Green, social and sustainable bonds to meet Africa’s sustainable investment needs

A statement from the Economic Commission for Africa (ECA) said experts were speaking at a virtual workshop on the development of the GSS bond market. The meeting aims to raise awareness and consider options for the potential issuance of GSS bonds in West Africa by sovereign government issuers or sub-national entities.

The virtual workshop was co-organized by the Economic Commission for Africa (ECA) and the World Bank and United Nations on May 26 in West Africa.

Hanan Morsy, Deputy Executive Secretary of the ECA, said: “As an innovative funding instrument, GSS bonds contribute to bridging the funding gap for the SDGs. While sharing characteristics with traditional bonds, GSS bonds exclusively direct funding to projects with positive climate and environmental outcomes in the energy, transportation, construction, agriculture and energy sectors. water “.

“The ECA has shown that a green recovery, based on green investments, can generate up to 420% better revenue on total value added and up to 250% better revenue on job creation.”

He noted that the workshop was the first in a series covering the development of GSS obligations in various sub-regions of Africa.

The workshop aims to raise awareness and explore options for the potential issuance of green bonds and other GSS bonds in West Africa, possibly by sovereign government issuers or sub-national entity.

Given the broad investor demand and potential of GSS bonds to meet Africa’s sustainable investment needs, this workshop aims to share information on the global GSS bond market and the potential of GSS bonds in West Africa.

“Funding critical green growth and adaptation needs in Africa is a key mandate of the World Bank. Green and sustainability bonds, and the higher level of transparency they bring, will help many countries in region on their journey to secure market financing for future investments, ”said Jorge Familiar, Vice President and Treasurer of the World Bank.“ The World Bank is ready to partner with stakeholders across the West Africa on this journey. “

Global sustainability bond issuance, they said, will reach more than $ 1.1 trillion in 2021 and is expected to increase to $ 1.5 trillion in 2022. However, sustainable sovereign bond issuance is relatively limited, representing only 11% of the total in 2021. In Africa , there are only four sovereign issuers of GSS bonds.

Jean-Paul Adam, Director of Technology, Climate Change and Natural Resource Management Division, ECA, said Africa has low investment from the private sector and high cost of capital to invest in green, sustainable or social sectors.

“While Africa has 23% of official climate finance, it holds less than 1% of global green bond issuance and pays more than twice as much as its peers with the same rating to access markets, ”said the ECA director.

He said Africa today faced many challenges, including the debt burden and historically high borrowing costs; recovery after Covid; climate change issues; lack of energy and food due to the war in Ukraine. These challenges make it all the more necessary for African States to benefit from new ways of raising funds from private investors in a clear and efficient framework and at reasonable costs.

The workshop discussions cover emerging market trends, practical experience of recent GSS sovereign bond issuers, GSS bond program requirements, a discussion of the benefits and costs associated with issue different types of GSS bonds and areas of potential ECA, World Bank and other donor support.

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