JSE launches green bond segment

25th October 2017

     

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The JSE on Wednesday launched its green bond segment, which provides a platform for companies and other institutions to raise funds that are ring-fenced for low-carbon initiatives.

It also enables investors to invest social responsibility investment funds in securities that are truly green.
 
JSE Capital Markets director Donna Nemer says the introduction of the new green bond segment provides companies with an effective tool to raise capital for investments into sustainable projects.

“Issuing a green bond can help companies strengthen their credentials as sustainable and responsible organisations. At the same time, green bonds allow investors to mitigate the effects of climate risk as a part of their investment portfolio, while these bonds also satisfy environment, social and governance requirements and green investment mandates.”
 
Nemer adds that emerging markets are especially vulnerable to the impact of climate change.

“The JSE views combatting this problem as imperative to building a climate-resistant future for the African continent in securing future jobs and investments. Globally, we are still very far away from realising the level of investment necessary to prevent global temperatures from rising further. Green bonds can play an important role in addressing this shortfall.”
 
The global market for green bonds is currently valued at around $895-billion and year-on-year issuance has doubled in size annually over the past two years.
 
The JSE has aligned its green bond listing requirements with international best practice but included specific rules pertaining to green bonds in the South African context. This includes that institutions which issue a green bond appoint an independent reviewer to confirm that the bond can be classified as green according accepted industry standards.

The JSE also requires green bond issuers to disclose the proceeds generated through issuing the bond, as well as how these funds are applied throughout the lifetime of the bond. This ensures that the capital raised is applied to the green projects it is earmarked for to give investors assurance that the funds are applied in line with the issuers intentions of raising a green bond.
 
EARLY ADOPTER

The City of Cape Town green bond, which is already listed on the JSE’s bond market, was certified by the Climate Bonds Initiative, while international ratings agency Moody’s also awarded it an excellent GB 1 rating.

The projects to be funded by the green bond are a mix of adaptation and mitigation initiatives and include the procurement of electric buses, energy efficiency in buildings and water management initiatives like water meter installations and replacements, water pressure management and the upgrade of reservoirs.

The city raised R1-billion for these projects when it issued the ten-year bond in July.
 

Edited by Creamer Media Reporter

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