SA’s green bond market appetite grows
Investec has reaffirmed its commitment to funding a sustainable future, with the issue of the group’s first green bond. The bond is backed by a number of Investec’s flagship renewable energy projects, all of which are helping to create a cleaner future for South Africa.
The bonds raised R1bn under Investec’s DMTN bond programme. The issue, which was 3.8 times oversubscribed, highlighted a healthy appetite among institutional investors looking to make a positive impact in terms of their environmental, social and governance (ESG) commitments.
The bond also fits into Investec’s commitment to create enduring worth for all its stakeholders. “Investec is committed to the UN’s Sustainable Development Goals and to net-zero emissions, including in our Scope 3 financed emissions. Green bonds are the most well-developed of the sustainable finance markets and align well with our aspiration as a group to fund a clean and energy-efficient world,” adds Tanya dos Santos, global head of sustainability at Investec.
The bonds have been issued in line with the Green Bond Principles of the International Capital Markets Association (ICMA), a global association of debt securities issuers as well as the Investec Sustainable Finance Framework. The principles seek to support the financing of environmentally sound and sustainable projects that foster a net-zero emissions economy and protect the environment.
“Investec’s green bond issue references existing, return-generating projects, rather than future projects. These are all accredited renewable projects currently delivering clean power into the grid,” notes Louis Dirker, Head of Debt Capital Markets at Investec Bank Ltd. “In many cases, the projects also have concurrent programmes helping to create jobs and uplifting communities.”
Investec’s green bonds reference five of South Africa’s leading wind and solar projects, namely:
- Bokpoort CSP Power Plant (50MW)
- Aurora Wind Power project (94MW)
- Karoshoek Solar One Project (100MW)
- Kathu Solar Park (100MW)
- Windfall 59 Solar project (74MW)
According to the World Economic Forum, annual issuance of green bonds is expected to exceed US$1 trillion in 2023, double the amount issued last year. Considering that the global bond market is worth some US$130 trillion, there’s significant room for green bonds to grow within the fixed income asset class. And there is strong appetite from the SA market.
According to Dirker, South African institutional investors are becoming more aware of the risks of climate change to their portfolios and are having to disclose these. “There’s also greater pressure being brought to bear from their stakeholders to make a positive contribution through their ESG policies and related financing. Green bonds thus fulfil an important role within the fixed-income component of an institution’s portfolio, especially where there is a reference to bankable, cash-generative projects.”
“The green bond market is South Africa is providing a critical link in the country’s conversion to a low carbon economy – demonstrating evidence of credible transitions. Global experience shows that green bonds are a vital tool in harnessing the increasing appetite for green and social impact investments and the opportunity for South Africa is huge. We are proud to join the prestigious list of issuers – further highlighting our commitment to a net-zero emissions future,” concludes Dirker.