Kenya set the stage for the country’s first green bond with new rules on Wednesday, part of efforts to diversify its capital markets. Like other African nations, Kenya needs to raise billions of dollars to invest in infrastructure projects including roads, water and irrigation, railways and power generation.
“The legal framework is now in place and the rules are now out there,” said Geoffrey Odundo, Chief Executive Officer of the Nairobi Securities Exchange.
So-called green bonds are fixed income securities that raise capital to help finance projects in renewable energy, energy-efficiency, green transport and wastewater treatment.
“We are introducing a verifier component, because there is need for verification of green assets and green financing … it’s what makes it possible for issuance of green bonds,” Odundo said, adding that the target was to issue one in 2019 to provide “traction” for other issuers.
“The government of Kenya have come up strongly, that they are looking at doing a green bond and its one of the ones we are keenly talking to,” he said.
Meanwhile, two unnamed financial institutions have lined up to issue Kenya’s first ever green bonds, the country’s banking sector lobby disclosed on Wednesday. This follows regulators’ approval of the legal framework to issue the listed and unlisted financial instruments at the Nairobi Securities Exchange (NSE).
The procedures for listing of the financing instruments for climate-friendly projects on the NSE have been approved by the Capital Markets Authority (CMA) and are expected to pave the way for their issuance.
“The approval of the amendments to our listing rules to facilitate issuance of green bonds will enable the NSE offer local and international issuers additional source of green financing, improve investor diversification as well as enhance issuer reputation thus leading to growth in our market,” NSE chief executive Geoffrey Odundo said Wednesday during the launch of the amended rules.
Kenya Bankers Association (KBA) director of public affairs Nuru Mugambi said the two unnamed Kenyan banks are firming up plans to issue the special bonds to raise money in the war on climate change. She did not provide timelines. But commercial lending rates capped in September 2016 at 4 percentage points above the central bank’s benchmark rate, may make it difficult for banks to price the products.
“The rate cap is making it difficult for banks to come into the capital markets to raise capital, therefore it’s limiting the bonds, but more so it’s limiting the potential that we see within the green bonds space,” she said.
Last week, Kenya Electricity Generating Company said that it plans to raise funds from the market later this year and it may opt to issue the country’s first green bond. In 2018, finance ministry officials said that there was room to raise funding through green bonds for infrastructure projects, with an initial aim of about $50 million.
In January, HSBC said global green bond issuance is seen at $140-$180 billion this year, from $149.2 billion in 2019.
Source Reuters