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Banks Gear Up to Float Kenya's First Private Sector Green Bond


Nairobi, Monday, August 8, 2016 - Banks, under the ambit of the Kenya Bankers Association (KBA), are working to develop a Green Bond Market and have partnered with Nairobi Securities Exchange (NSE) towards raising the country's first bank-supported climate change-aligned corporate debt instruments in the next six to eight months, paving the way for Kenya to join its peers in the Continent in tapping the growing investor demand for green investments. According to Climate Bonds Initiative, the climate-aligned global bond market stands at USD 696 billion with green bonds making up 17 percent or USD 118 billion.

The collaboration is in line with NSE's commitment to develop sustainable capital markets through the United Nations-led Sustainable Stock Exchanges (SSE) Initiative, which provides a framework for innovation within the capital markets, and is reinforced by the Sustainable Finance Initiative championed by KBA on behalf of the banking industry and broader financial services sector. The Kenya effort will be supported by, among other stakeholders, the Central Bank of Kenya, the Capital Markets Authority and the National Treasury and underpins Vision 2030, Kenya's Green Economy Strategy and Implementation Plan, and the UN Sustainable Development Goal on Climate that calls for urgent action to combat climate change and its impacts by the year 2030. Speaking at a consultative forum between banks, NSE and the investment community, KBA CEO, Habil Olaka, said that there is goodwill from the respective stakeholders to float the first bank-supported green bond in the coming months. "We have had advanced discussions with the NSE and Central Bank of Kenya, which resulted in various proposals to be explored. Now that we have industry support, we are able to develop the roadmap and capital raising strategy," he said. "We are also very pleased that National Treasury and Capital Markets Authority have expressed willingness to align public and private sector efforts so as to position Kenya as the leading green bond market in East Africa."

Speaking at the same event, the NSE Chief Executive, Mr. Geoffrey Odundo, said "Following the recently concluded United Nations Sustainable Stock Exchanges (SSE) executive dialogue on Green Finance held during the UNCTAD Conference, we have partnered with KBA to come up with a cooperative finance model which will see a credit-enhanced special purpose vehicle (SPV) formed by KBA. Also under consideration are the establishment of parallel programs at the bank level". "The Exchange will engage with the Capital Markets Authority on the proposed structure and requisite legislation to facilitate issuance of these instruments," he added. So far, banks operating in South Africa and Morocco are already tapping the green finance opportunities in partnership with local municipalities and development finance institutions. However, South Africa is leading in terms of green financing raised via the capital markets - primarily supported by the public sector. The City of Johannesburg raised a USD 142 million Municipal Bond which was 150 percent oversubscribed; the capital targeted clean development projects. Also in South Africa, the World Bank's International Finance Corp (IFC) successfully raised a 9 year, 1 billion Rand Green Bond via the Johannesburg Stock Exchange. The capital flows from the green bonds in Kenya will go towards funding bank clients that require finance for clean and sustainable development projects in the priority areas of energy, agriculture, transport, infrastructure, building and urban planning, and water and waste management. A special focus will also be put on banks' small and medium-sized enterprises (SMEs) clients towards extending preferential rate capital to the segment.

NOTE TO EDITORS:

The low-carbon investment category has witnessed monumental growth rates since the segment was first tracked in 2008. It is anticipated by the Climate Bonds Initiative that the climate-aligned bonds universe today stands at USD 694 billion. With the Paris Agreement (2015), further investments are expected from public sector, private sector, sovereign investment, impact investors, pension funds and blended finance. Most climate change mitigation investments are channelled towards renewable energy, energy efficiency and sustainable transport; while adaptation finance has targeted water and wastewater management. In Africa, commitments include investment targeted towards Emissions Reduction; Energy Access and Efficiency; Renewable Energy; Increase Forest Cover; Green Building & Urban Planning; and Climate Change Resilience & Mitigation. In 2011, the African Development Bank (AfDB) mobilised USD 596 million for its regional member countries to use on adaptation projects and another USD925 million for mitigation projects. AfDB mobilised funding from various investors, including the Africa Climate Change Fund, Sustainable Energy Fund for Africa, and Africa Water Facility. In 2013, AfDB raised a further USD 500 million green bond to support climate change solutions across Africa. In addition to these investors, several other funds are targeting projects and initiatives across the Continent; these include The Green Climate Fund, Adaptation Fund, Clean Technology Fund, and the Sustainable Development Investment Partnership.

About the Sustainable Finance Initiative

Commercial banks in Kenya have developed a set of universal principles that will guide them in balancing their immediate business goals with the economy's future priorities and socio-environmental concerns. By establishing the Sustainable Finance Initiative (SFI) and defining the SFI Guiding Principles and Minimum Standards, Kenya follows in the footsteps of other countries, including Nigeria, India and South Africa, which have had initiatives either spearheaded by regulators or banks to promote sustainable development. The SFI Principles are grounded in three main priorities, namely equipping the financial services sector to perform optimally in the area of comprehensive risk management; enhancing business practice, leadership and governance; and promoting industry growth and development by fostering a culture of innovation and inclusivity enabled by new technology. For more information visit http://sfi.kba.co.ke.

About the Nairobi Securities Exchange

The Nairobi Securities Exchange (NSE) is the principal securities exchange of Kenya. Besides equity securities, the NSE offers a platform for the issuance and trading of debt securities. The NSE is a member of the African Securities Exchanges Association (ASEA) and the East African Securities Exchanges Association (EASEA). It is a full member of the Association of Futures Markets (AFM) and an affiliate member of the World Federation of Exchanges (WFE), and a partner Exchange in the United Nations Sustainable Stock Exchanges Initiative (SSE).

About the Sustainable Stock Exchanges Initiative

The SSE is a peer-to-peer learning platform for exploring how exchanges-in collaboration with investors, regulators, and companies-can encourage sustainable investment and enhance corporate transparency, and ultimately performance, on ESG (environmental, social and corporate governance) issues. The SSE is convened by the UN Conference on Trade and Development (UNCTAD), the UN Global Compact, the UN Environment Program Finance Initiative (UNEP FI), and the Principles for Responsible Investment (PRI). For more information on specific exchanges' sustainability efforts, how to become a Partner Stock Exchange, and further opportunities to advance the integration of sustainability within capital markets, visit www.sseinitiative.org.


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