green bond in Africa to date. As of 2023, it has issued four green bonds. However, these green bonds are primarily focused on renewable energy projects, rather than green buildings. Interviewee 3 mentioned that Absa issued its first green bond in 2021 and introduced green deposits in 2023, including the Absa Fixed Deposit and Absa Access Deposit Note. However, upon analyzing Absa’s reports, it was found that the green deposits and Absa’s first green bond, issued in 2021, were both directed towards renewable energy projects, specifically solar and wind (Absa Group Limited, 2023a,b,c). Similarly, interviewee 4, supported by document analysis of Investec reports, highlighted that in 2022, Investec issued its first green bond, valued at R1 billion, for clean energy projects (Investec Group, 2022a,b).

4.3 The criteria employed by financial institutions when issuing green finance incentives

There is a consensus on the issuance framework utilized by the actively participating financial institutions. The frameworks are derived from the principles in the International Capital Market Association (ICMA), the Green Bond Principles (GBP), and Sustainable Bond Principles (SBP), Sustainability Bond Guideline (SBG), Loan Market Association (LMA)’s Green Loan Principle (GLP), Social Loan Principle (SLP), Loan Syndications, Trading Association (LSTA), Asia Pacific Loan Market Association (APLMA), European Union (EU) Sustainable Finance Taxonomy and the Climate Bonds Taxonomy. Due to a comparable approach, the framework encompasses four components (use of proceeds, project evaluation and selection process, management of proceeds, and reporting).

4.3.1 Use of proceeds

The interviewees emphasized the importance of ensuring that green funding is provided to qualifying projects, and that a use-of-proceeds eligibility criterion is used to achieve that. The interviewees were questioned on how important it is to meet the use of the proceed eligibility criteria, and one of them asserted that “Compliance to these standards is of paramount importance – conventional due diligence is conducted for each project before funding is approved.” Under the issuance frameworks, financing and refinancing are offered. This is for the construction of new buildings, reconstruction, retrofitting, renovations, and the operation of existing buildings that aim to become environmentally friendly. The financing is presented as green loans or green bonds. The directly involved financial institutions generally use a uniform eligibility criteria to determine whether projects qualify for green funding.

For buildings to be considered eligible for green funding, the interviewees concurred that the buildings must achieve a 20% or more improvement in carbon emissions or energy performance over the baseline and possess a LEED Gold certification, a Green Star 4 category, an Energy Water Performance Level 6 or above, or an EDGE certificate. The interviewees highlighted the possession of EDGE certification as an essential element of the eligibility criteria. When asked about the importance of green certification, one of the interviewees stated that “It is of paramount importance—it is not considered a qualifying green building without the green certification.” Interviewee 3 further mentioned that “some projects are unsuccessful in acquiring green finance due to lack of robust evidence of a green asset or evidence that is quite old such as the lack of green building certification or certification that was received (and not renewed) more than 3 years ago”. This statement was supported by Interview 1 by highlighting that one of the key factors in acquiring green funding for a green building project is “Provision of evidence for the green asset that is being financed/refinanced”.

4.3.2 Project evaluation and selection

The findings reported in this sub-section are based on document analysis of the banks’ reports provided by the interviewees. The sustainable finance or related team leads the project evaluation and selection process. They facilitate the project selection process and assess whether each project complies with the financial institution’s internal policies. At FirstRand, the environmental and social risk management framework is consulted. The Group Treasury is thereafter responsible for finalizing and approving the process, thereby presenting the outcome. With Standard Bank, eligible projects undergo an Environmental and Social Management (ESM) screening process. Once completed, eligible projects are included in the Eligible Assets Portfolio and listed in the allocation register, along with other funded green building projects. At Nedbank, the selection process assesses whether new or existing projects comply with the use-of-proceeds eligibility criteria, the bank’s Social and Environmental Management Systems (SEMS), and relevant standards commonly used in the green finance sector. At Absa, the committee assesses whether the projects align with the bank’s environmental, social, and governance systems. The Environmental Social Risk process is an essential part of Absa’s ESMS, and it assesses aspects such as applicability screening, project risk categorization, due diligence, legal requirements, and monitoring and reporting. At Investec, a social and environmental risk assessment process is conducted to identify risks associated with projects and ensure these elements are integrated throughout the project lifecycle. Awarded projects are further assessed to ensure they are allocated correctly. When a project has revoked its eligibility, the funds are reallocated to other eligible green projects.

