The government needs to establish viable projects that will enhance uptake of Kenya’s first Green Bond ahead of its issue expected in the 2018-19 financial year, analysts have said as quoted by The Star. In its first quarter 2018 market review, Cytonn Investments said for the bond to be successful, the government should identify viable projects that fit into the green bond objectives and educate investors.
“This should be done prior to issuing the green bond, in order to appeal to the target market, for the bond to be successful in achieving its purpose,” the report stated.
The government has been postponing issuance of the first Green Bond since 2017, nearly two years after a proposal was tabled at the Nairobi Securities Exchange in July 2016. The green financing tool set to be issued locally but open to foreign investors, is a long term debt used to fund projects revolving around renewable energy, reduction in emissions and pollution, a move aimed at boosting environmentally friendly developments and promoting sustainability.
“The issuance of a green bond will serve to attract more investors into the renewable energy space, diversifying energy sources and increasing foreign direct investment volumes into the country from foreign social investment entities that support green living,” the report stated.
According to Cytonn, investing in preparatory work will avoid a slump in uptake as a result of poor awareness as was the case with the government retail bond M-Akiba.
“While we commend innovation, the M-Akiba Bond introduced in the first quarter of 2017 as a way of providing an avenue for smaller retail investors to invest in government securities and encouraging a savings and investment culture in Kenyans, might not have met its purpose,” the report stated.
Whereas the pilot issue of the bond managed to raise Sh150 million, 100 per cent of its target, the second issue of M-Akiba was only able to net in Sh247 million of the Sh1 billion offered by government. The corporate sector, spearheaded by Commercial Banks is also on the move to issue a Green Bond.
KBA chief executive Habil Olaka said banks have already come up with three ideas within the Kenya Green Bond Programme. These include issuing it through an individual bank within the banking sector where one bond is issued, but is available in a number of banks or going out to the market as a corporate and issuing a green bond.
It could also be done through a combined facility where a number of banks come together and issue through a collective vehicle where a corporate customer of a bank can come out and issue a green bond.
“We hope to have the inaugural issue of the bond within this financial year, and as the government introduces its sovereign bond in the 2018-19 financial year, the corporate sector will also issue a Green bond that will effectively ride on what has been laid down by the sovereign green bond,” Olaka said.
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