IFC and two investment funds managed by IFC Asset Management Company--IFC Financial Institutions Growth Fund, LP and IFC Emerging Asia Fund, LP--have picked 4.99% stake in Federal Bank Limited (FBL) for Rs 916 crore, the lender said on Thursday.
The investment will aid Federal Bank’s commitment towards maintaining environmental, social and governance (ESG) standards, and strengthen its Tier-1 capital adequacy ratio. It will also held the lender expand its micro, small and medium sized enterprises (MSME) and climate finance portfolios.
“...The addition of this marquee name to the list of our prominent shareholders reinforces the trust and confidence reposed by the IFC group on the bank and its management. The infusion of quality capital further strengthens Tier 1 and overall CAR of the bank,” said MD & CEO of Federal Bank Shyam Srinivasan said.
"The equity investment is expected to see Federal Bank grow and strengthen its ESG portfolio, with increased green portfolio financing for projects including energy efficiency, renewable energy, climate smart agriculture, green buildings, and waste management," the release said.
India ranks third globally in terms of greenhouse-gas (GHG) emissions, with the country needing substantial investments to meet its goals under the Paris Agreement to reduce GHG emissions by 2030. IFC estimates a total climate-smart investment opportunity of $3 trillion in India to the year 2030, it added.
“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.
"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.
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.
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