4.3.3 Management of proceeds

The sustainability or related team facilitates the allocation and management of funds. Interviewee 1 stated that the Group Treasury, the sustainable finance team, and the ESG advisory team from Rand Merchant Bank (RMB), a division of FirstRand, monitor the allocation and use of funds in green building projects. For green bonds, FirstRand aimed to allocate the exact or surplus funds a project requires. However, with green loans, the actual amount is allocated towards a green building project. The funds are allocated within 24 months of issuance and are monitored annually. Surplus funds are invested in other eligible projects that meet the criteria. The interviewee was asked about the implications of defying the use of proceeds eligibility criteria, and they stated that “When a project defies the eligibility criteria, the funds are retracted, and the project is removed from the green deposit portfolio. “.

In the Standard Bank case, the document analysis indicated that the proceeds are allocated to a green bond or loan portfolio and recorded in the Allocation Register. Standard Bank allocates the exact or exceeding amount of the total financial need of eligible green building projects. The funds are allocated within 24 months from the issuance date. The process of distributing and managing the funds is audited by an external organization.

Furthermore, Interviewee 2 noted that at Nedbank, eligible green building projects are allocated funds from either the green bond or green loan portfolio. The funds are monitored through Nedbank’s internal processes to ensure they are used efficiently. Proceeds available under each green bond or green loan portfolio either equate to the amount of funds required for each eligible project under that portfolio or exceed them. This allows full financial coverage for each eligible green building project. The interviewee further mentioned that in cases where there are excess funds, the bank invests or withholds surplus funds until the occurrence of other eligible projects.

Interviewee 3 mentioned that Absa maintains a Sustainable Asset Register (SAR) to track the allocated funds and their utilization. These funds are monitored internally and externally for reporting purposes. Absa has the right to add or remove eligible projects from the SAR. It is responsible for ensuring that the available funds under the green bond or green loan deposits are equivalent to or exceed the proceeds required for each project. It was also highlighted by interviewee 3 that in a case where the borrower struggles to meet payment deadlines of the green asset, “The Borrower struggling to meet payment deadlines will be governed by the commercial terms of the broader facility agreement, and not any green provisions”.

Moreover, interviewee 4 stated that Investec’s sustainability and finance teams are responsible for allocating, recording, and overseeing the use of the funds. The green bond funds are included in the Investec Property Fund’s accounting system, with the green bond code used for tracking. The teams create and maintain an eligible green project register that comprises all funded projects and their respective green bond codes.

4.3.4 Reporting

The interviewees noted that the frameworks require banks to compile and publish an annual allocation and impact report for funded green building projects. The reports include the number of funded projects, the amount of allocated funds from the green bond, green deposits, or green loans, unallocated funds, newly financed and refinanced projects, and annual impact indicators. The impact report constitutes:

• Number of green buildings funded with an eligible certification (e.g., EDGE)

• Total m² of green buildings funded

• Total m² of energy-efficient property funded

• Estimated annual CO₂ equivalent emissions reduction/avoidance (tons CO₂eq/year)

• Number of mortgages provided to green-certified houses/residential projects

• Number of beneficiaries

4.4 The success rate of financial institutions in financing green buildings

4.4.1 FirstRand

Interviewee 1 stated that FirstRand is successfully financing green buildings and has allocated some of its green bonds towards these projects. The interviewee further suggested reviewing the FirstRand green bond issuance report to substantiate their statement. The document analysis revealed that FirstRand issued two sustainability bonds totaling R2.029 billion in 2022 (FirstRand, 2023a,b,c,d). The funds were allocated equally to financing future projects and refinancing existing and new projects. From each bond, 80% of the funds were allocated to social bonds, while the remaining 20% was directed towards green bonds. The proceeds from the green bonds were allocated to affordable and sustainable housing and green buildings (see Table 3). By the end of August 2022, 78% of the funds from each bond had been allocated, with 20% dedicated to green building projects and 58% to sustainable housing. A 100% green bond allocation rate was achieved by the end of August 2023, with sustainable housing accounting for the remaining 22% from August 2022. Considering the impact of reporting, three IFC EDGE-certified green buildings were funded, resulting in approximately 3,140 tons of carbon dioxide emissions reductions per year, and 65,031 m² of green buildings received funding. In terms of sustainable and affordable housing, 2,659 applicants were awarded access to green houses, 2,403 green mortgages were provided for this type of housing, and 842 sustainable and affordable homes were built (FirstRand, 2024).

