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CMA says the bond is structured as a restricted public offer for sophisticated investors, who will benefit from a 50 percent guarantee from Guarantco on principle and interest payments/FILE

Kenya

CMA approves Kenya’s first Sh5bn unlisted Greenbond

CMA says the bond is structured as a restricted public offer for sophisticated investors, who will benefit from a 50 percent guarantee from Guarantco on principle and interest payments/FILE

NAIROBI, Kenya, Aug 15 – Capital Markets Authority has approved Kenya’s first Sh5 billion unlisted green bond, which will be issued by Acorn Project (Two) Limited.

According to the Authority, the approval will enable the government to raise funds to undertake sustainable and climate resilient development.

CMA says the bond is structured as a restricted public offer for sophisticated investors, who will benefit from a 50 percent guarantee from GuarantCo, a private infrastructure development company, on principle and interest payments.

“The issuance is a critical step in advancing the development of an effective ecosystem to support the establishment of green capital markets in Kenya in line with the Marrakech Pledge 2016, now that the necessary legal instruments are in place to facilitate such issuances,” said CMA Chief Executive Paul Muthaura.

Muthaura added that the Authority will continue engaging with potential issuers in order to create a pipeline of green bond issuers to facilitate effective matching of demand and supply of green-centric capital and climate-resilient investing opportunities.

Kenya’s First

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.

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

The approval by CMA comes a year after the government announced it would float the bond in the 2018 – 2019 financial year.

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

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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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