Nairobi Securities Exchange (NSE) has set April 2017 as the latest date for beginning the sale of Kenya’s first environmentally friendly bond.
The bond, which will put East Africa’s largest economy at par with its peers on the continent, hopes to tap into the growing investor appetite for green investments.
South Africa, Mauritius and Egypt stock exchanges rank companies based on their initiatives in social and environmental protection.
Its debut, according to Kenya Bankers Association (KBA) CEO Habil Olaka, may be fast-tracked to come as early as February since there is goodwill from respective shareholders.
Green bonds are deliberately designed to fund projects that have positive environmental or have climate benefits. “We have had advanced discussions with the NSE and Central Bank of Kenya, which resulted in various proposals to be explored.
Now that we have industry support, we are able to develop the roadmap and capital raising strategy,” he said.
Olaka added that National Treasury and Capital Markets Authority, the regulator of NSE, had expressed willingness to join in the move.
KBA has been partnering with NSE to push for the country’s first bank-supported climate change corporate debt instruments as part of its commitment to United Nations-led Sustainable Stock Exchanges (SSE) Initiative.
The capital flows from the green bonds will be used to finance investments in clean and sustainable development projects. Priority will be given to projects in energy, agriculture, waste management, water, transport and urban planning.
Focus will also be put on banks’ small and medium-sized enterprises clients towards extending preferential rate capital to this segment.
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According to NSE Chief executive Officer Geoffrey Odundo, the recently concluded United Nations Sustainable Stock Exchanges (SSE) executive dialogue on Green Finance that was held on the sideways of United Nations Conference on Trade and Development (UNCTAD) Conference, offered motivation to develop road-map.
“We have partnered with KBA to come up with a cooperative finance model which will see a credit-enhanced special purpose vehicle formed by KBA. The exchange will engage with CMA on the proposed structure and requisite legislation to facilitate issuance of these instruments,” he said.
Kenya will be hoping to replicate the successes in other stock exchanges such as in South Africa. The city of Johannesburg raised a $142 million (Sh14.4 billion) Municipal Bond for clean development projects.
Through KBA, banks are now beginning to include social and environmental impact as part of the checklist before they commit to fund projects.
In March, NSE joined Sustainable Stock Exchange Initiative, a UN programme to enhance governance standard for listed firms. It is planning to introduce a Index for listed companies to complement the traditional NSE 20.