Allocation of the green bonds towards green buildings (FirstRand, 2024)

In October 2023, FirstRand issued two more green bonds (FRJ28G and FRJ30G) worth R3.5 billion (FirstRand, 2024). The first green bond (FRJ28G) has a five-year term and is valued at R1.714 million, while the second green bond (FRJ28 G) has a seven-year term and is valued at R1.798 million. The green bonds have provided funding for eligible renewable energy and green building projects. Approximately 40 green housing projects with IFC-EDGE certification have been funded through both green bonds. Each bond has achieved an allocation rate of 2% (R41,646,000) of the total funds (see Table 4). These green building projects have awarded 53 people access to green houses (FirstRand, 2024). Considering that the green bonds have been partially allocated as of June 2024, FirstRand has affirmed that it will issue allocation reports until the full allocation of the funds and ensure that all the funds are allocated by October 2025 (FirstRand, 2024).

Allocation of the green bond proceeds towards green projects (FirstRand, 2024)

4.4.2 Standard Bank

An analysis of the Standard Bank issuance report revealed that the bank aims to raise R250 billion in funding for its sustainable finance sector by 2026 (Standard Bank Group, 2024). Standard Bank has issued R5.083 billion in green bonds thus far. Between 2021 and 2023, three green bonds were issued for renewable energy projects (Standard Bank Group, 2024). The funds were allocated to five eligible renewable energy projects, and 100% was allocated (see Table 4). Although a 100% success rate in green bond allocation was achieved, none of the funds was allocated towards any green building projects. Therefore, Standard Bank has not achieved a notable success rate in allocating green bonds to green buildings (see Table 5).

Standard Bank’s green bond issuance report (Standard Bank Group, 2024)

4.4.3 Nedbank

Interviewee 2 mentioned that Nedbank is advancing its initiative to provide funding for green housing and green residential areas. Upon reviewing the bank’s issuance report, it was found that in 2021, Nedbank issued two green bonds: one for green housing, with a green bond code of NBG06 G, and another for green residential development (bond code NBG07 G; see Table 6). The green housing bond, valued at R125 million, was issued on 29 July 2021. This bond is for individuals seeking to purchase homes with EDGE certification. The maturity date of this financial instrument was set to be July 29, 2028. Furthermore, on December 10, a second bond was issued for EDGE-certified green residential developments, which matures on December 15, 2028. The green bond is valued at R1.09 billion. At the end of the 2021 financial year, no amount was allocated from the financial instruments.

Nedbank annual green bond impact report (Nedbank, 2023)

In 2022, 84% (R125,491,657) of the green housing bond was allocated, with 99 registered green mortgages (Nedbank, 2021). The projected carbon dioxide savings were 66089Kg while the projected electricity savings were 67,691 kWh. About 9.6% (R104,417,323) of the total green residential development bond was allocated, with only two green residential development mortgages granted. Proceeding to 2023, about 100% (R124,450,272) of the funds from the green housing bond were allocated towards the intended projects (see Table 6; Nedbank, 2023). The number of registered green mortgages under this green bond was 115, with a projected 226,721 kg of CO2 savings and 233,292 kWh of electricity savings. Regarding the green residential development bond, 70% (R764,201,570) was allocated. About 14 green residential development mortgages were granted. The remaining amount is set aside for future EDGE-certified green residential developments, as the entire bond is dedicated to them. Nedbank has achieved a 100% success rate in allocating green bonds to the green housing bond and a 70% success rate in allocating green bonds to the green residential developments bond.

4.4.4 Absa

According to interviewee 3, Absa has successfully issued green bonds targeting the energy sector. However, no proceeds have been allocated to green buildings. To verify the interviewee’s statement, the Absa issuance report was analyzed. It revealed that Absa issued a R2.2 billion green bond and launched green deposits, comprising two products: Absa fixed deposit and Absa access deposit note, in 2023 (Absa Group Limited, 2023a,b,c). Proceeds from the green bond were dedicated to renewable energy projects, specifically wind and solar. The green deposit funds were allocated to solar projects (see Table 7).

