IFC investment to raise green portfolio financing: Federal Bank

In addition, the investment also marks IFC’s first in India aligned to the greening equity approach, which will enable the bank, an IFC partner for over a decade, to reduce its exposure to coal and increase climate lending.

Federal Bank said on Thursday the equity investment by World Bank arm IFC is expected to increase green portfolio financing for projects related to energy efficiency, renewable energy, climate-smart agriculture, green buildings and waste management.

IFC and two investment funds managed by IFC Asset Management Company – IFC Financial Institutions Growth Fund, LP and IFC Emerging Asia Fund, LP – have made an equity investment of $126 million (Rs 916 crore) for a 4.99% stake in the Kerala-based lender.

The investment will support the bank’s commitment to environmental, social and governance standards, while strengthening its tier 1 capital adequacy ratio (CAR) and expanding MSMEs and climate finance portfolios.

Shyam Srinivasan, MD & CEO of Federal Bank, said: “After the bank’s board approved issuance of shares to the IFC group to an extent of 4.99% of the bank’s paid-up capital, IFC has become a significant shareholder. The addition of this marquee name to the list of our prominent shareholders reinforces the trust and confidence reposed by the IFC group in the bank and its management. The infusion of quality capital further strengthens tier 1 and overall CAR of the bank.”

In addition, the investment also marks IFC’s first in India aligned to the greening equity approach, which will enable the bank, an IFC partner for over a decade, to reduce its exposure to coal and increase climate lending.

“This move is in line with IFC’s strategy to support green growth by spurring investments to build back better and greener, seizing opportunities to help India meet its climate goals and build a greener, resilient future,” said Roshika Singh, acting country manager for IFC in India. “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 help ensure an inclusive recovery.”

IFC estimates a total climate-smart investment opportunity of $3 trillion in India till 2030.