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First Kenya Govt green bond postponed as banks ready to float one

In the next six to eight months, Kenya intends to float the first ever private sector green bond whose proceeds will go solely to green projects/FILE

NAIROBI, Kenya, Feb 6 – The government has pushed the floating of Kenya’s first Green bond to the 2018 – 2019 financial year.   

Treasury Economic Secretary Geoffrey Mwau says the move is aimed at giving the Capital Markets Authority (CMA) ample time to put in place regulatory framework and guidelines for the Government bond.

Mwau, however, did not disclose the amount or the exact time the bond will be floated but said the funds will focus on investing in green projects as the country gears towards sustainable development.

Treasury had planned to float the bond early 2017 but halted the plans due to lack of a regulatory framework.

“There is a demand for green bonds in the country, but regulatory works take time, but we hope by 2018-2019 financial year,” Mwau stated.

The bond will be issued locally with international investors expected to participate.

Meanwhile, Banks through the Kenya Bankers Association are expected to float the first ever private sector green bond whose proceeds will finance climate-friendly projects by the end of the year.

This is aimed at tapping the growing investor demand for green investments.

“We have several ways in which we can do this, either through one bank issuing or all banks issuing one green bond, or a corporate customer issuing it. We are still in consultations…we have a number of banks that have green assets,” said Habil Olaka, Chief Executive, Kenya Bankers Association.

A green bond is similar to a regular bond – a debt investment in which an investor loans money to an entity (Government) which borrows the funds for a defined period of time at a variable or fixed interest rate – only that the proceeds received will be dedicated to green projects.

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Priority is given to green projects in energy, agriculture, transport, infrastructure, building and urban planning, water and waste management.

A building with a low production of carbon, for example, could be considered for financing as well as other construction projects with carbon-neutral outputs.

Even though Kenya will be the first East African country to raise a Green Bond, the model has been implemented elsewhere and worked successfully.

According to Climate Bonds Initiative, the climate-aligned global bond market stands at USD696 billion (Sh70.6 trillion) with green bonds making up 17 percent or USD118 billion (Sh11.9 trillion).

Closer home, Johannesburg raised a US$142 million (Sh14.3 billion) bond dedicating it to cleaning its roads and rectifying its sewerage system.

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