Economy
The Importance of Financing a Sustainable Future
By Sunil Kaushal
While climate change may have taken a back seat in a news cycle dominated by COVID-19, war and the cost-of-living crisis, the risks and threats associated with our warming planet remain the biggest long-term threat to our combined economic future.
Banks and financial institutions will be critical to managing that risk this includes financing of sustainable infrastructure, supporting transition and investing in green innovation. In fact, the banking industry has a responsibility to bridge top-down and bottom-up approaches to net-zero and help the public and private sectors realise the vast opportunities the energy transition and the move to sustainable infrastructure promises.
We can do that by providing capital to finance the investment in renewables, climate adaptation technologies and the transition to a ‘circular economy’ which encourages sustainable use of resources.
According to EY, financial institutions recognise that the transition to net zero will involve more than investments and underwriting for “green” assets and businesses such as renewables and electric vehicles. To achieve net zero across the whole economy, legacy carbon-intensive assets and companies will require financing to help them transition to a cleaner future.
For businesses, this means a fundamental change to operations, and that, in turn, requires capital. Insurers, lenders and investors will play a crucial role in making that capital available and in incentivising and supporting their clients and investees as they make their transitions.1
While stimulating growth through investment in roads, buildings and power supplies isn’t a new strategy, now it offers an opportunity to redefine the traditional playbook and focus on investing and financing sustainability for the longer term.
Creating sustainable and climate-friendly infrastructure will, however, require finance that is fit for the future. There is a growing concern, for example, around stranded asset risk – particularly for long-term investments such as infrastructure. Infrastructure projects need to consider risks 10 years and beyond into the future, many of which may not be immediately apparent. These risks include rising sea levels, increasing temperatures, drought, and coastal erosion. There are also financial and economic risks associated with making investments outside an ESG framework, this includes changes to regulatory settings that may disadvantage or penalise these investments.
Projects that are climate adapted from the outset reduce some of these risks and are more likely to stand the test of time, so banks will need to take into account the potential climate risks over the lifespan of the project to ensure resilience and protect investments.
Sustainable infrastructure projects, however, are traditionally more difficult to make bankable. With a bit of thinking, though, there are usually profitable solutions. For example, in a renewable energy plant, you have clear cash flows linked to the price of generated energy or for an energy efficiency improvement project, you have energy savings which can be translated into cost savings, and they can repay the financing.
At Standard Chartered, we are committed to playing our part in supporting sustainable projects in the region. We take a firm stand in accelerating to net zero by helping emerging markets in our footprint reduce carbon emissions as fast as possible and without slowing development, putting the world on a sustainable path to net zero by 2050.
Sustainability has long been a core part of our strategy, and we have committed USD40 billion of project financing services for sustainable infrastructure and USD35 billion of services to renewables and clean-tech projects by the end of 2024. We have also committed to catalysing $300 billion in sustainable investments by 2030. The projects we finance will trade and growth and contribute to a better quality of life through sustainable development.
The need for action from finance providers is to not only decarbonise their own balance sheets but also to help businesses in the real economy move towards a sustainable future. A successful net-zero transition must be just, leaving no nation, region or community behind and, despite the hurdles, action needs to be swift. To meet the 2050 goal, we must act now, and we must act together: companies, consumers, governments, regulators and the finance industry must collaborate to develop sustainable solutions, technologies and infrastructure.
Sunil Kaushal is the CEO of Standard Chartered Africa and Middle East (AME)
By Adedapo Adesanya
The Naira weakened against the United States Dollar by N4.75 or 0.35 per cent to N1,364.89/$1 from N1,360.14/$1 in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Tuesday, August 11.
In the same vein, the domestic currency slumped against the Pound Sterling in the official market during the session by N4.11 to trade at N1,842.61 compared with the previous day’s N1,838.50/£1, and against the Euro, it lost N4.41 to sell at N1,575.50/€1 versus Monday’s N1,571.09/€1.
But it was a different scenario at the GTBank FX desk, where the Naira gained N4 against the US Dollar yesterday to close at N1,367/$1, in contrast to the previous day’s N1,371/$1, and appreciated by N5 in the parallel market to quote at N1,395/$1 compared with the preceding session’s N1,400/$1.
Interbank FX turnover, according to data from the Central Bank of Nigeria (CBN), fell sharply by 86 per cent to $29.1 million, down more than 86 per cent from $213.9 million a day earlier, with the number of settled interbank deals down to 47 from 182.
The decline in Dollar trading was attributed to weaker bank bids from customers seeking foreign exchange payments, while tight market liquidity continued to weigh on the Naira.
Nigeria’s gross external reserves rose by $83.81 million to $52.14 billion.
Meanwhile, the cryptocurrency market rebounded, with Dogecoin (DOGE) going up by 2.8 per cent to $0.0721 and taking its weekly gain to over 3 per cent, while Bitcoin (BTC) slipped by 0.3 per cent to $63,769.69.
Investors are focused on Thursday’s US Consumer Price Index (CPI) report and Middle East tensions, as lower inflation and a potential Fed pivot could fuel a relief rally in risk assets even as rising oil prices threaten to push inflation higher.
