The Kenyan capital market has received a boost with the introduction of ‘Green bonds’ into its various financial instruments. The capital markets authority (CMA) launched the green bonds market on Wednesday 2019. This widens options for investors who can use green bonds to finance their ventures. This is in addition to other financial facilities provided by banks and regular bonds which have been in existence.
Bonds are a form of loans which are repaid within a given time just like mortgages and credit cards. They have a maturity date which stipulates the date when the issuer of the bond must pay the investor the amount borrowed together with accrued interest.
Green bonds are similar to regular bonds, except that their proceeds are used to finance projects with environmental benefits. Investments aimed at climate change mitigation and adaptation are good examples in this category. also included are investments in natural resources such as air, water, soil and even those that aim to prevent their depletion. To benefit from this financing, investors in real estate, energy, and the wider manufacturing sector need to get innovative with these resources.
The Policy Guidance Note (PGN)
The introduction of these bonds is a product of consultative talks between stakeholders as documented in the PGN which was issued to the Capital Markets Authority by the Nairobi Securities Exchange. It guides on the issuance of Green Bonds and approves amendments to the NSE listing rules.
‘Over the next five years and beyond, green instruments will play an important but niche role in driving the growth of Kenya’s capital markets,” said the CMA Chief Executive Paul Muthaura during the launch of the bond on Wednesday.
An impetus to Kenya’s Vision 2030
This will give an impetus to Kenya’s Vision 2030, which aims to transform Kenya into a newly industrializing, middle-income country providing a high quality of life to all its citizens.
It specifically targets the following sectors in its four pillars: Wholesale & Retail, Trade, Manufacturing, Financial Services, Business Process Offshoring, and IT-Services. It also targets Education & Training, Health, Water & Sanitation, Environment, Housing & Urbanization, Gender, Youth, Sports, and Culture.
These cumulatively present opportunities for investors to identify climate-related investments to undertake in the named sectors.