NAIROBI, Kenya, Dec 12 – Companies and governments have often floated green bonds to raise funds for environmentally friendly projects, from renewable energy and clean transport to water and waste management.
These bonds allow investors to earn a return while supporting initiatives that have a positive environmental impact.
The recent example is Safaricom’s debut green bond, which attracted Sh41.4 billion against a target of Sh15 billion, marking a 175 percent oversubscription.
Green bonds are special types of loans raised by companies or governments to finance environmentally friendly projects.
They work just like normal bonds, except the money must go into green projects such as renewable energy (solar, wind), energy-efficient buildings, clean transport (electric buses, trains), water and waste management, as well as sustainable agriculture
Investors in green bonds earn the same benefits as traditional bonds, interest payments, and principal repayment, but their investment directly supports projects with measurable environmental benefits.
When you buy a bond, you are lending money to the issuer in exchange for:
Regular interest payments (coupon) over the life of the bond.
Repayment of the principal (the amount you initially invested) at a fixed date known as the maturity date.
Bonds are a common way for organizations to raise capital for projects or operations without giving up ownership, unlike stocks.
Who can buy Green Bonds
Green bonds can be purchased by anyone, but some conditions depend on the bond type and market:
Institutional Investors-These include pension funds, insurance companies, and mutual funds.
They are the main buyers because they invest large amounts and often have mandates to support ESG (Environmental, Social, Governance) initiatives.
Retail (Individual) Investors-Many green bonds are now structured to allow individuals to invest, especially if they are listed on a securities exchange as in the case of the one for Safaricom.
The minimum investment may vary, so individuals need to meet that requirement.
International Investors-Foreign investors can also buy green bonds if the issuance allows cross-border participation.
How Green Bonds Work
Issuance-Companies or governments issue green bonds to raise capital from investors.
Use of Funds-The funds raised are dedicated to green projects.
Interest Payments (Coupon)-Investors receive regular returns over the life of the bond.
Maturity-At the end of the bond term, the issuer repays the principal investment.
Transparency-Issuers often report on the progress and environmental impact of the projects financed.
Maturity and Why It Matters
The maturity date is a critical feature of both regular and green bonds. It defines:
How long investors’ money is tied up.
When the principal will be returned.
The schedule of interest payments.
For example, the Safaricom green bond maturing in five years from the date of issue.
A clearly defined maturity makes bonds predictable and relatively low-risk, especially when issued by reputable companies or governments.
It will be listed on the Nairobi Securities Exchange on December 16.
Green bonds are often listed on a securities exchange to ensure transparency, credibility, and investor confidence.
Listing requires issuers to disclose key information such as bond terms, interest rates, maturity, and the specific use of proceeds, assuring investors that their funds are used responsibly.
It also provides liquidity, allowing investors to buy and sell the bond in the secondary market, and attracts a wider range of institutional and retail investors.
Regulatory oversight from the exchange ensures compliance with reporting and governance standards.
At the same time, public listing enhances the issuer’s reputation and signals a genuine commitment to sustainability, making the bond more attractive and trustworthy for the market.
Why Green Bonds Are Popular
Rising demand for sustainable investments-Institutional and retail investors increasingly seek ESG-compliant assets.
Reputable issuers attract trust-Investors have confidence in repayment.
Limited supply-High-quality green bonds are still relatively rare, so new issuances draw attention.
Green bonds as investment vehicles combine financial returns with environmental impact, offering investors a way to earn money while supporting sustainable development projects.