Green financial instruments allocation report (Absa Group Limited, 2023a,b,c)

4.4.5 Investec

Interviewee 4 highlighted that Investec does not have a green building-specific financial product. However, it has successfully issued green bonds towards the renewable energy sector. Upon consulting the Investec’s sustainability report (Investec Group, 2023), it confirmed that the bank has not provided a detailed green bond/green loan allocation and impact report. The sustainability report only highlighted the green projects in which the bank participates. One of the projects included in the report is the Investec-funded R2 billion to the renewable energy company SOLA Scorpius, towards a 150 MW Solar PV project in the Free State (Investec Group, 2024a,b). Therefore, no conclusion can be drawn about the success rate of green bond allocation towards green buildings.

5 Discussion

The findings in this study provide a conceptual mapping and a descriptive status quo of green finance opportunities and the role of directly participating financial institutions in funding green buildings in South Africa. As this study’s key finding highlights, many green finance opportunities are directed towards sustainability, energy, and green building. This aligns with South Africa’s long-term key strategies, which aim to transition to a period in which environmental sustainability is integrated into structural economic development to alleviate environmental and socio-economic issues. As one of the significant global contributors to carbon emissions, the Department of Forestry, Fisheries and the Environment (DFFE) developed a Green Economy Strategy to mobilize capital into sectors such as energy, green buildings, and transport, inter alia (DFFE, 2021). Similar conclusions are drawn in studies pertaining to emerging economies (Jha and Bakhshi, 2019; Hasan and Hossain, 2022). These findings underscore the expanding policy focus on green finance investments in emerging markets.

The private sector in this study is found to be driving efforts to fund green buildings, as most green funding opportunities originate from them. The government’s contribution is trivial and concerning. These findings may be attributed to how green buildings align with the private sector’s financial competencies, given its access to more capital. The government’s involvement is predominantly in developing policies and regulations, such as the Green Finance Taxonomy. Furthermore, these findings may be due to the government’s financial constraints and conflicting priorities. The socio-economic dynamics in South Africa are likely to prompt the government to allocate funds to essential services that directly affect people, such as health care, rather than mobilize investments for green buildings. This phenomenon is not unique to South Africa, as other studies suggest that most green funding opportunities originate in the private sector in both developed and developing countries (Chang, 2019; Bank of China, 2021).

The results show that green bonds and green loans are available and accessible in the five actively participating financial institutions, while none of them offer green insurance. They suggest that the development of green finance instruments is growing, likely driven by increasing market demand, and these financial institutions are at the forefront. Other studies have highlighted that financial institutions play a significant role in offering these instruments (Zhan and de Jong, 2018; Liu and Lai, 2021). However, the absence of green insurance is contrary to other countries such as China and Malaysia, where it is offered (Yang et al., 2017; He et al., 2022). This suggests that these actively participating financial institutions may prefer to offer instruments with an economic structure similar to that of conventional bonds and loans, rather than issuing green bonds or green loans.

This study found that only two of the five actively participating financial institutions (FirstRand and Nedbank) have offered funding for green buildings. At the same time, the remaining three (Absa, Standard Bank and Investec) prioritize the energy sector. Although these findings suggest that green finance in the green building market is limited and nascent, the commitment and role of these two financial institutions in driving this market cannot be overlooked. Furthermore, these results illustrate an imbalance in the allocation of green finance: the majority of the directly involved financial institutions provide funding to the energy sector. In contrast, only two financial institutions support the green building sector. South Africa is facing an energy crisis that requires urgent collective effort and financial investment to mitigate. Ongoing load shedding has hindered economic growth, lowered industrial production, and eroded investor confidence. This has created an urgent need for funding, given the energy sector’s central role in driving and fostering economic and social growth. In alignment with these circumstances, financial institutions are likely to allocate funds towards the energy sector rather than the green building sector. Compared with green building projects, energy projects are large-scale and require substantial initial investments, resulting in higher returns on investment. It is also worth noting that energy projects are associated with predictable long-term risks and financial returns, whereas green building projects are dependent on market factors. Overall, these results suggest that the directly involved financial institutions in mobilizing green finance give precedence to the energy sector over green buildings, considering South Africa’s energy crisis and its implementation of a Just Energy Transition, which rationalize the slower growth of green building adoption in South Africa.

