For many African companies seeking capital, the financing conversation still begins with familiar questions: Is the business profitable? Can it repay the loan? Is the project technically feasible? What collateral is available?
Those questions remain fundamental. But they are increasingly no longer the only ones.
Development finance institutions, international banks, export credit agencies and sustainable-finance investors increasingly assess environmental, social and governance considerations alongside traditional financial and technical analysis. IFC’s Performance Standards, for example, establish environmental and social requirements that IFC and MIGA clients must apply to activities they finance. The Equator Principles provide a similar framework for participating financial institutions assessing environmental and social risks in project-related financing.
For companies, this creates both a requirement and an opportunity.
A potentially good business can be poorly positioned for finance
Consider an African manufacturing company seeking financing for a new production facility.
Commercially, the investment may make sense. Demand exists. Revenues are growing. The company can demonstrate its ability to operate the facility.
But the prospective financier may also want to understand its energy consumption, emissions, waste management, occupational health and safety, labour practices, community impacts and governance arrangements.
An export credit agency supporting the purchase of foreign equipment may have its own environmental and social due-diligence requirements. The OECD’s 2024 Common Approaches, for example, establish environmental and social due diligence for projects supported by official export credits.
The company may already be performing relatively well on many of these dimensions.
The problem is that it may never have identified, quantified or documented them.
Energy-efficient equipment may simply appear in the capital expenditure budget. Local employment may be recorded only through payroll. Water savings may never have been measured. Workplace safety systems may exist operationally but not in a form suitable for investor due diligence.
The sustainability value exists. The financing evidence does not.
Sustainability can also open different financing doors
This distinction becomes even more important when companies look beyond conventional corporate finance.
Green loans are built around financing eligible green projects and require borrowers to identify how proceeds will be used. Sustainability-linked loans take a different approach: their financial characteristics can vary according to the borrower’s achievement of predefined and measurable sustainability performance objectives.
A company therefore cannot simply say: “Our project is sustainable.”
It needs to demonstrate why.
A solar installation can be quantified through renewable-energy generation and avoided emissions. A new industrial process may reduce energy or water intensity. A transport investment might replace a more emissions-intensive alternative. A healthcare or education investment may create measurable social benefits.
Recognising these characteristics does not automatically make a project financeable. Creditworthiness, cash flows, risk allocation and commercial fundamentals remain essential.
But failing to recognise them can mean that potentially relevant financing instruments are never considered.
The financing gap can therefore also be an information gap
This is particularly important for firms operating in markets where sustainable-finance capabilities are still developing.
Management teams are understandably focused on operations, customers and profitability. Sustainability information may sit across engineering, human resources, finance, procurement and operations, without anyone connecting it to the financing strategy.
The result can be a mismatch.
The company thinks in terms of assets and expenditure. The financier thinks in terms of eligibility, risks, safeguards, KPIs and measurable impacts.
Both may be looking at exactly the same investment but describing it through different frameworks.
Closing that gap requires more than producing an ESG report.
It requires translating the underlying economics and operations of the business into information that responds to financing requirements.
From sustainability performance to financing readiness
A useful starting point is therefore not: “How sustainable is our company?”
but: “Which aspects of our business and investment programme are financially material, environmentally or socially relevant, and capable of being demonstrated to prospective financiers?”
That changes the exercise.
It means identifying eligible investments, establishing credible baselines, measuring performance, understanding environmental and social risks, strengthening policies where necessary and matching those characteristics against potential financing instruments.
This is an area DSI Analytics is working to support.
Our approach is to help businesses connect sustainability with the financing decision: identifying relevant sustainability characteristics, assessing gaps against financier requirements, developing measurable indicators and translating those findings into a credible financing proposition.
The objective is not to make every business appear “green”.
It is to make sure that where genuine sustainability value exists, companies can recognise it, demonstrate it and use it as part of a stronger conversation with capital providers.
Because in a changing financial market, a company can have a good investment opportunity and still miss the right financing opportunity simply because it has not learned how to make the full value of that investment visible.