Big four bank Nedbank has unveiled a R2 billion tier two capital instrument on the Johannesburg Stock Exchange (JSE) to support renewable energy investments in SA.
In a statement, the bank says this instrument, which is the first of its kind in SA, is listed on the Green Bonds segment of the JSE.
The move comes after the local bourse last month announced the Green Bond Segment is being expanded to a fully-fledged Sustainability Segment and interested issuers can list social and sustainability bonds along with green bonds.
With the introduction of the Sustainability Segment, the JSE aims to provide a platform for companies to raise debt for green, social and sustainable initiatives on a trusted, global marketplace.
The JSE’s Sustainability Segment makes it easier for companies to list and trade sustainability-related instruments to raise funds for activities directed at sustainable development.
A green bond is a type of fixed-income instrument that is specifically earmarked to raise money for climate and environmental projects.
These bonds are typically asset-linked and backed by the issuing entity’s balance sheet, so they usually carry the same credit rating as their issuers’ other debt obligations.
Driving sustainable development
Nedbank says it previously offered two highly successful renewable energy green bonds, which were significantly oversubscribed, and the proceeds of which are now funding a number of high-potential solar and wind renewable energy projects.
According to Mike Davis, group executive for balance sheet management at Nedbank, this R2 billion bond underscores the bank’s commitment to driving sustainable development in Africa through the deployment of innovative funding mechanisms, to ensure capital flows are oriented towards responsible investing.
Davis points out the launch of this sustainable capital instrument was designed and created in partnership with the African Development Bank.
He says the launch also serves as a significant drawcard for foreign investment in SA, “which is sorely needed at this point, if for no other reason than to help the country build fiscal and monetary resilience and to see it through the challenging economic times that lie ahead”.
Nedbank points out that the significance of this sustainable capital instrument is further emphasised by the fact that it comes a little over a month after its shareholders unanimously voted in support of two new sustainable development resolutions.
These commit the bank to adopting and publicly disclosing an energy policy and reporting fully on its approach to measuring, disclosing and assessing its exposure to climate-related risks.
“With the imminent launch of the JSE Sustainability Segment later in July, it is imperative that banks fully embrace the absolutely vital role they must play in enabling and driving sustainable socio-economic development for the benefit of all,” Davis notes.
According to Nedbank, this bond has been validated independently by the Carbon Trust, which provided a second party opinion and reaffirmed that this capital instrument aligns fully to the Green Bond Principles, thereby lending full credibility and transparency to the utilisation of the proceeds to support sustainable development initiatives and adding significant value to the instrument and its investors.
Groundswell of innovations
Stefan Nalletamby, director for the financial sector department at the African Development Bank, congratulated Nedbank on its launch of SA’s first “green” tier two capital instrument and expressed the hope that this would be the first of many such instruments, representing a groundswell of innovative capital commitment to sustainable development by the country's financial institutions.
“We are very pleased to be able to support the South African economy by injecting investment into the private sector through a responsible and trusted partner committed to responsible investing,” Nalletamby says.
He believes this investment will help accelerate the recovery of the economy from the slowdown caused by the COVID-19 pandemic.
“The successful launch of this instrument demonstrates the growing appetite in South Africa for sustainable and renewable investment on both sides of the balance sheet,” Davis points out.
“This will not only help to underpin and drive the development of South Africa's green economy, but also send a very powerful message that it is time for both borrowers and investors to get fully behind the green agenda.”
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