The findings show that access to green finance from a green building perspective is established by obtaining a green certificate, such as an EDGE certificate, and by adhering to the financial institution’s internal policies. Given that the incentive issuance criteria are universal, it is not a foreign concept that these requirements apply in other countries as well. They align with the sustainable finance framework adopted by the Bank of Windhoek in Namibia, which also requires a good BREEAM certificate (Bank Windhoek, 2018). Similarly, China Construction Bank requires a LEED Silver certification or a good BREEAM certificate, accompanied by an additional 2-star or higher Chinese Green Building Evaluation Label (China Construction Bank (CCB), 2023). These results imply that certificate compliance is compulsory, and the developer underwrites the costs of acquiring the green certificate. This can be the second factor explaining the slow growth in green building adoption, as the high costs of obtaining a green certificate are likely to discourage developers. Furthermore, this suggests that the role of actively participating financial institutions in financing green buildings is counterintuitive, as some of their requirements, particularly certificate compliance, are likely to contribute to the stagnant growth of green buildings.

As the results show, FirstRand and Nedbank play a key role in funding green buildings that offer environmental benefits, including reduced carbon emissions and lower energy consumption. These findings illustrate the environmental dividend from green buildings, which is essential for curbing carbon emissions. They underscore the environmental benefits associated with green buildings and, above all, highlight the pivotal role of directly involved financial institutions in providing funding for them.

6 Conclusion

This study investigated the role of financial institutions in financing green buildings in South Africa. With four objectives, the study determined available green funding opportunities, green finance incentives, the criteria used to issue them, and the progress of actively participating financial institutions in funding green buildings. Using document analysis and interviews, 158 documents from the actively participating financial institutions (FirstRand, Nedbank, Standard Bank, Absa, and Investec) were reviewed, along with four thorough interviews with sustainable finance consultants from these banks.

The key findings of this study showed that: first, there are 144 green funding opportunities available, emanating from various sources, and most are allocated to sustainability, green infrastructure, and the energy sector. Second, the private sector is at the forefront of disseminating these opportunities for green buildings, while the government’s contribution is trivial. Third, actively participating financial institutions play an important role in issuing green bonds and green loans. However, there is a need for green finance to be included as an offered instrument. Fourth, there is a disproportionate allocation of funding to the green building and energy sectors, as only two of the actively participating financial institutions have documented their contributions to green buildings. In contrast, the rest have documented their contributions to the energy sector. Nonetheless, FirstRand and Nedbank are leading the way in funding green buildings, and the funded buildings demonstrate environmental dividends. Fifth, the compulsory possession of a green certificate as a requirement for accessing green finance from actively participating financial institutions appears paradoxical, as it entails initial costs underwritten by the developer to acquire the certificate.

6.1 Policy implications

This study offers insight into the availability and accessibility of green funding opportunities. Deciphering fragmented funding channels reveals funding imbalances between the private and public sectors. There is a glaring need for the government to increase its funding for green buildings to leverage their benefits and address environmental issues. Conversely, financial institutions are at liberty to expand their funding pools and offer incentives, such as green insurance, to ensure the security of green buildings.

The results can inform green finance policies, particularly for green buildings that address the challenges faced by property developers and hard-to-abate sectors. Create a framework that addresses the high costs of acquiring a green certificate and the transition finance that could help sectors become environmentally friendly. Regarding property developers, this study highlights factors of paramount importance in acquiring green finance for green buildings. Moreover, it provides a detailed process and roadmap for finding specific incentives and for the overall acquisition process.

6.2 Recommendations

6.2.1 Short-term basis

Considering that only two financial institutions in this study offer financing for green buildings, it is recommended that all financial institutions, in collaboration with the South African government, expand their product offerings and provide funding for more green building projects to increase the green funding pool. The introduction of transition finance to facilitate the process of conventional buildings transforming into green buildings is suggested as one approach. Sartzetakis (2021) highlighted the use and effectiveness of green bonds as a transition finance instrument and how their issuance towards green buildings can contribute to increasing the sustainability of the building sector.

This study revealed that obtaining green certification and complying with financial institutions’ internal social and environmental policies are essential for accessing green finance. Given the costs of attaining green certification, green finance issuers should explore ways to incentivize clients to obtain it as early in the process as possible. This recommendation is corroborated by a study conducted in Indonesia, which examined the relationship between the implementation of green buildings and the provision of incentives. The study highlighted that the availability and early access to incentives can help reduce the costs of green certification and encourage property developers to adopt green building practices (Berawi et al., 2020).

