Across Africa, sustainable development has gained momentum, and capital markets are positioned to drive the agenda. At a regional level, CoSSE is excited to have the opportunity to work with FSD Africa on accelerating the take-up of green bonds to finance sustainable green projects in the SADC region.
To address the climate crisis, multilateral organisations have emerged to expedite the attainment of a green and sustainable future through concerted initiatives. Prominent coalitions include the Paris Agreement Treaty, the United Nations Sustainable Development Goals (UN SDGs), and the Sustainable Stock Exchanges (SSE) Initiative. Of the 14 Exchanges in CoSSE, seven are partners of the SSE Initiative, namely Stock Exchanges of Botswana (BSE), Dar es Salaam (DSE), Johannesburg (JSE), Mauritius (SEM), Namibia (NSX), Seychelles (MERJ) and Zimbabwe (ZSE). That being so, these Exchanges committed to the following statement:
“We voluntarily commit, through dialogue with investors, companies and regulators, to promoting long-term sustainable investment and improved environmental, social and corporate governance disclosure and performance among companies listed on our exchange.”
Furthermore, the BSE, DSE, NSX and SEM are signatories of the Marrakesh Pledge, which is a continental coalition dedicated to fostering green finance in Africa and enabling an effective shift towards a low carbon economy.
According to research, out of all the regions, Africa is the most vulnerable and will be the most severely affected by the deleterious impacts of climate change. This is due to the climatic challenges connected to the geographical position of the continent, as well as weak infrastructures and their lack of capacity to effectively combat climate change while equipping populations with resilient mitigation strategies.
The United Nations Environment Programme (UNEP) indicates that by 2020, between 75 and 250 million people on the continent are to encounter water shortages due to increasing temperatures. The UNEP further projects that Africa’s annual GDP will decline by 2 percent to 4 percent due to climate change by 2040. The increased occurrence of reduced yields in rain-fed agriculture, droughts, heatwaves and flash floods in the SADC region are empirical evidence of global warming and a call-to-action.
To be a part of the solution, SADC Stock Exchanges are investing in the mainstreaming of green financial markets through the SADC Green Finance Programme. The main benefits of a functioning green bond market include;
- attracting new listings;
- satisfying environmental, social and governance (ESG) requirements;
- meeting a growing investor and issuer demand;
- improving investor diversification;
- enabling direct investment in social impact activities and;
- bringing a competitive edge to the market.
Although the concept of green financing is relatively nascent in the region, SADC has the second-mover advantage of learning from the pioneers and adopting tried & tested models and policies with added improvements.
Green-finance markets in the continent are more active in what are said to be Africa’s economic hubs, namely South Africa, Nigeria and Kenya. Several green bond issuances have occurred in these respective economies over the years, with the largest sale in the continent of USD200 million coming from the JSE in South Africa, in 2020. The burgeoning of green financing across the continent depends on the implementation of several components, of which the SADC Green Bond Programme aims to facilitate.
Chief among these is the regulatory component which will facilitate the establishment of a robust legal and regulatory framework to enforce transparency and compliance from issuers. Component 2 focuses on developing a pipeline of issuances for both sovereigns and corporates and demonstration transactions. Since listing a green bond will be a novelty for most issuers, the component makes a provision for specific guiding steps to support the issuers in developing green bond frameworks and facilitating verification and reporting processes.
The third component of the programme will support capacity building and market education to ensure wider uptake of green finance and, most importantly, to ensure that best practice for labelling green financial products is understood. The component will facilitate training and help organise workshops/ roundtables targeting potential issuers, investors and other relevant stakeholders.
The fourth and final component will facilitate the undertaking of a demand study to comprehensively gauge the demand for green bonds in the SADC region and understand the existing and estimated future investment potential.
As this programme gains traction, we are eager to reap quantifiable progress in the otherwise embryonic nature of the green bond market in SADC and Africa at large. The importance of the green bond market is to harness the significant role that financial markets can play in addressing the global climate change crisis. This is an opportune and critical time for SADC Stock Exchanges, particularly as governments start to pursue infrastructure development at a larger scale. Although green bonds are a relatively small slice of the global bond market, they are proving to be effective in improving companies’ environmental footprint, thereby potentially catalysing climate change.
CoSSE which was formed in 1997 is a collective and cooperative body of the 14 stock exchanges in the Southern African Development Community (SADC) region. CoSSE is charged with the responsibility to accelerate the development of the SADC capital markets through cooperation and collaboration between SADC stock exchanges and other key SADC institutions and stakeholders. CoSSE Secretariat has close working relations with the SADC Secretariat, and SADC Structures such as the Committee of Central Bank of Governors (CCBG), Committee of Insurance, Securities and Non-Banking Financial Authorities (CISNA), the Committee of Ministers of Finance and Investment (CoMFI) and the Committee of Senior Treasury Officials (CoSTO).
For more information about CoSSE, visit the website at www.cosse.africa or contact the Secretariat via telephone at (+267) 3674421 or email at email@example.com