Banking and wealth management firm Investec has reaffirmed its commitment to funding a sustainable future by issuing its first green bond, which is backed by a number of Investec’s flagship renewable energy projects, all of which are helping to create a cleaner future for South Africa.

The bonds raised R1-billion under Investec’s Domestic Medium-Term Note bond programme, which was 3.8 times oversubscribed – revealing significant appetite among institutional investors who want to make a positive impact in terms of their environmental, social and governance (ESG) commitments.

The bond also fits into Investec’s commitment to create enduring value for all its stakeholders.

According to the World Economic Forum, yearly issuance of green bonds is expected to exceed $1-trillion in 2023, double the amount issued in 2021.

Investec global sustainability head Tanya dos Santos says the firm is committed to the United Nation’s Sustainable Development Goals and to net-zero emissions, including in its Scope 3 financed emissions.

“Green bonds are the most well-developed of the sustainable finance markets and align well with our aspiration as a group to fund a clean and energy-efficient world.”

The bonds have been issued in line with the Green Bond Principles of global association of debt securities issuers the International Capital Markets Association (ICMA), as well as the Investec Sustainable Finance Framework.

The principles seek to support the financing of environmentally sound and sustainable projects that foster a net-zero emissions economy and protect the environment.

Investec Bank debt capital markets head Louis Dirker says Investec’s green bond issue references existing, return-generating projects, rather than future projects.

“These are all accredited renewable projects currently delivering clean power into the grid. In many cases, the projects also have concurrent programmes helping to create jobs and uplifting communities.”

Investec’s green bonds reference five South African wind and solar projects – the 50 MW Bokpoort concentrated solar power plant, the 94 MW Aurora wind power project, the 100 MW Karoshoek Solar One project, the 100 MW Kathu Solar Park and the 74 MW Windfall 59 Solar project.

Considering that the global bond market is worth some $130-trillion, there is significant room for green bonds to grow within the fixed income asset class, Investec reports.

Dirker explains that South African institutional investors are becoming more aware of the risks of climate change to their portfolios and are having to disclose these. “There is also greater pressure being brought to bear from their stakeholders to make a positive contribution through their ESG policies and related financing.

“Green bonds thus fulfill an important role within the fixed-income component of an institution’s portfolio, especially where there is a reference to bankable, cash-generative projects,” he adds.

“The green bond market in South Africa is providing a critical link in the country’s conversion to a low-carbon economy, demonstrating evidence of credible transitions,” says Dirker.

Global experience, he says, shows that green bonds are a vital tool in harnessing the increasing appetite for green and social impact investments and the opportunity for South Africa is “huge”.