Experts meeting in Abidjan this week agreed that Africa has not yet fully grasped the opportunities offered by green bonds (bonds issued to finance investments that meet strict sustainability requirements) and that a new approach is needed to raise awareness of these financial instruments on the continent.
Ahmed Attout (Acting Director, Financial Sector Development at the African Development Bank Group), Paul O'Connor (Executive Director and Head of EMEA Sustainable Finance - Debt Capital Markets at JP Morgan Chase), Thapelo Tsheole (President of the African Securities Exchanges Association) and Laju Atake (Senior Transactor for Debt Capital Markets in Greater Africa at Rand Merchant Bank Nigeria Limited) spoke at the US-Africa Green and Sustainable Finance Workshop, which was hosted by the US Trade and Development Agency in collaboration with the African Development Bank Group in Abidjan on 19 and 20 March 2024.
The panel discussed the current situation of the green bond market, its performance and the potential of green bonds and sustainable debt issuances to finance infrastructure and projects in other sectors in Africa.
"There is a general lack of communication concerning green bonds. This is a pipeline that needs to be developed for the African continent," Mr Tsheole said. "In Tanzania, we have a project financed using green bonds. We need to implement it and achieve visibility. But how are we to communicate?" Mr Tsheole stressed the importance of communicating with issuers and future issuers so that investors can find a place in the green bond market. He also noted that a good regulatory framework is needed to help to encourage stakeholders to invest more in green bonds.
Paul O'Connor argued that green investment in Africa was still nascent. "We have seen progress in the field. Certainly, we have worked hard, but there are things that still need to be done in order to reach out to other players and develop the sector so that it can attract international capital." Mr O'Connor said.
"It's an open market with a promising future for greater sustainability," said Ahmed Attout, Acting Director of the Financial Sector Development Department at the AfDB. "The African Development Bank Group actively supports the development of green bonds markets in Africa, upstream by supporting the creation of an enabling environment, midstream by strengthening and capacitating regional financial intermediaries and risk mitigation solutions providers, as well as downstream at the green bonds and loans issuance level either by acting as a guarantor or anchor investor," he added.
AfDB Group made issued its first green bond of USD 500 million, in October 2013 and has issued several more since then, the latest being a USD 50 million 15-year Kangaroo Green Bond issued in March 2023. The Bank also signed a joint partnership agreement in November 2023 with the Global Green Bond Initiative (a coalition of development finance institutions) to collaborate on technical assistance. The aim is to promote green bond markets in Africa and boost Africa's share of the global green bond market (in 2022 Africa accounted for less than 1 percent of over USD 2 trillion in total green issuance).
Mr Atake emphasized that the situation must change in the near future. "We need green loans. It's something that we want to put to work in Nigeria with the ambition of conquering all of the countries on the Continent."
The Bank is a catalyst in increasing the deployment of green and sustainable loans/bonds in Africa. For instance, it supports private sector entities such as the Absa Group Limited in their fund mobilization efforts by providing a sustainability-linked subordinated loan (qualifying as Tier II capital) and subscribing to a floating rate Note Social Bond (qualifying as Tier II capital). The funding supports Absa's ambition to grow its loan book growth in new sustainable lending activities, particularly for SMEs, including youth and women-owned/ led enterprises.
The Bank also supports regional member countries (RMCs) by using its partial credit guarantees to assist governments in raising sustainable/green loans/bonds at competitive rates with longer maturity. It supported of the Republic of Cote d'Ivoire's mobilization of financing earmarked for environmental, social, and governance (ESG) expenditures in line with Cote d'Ivoire's Sustainable Framework. The Bank also supported Benin, the Arab Republic of Egypt, and Senegal so that they could mobilize similar types of sustainable debt financing.