Binance Coin (BNB) grew by 2.2 per cent to $612.49, TRON (TRX) rose by 1.1 per cent to $0.3350, Ripple (XRP) increased by 0.9 per cent to $1.02, Ethereum (ETH) advanced by 0.8 per cent to $1,889.60, and Solana (SOL) jumped by 0.5 per cent to $76.24, while Cardano (ADA) lost 0.6 per cent to end at $0.1867, with the US Dollar Tether (USDT) and the US Dollar Coin (USDC) flat at $1.00 apiece.
By Adedapo Adesanya
Oil was up by 1 per cent on Tuesday as doubts about a potential United States-Iran peace deal fueled concerns that Middle East supply disruptions would persist.
As a result, Brent futures rose by $1.19 or 1.4 per cent to $88.91 a barrel, while the US West Texas Intermediate (WTI) futures expanded by $1.07 or 1.3 per cent to $83.20 per barrel.
Both contracts had jumped about 5 per cent on Monday as hopes for a peace deal between the US and Iran started to fade.
It looked worse on Tuesday when Iran said the Strait of Hormuz will remain closed unless the US ends the war and meets Iran’s conditions, raising the bar for a deal that would restore more oil traffic through the key waterway. About 20 per cent of global oil supply passed through the strait before the start of the Iran war on February 28.
Mr Mohsen Rezaei, secretary of Iran’s Supreme National Security Council, said it has also delivered additional conditions to the US through mediators.
US officials had suggested last week that negotiations involving Iran and Oman were making progress toward allowing more vessels through Hormuz.
Shipping traffic through the Strait of Hormuz fell sharply on Monday as tensions continued to disrupt maritime activity across the Middle East.
Shipping data showed that only six vessels passed through the strategic waterway on Monday, below the 10-day average of about 11 vessels. Before the conflict, daily traffic through the strait averaged between 125 and 140 vessels.
The disruption comes amid heightened security concerns across key regional shipping routes.
In the Bab el-Mandeb, Yemen’s Iran-aligned Houthis attacked a Saudi vessel carrying military equipment, according to the Houthi-run Saba news agency.
Separately, Reuters reported a missile attack on a container ship off Pakistan in what was suspected to be a US strike, further underscoring the security risks facing commercial shipping in the region.
The disruption to regional maritime traffic has also raised concerns about the recovery of oil production in the Middle East.
The US Energy Information Administration (EIA) said on Tuesday that some oil producers in the region could struggle to restore output to pre-conflict levels by the end of 2027, even if shipping and trade patterns return to normal by early next year.
The outlook highlights the potential for prolonged disruptions to global oil supplies despite a possible normalisation of trade flows in the coming months.
In Libya, a member of the Organisation of the Petroleum Exporting Countries (OPEC), renewed violence in the strategic city of Zawiya has disrupted the oil industry, with state oil firm the National Oil Corporation saying it could declare force majeure if drone attacks on energy assets in the city continued.
In Europe, the Ukrainian military said on Tuesday it attacked an oil refinery in the Russian city of Orsk, the second-largest city in the Orenburg region and an important industrial hub.
The combination of Ukraine’s attacks on Russian energy infrastructure and the Iran war has limited global supplies and boosted global energy prices.
By Aduragbemi Omiyale
African leaders have been advised to focus on economic integration through industrialisation, as this would make the continent a formidable force in the global market.
This charge was given by the Minister of State in the Tanzanian President’s Office responsible for Planning and Investment, Prof. Kitila A. Mkumbo, during a visit to the Dangote Petroleum Refinery and Petrochemicals in Lagos.
“Africa now needs economic liberation, and that can only come through industrialisation,” he said, describing Mr Aliko Dangote as Africa’s leading industrialist whose investments are increasingly extending beyond Nigeria to support development across the continent.
He added that Tanzania looks forward to working with Dangote Group as part of a broader vision of accelerating Pan-African industrialisation and strengthening regional manufacturing capacity.
The Minister also highlighted the importance of local refining capacity in improving Africa’s energy security, particularly in light of recent disruptions in global oil markets.
Referring to the impact of tensions around the Strait of Hormuz on global fuel prices, he said increased refining capacity from facilities such as the Dangote Petroleum Refinery would help cushion African economies against external shocks.
According to him, affordable and reliable energy remains one of the most important drivers of economic development, noting that expanded refining capacity across the continent would contribute significantly to lowering energy costs and improving the quality of life for millions of Africans.
The Tanzanian delegation was in Nigeria to follow up on discussions held earlier this year between President Samia Suluhu Hassan and Mr Dangote regarding the expansion of Dangote Group’s investment footprint in Tanzania.
The East African nation reaffirmed its commitment to deepening economic cooperation with Dangote Group, expressing strong interest in attracting new investments in fertiliser production, energy and industrial infrastructure to support the country’s long-term development agenda.
“We have come here to make a follow-up on what they deliberated with our President in terms of further Dangote investments in Tanzania,” Mr Mkumbo said.