6.2.2 Long-term basis

The study noted a paucity of green insurance availability and offerings by financial institutions. As demand for and adoption of green buildings increase over time, it is recommended that financial institutions consider gradually introducing green insurance. As substantiated by Alabady and Ghazaleh (2017), some traditional insurance policies are not ideal for green buildings, as they may entail risks different from those of conventional buildings. The significance of green insurance is evident in countries such as China, where green insurance, combined with other green finance instruments, has contributed to increased green building construction and investor interest, as they are assured that any damage to green buildings will be covered (He et al., 2022).

6.3 Limitations of the study

Although this study offers valuable insight into the role of financial institutions in providing green finance for green buildings in South Africa, it has underlying methodological, sampling and scope limitations. First, the scope of the study is limited to the role of the actively participating financial institutions in financing green buildings at a descriptive and structural mapping level. It does not empirically account for the effectiveness, volume, and market concentration of the financial institutions. Second, a mixed-methods design was employed, combining quantitative financial data with in-depth qualitative insights; however, the quantitative data were not subjected to statistical testing, implying that the results are illustrative rather than conclusive. Third, the study has a small sample size, limiting the generalizability of its findings and increasing the potential for subjective bias to affect the overall results. Fourth, this study selected participating financial institutions that are actively involved in green finance by screening their annual reports, rather than interviewing all the financial institutions. Fifth, this study draws on the Double Dividend Hypothesis as its theoretical underpinning; however, it does not empirically test it. It only illustrates the environmental dividend of funded green buildings. Lastly, the sample size (four interviews and 158 reviewed documents) does not represent the entire financial sector in South Africa but rather illustrates the current active role players.

6.4 Future research

These limitations can be addressed in future research by increasing the sample size to include all financial institutions in South Africa. To measure the role of the financial institution, quantitative indicators can be used to draw statistical conclusions about the financial sector. Similarly, quantitative indicators can be used to test the Double Dividend Hypothesis in the green building domain.

Statements

Data availability statement

The raw data supporting the conclusions of this article will be made available by the authors, without undue reservation

Ethics statement

The studies involving humans were approved by Faculty of Science Ethics committee, University of Johannesburg. The studies were conducted in accordance with the local legislation and institutional requirements. The participants provided their written informed consent to participate in this study

Funding

The author(s) declared that financial support was not received for this work and/or its publication

Conflict of interest

MR was employed by the Solid Green Consulting

The remaining author(s) declared that this work was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest

Generative AI statement

The author(s) declared that Generative AI was not used in the creation of this manuscript

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Glossary

• APLMA

  Asia Pacific Loan Market Association

• BREEAM

  Building Research Establishment Environmental Assessment Method

• DFFE

  Department of Forestry, Fisheries and the Environment

• EDGE

  Excellence in Design for Greater Efficiencies

• ESG

  Environmental, Social, and Governance

• ESM

  Environmental and Social Management

• EU

  European Union

• IFC

  International Finance Corporation

• ICMA

  International Capital Market Association

• GBP

  Green Bond Principle

• GLP

  Green Loan Principle

• LEED

  Leadership in Energy and Environmental Design

• LMA

  Loan Market Association

• LSTA

  Loan Syndications, Trading Association

• RMB

  Rand Merchant Bank

• SAR

  Sustainable Asset Register

• SEMS

  Social and Environmental Management Systems

• SBG

  Sustainability Bond Guideline

• SBP

  Sustainable Bond Principles

• SLP

  Social Loan Principle

• UNEP FI

  United Nations Environment Programme Finance Initiative

• UN SDG

  United Nations Sustainable Development Goals

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Summary

Keywords

financial institutions, green buildings, green finance incentives, green finance, South Africa

Citation

Mbokane L, Reinink M, Ntakana K and Modley L-A (2026) Financing green buildings in South Africa: the role of financial institutions and green finance incentives. Front. Sustain. Cities 8:1758057. doi: 10.3389/frsc.2026.1758057

Received

01 December 2025

Revised

19 February 2026

Accepted

20 February 2026

Published

13 March 2026

Volume

8 – 2026

Edited by

Nishant Raj Kapoor, Academy of Scientific and Innovative Research (AcSIR), India

Reviewed by

H. M. N. K. Mudalige, University of Peradeniya, Sri Lanka

Md. Sazib Miyan, Begum Rokeya University, Bangladesh

Updates

Copyright

© 2026 Mbokane, Reinink, Ntakana and Modley

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Disclaimer

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