London Stock Exchange welcomes first East African sustainability bond listing
The successful issuance of the dual-tranche Jamii Bonds by NMB Bank last year on the Dar es Salaam Stock Exchange marked a significant milestone in the growing capacity of local investors to meet the rising demand for climate and sustainability financing. The bond, Tanzania's inaugural sustainability bond, raised TZS 212.9 billion and USD 73 million, making it the largest sustainability bond issued in East Africa.
FSD Africa, a specialist development agency, played a supportive role in this historic event. They provided technical assistance for NMB Bank's portfolio review and securing a Second Party Opinion (SPO) for its sustainable finance framework. The SPO document explains to investors which eligible projects will be funded, how these projects are selected, how often impact will be reported, and how the funds raised will be managed.
The NMB Jamii Bond, now cross-listed on the London Stock Exchange, aims to increase investment into Tanzanian climate finance and development projects. Its alignment with various international organizations and their requirements and taxonomies was assessed by the not-for-profit organization Climate Bonds Initiative (CBI).
Despite the success of the NMB Jamii Bond, there are challenges in attracting private capital to climate and sustainability-focused projects in Africa. Napier, in a report, found that actual risk, perceived risk, and ticket sizes dissuaded private capital players. To address this, recommendations were made, including targeting higher leverage ratios through blended financing structures and supporting capacity building within domestic finance institutions.
International networks like GFANZ could play a crucial role in supporting pipeline development and backing transaction accelerators. Africa's climate finance needs are estimated to be $277bn annually to meet its Nationally Determined Contributions. However, Africa is projected to be $2.5trn short of the finance it needs to cope with climate change by 2030, despite contributing the least to greenhouse gas emissions.
Information exchange platforms could make existing transactions more visible to investors, helping to bridge the financing gap for projects that advance Africa's climate goals by promoting green and social investments through capital markets. FSD Africa's involvement in the NMB Jamii Bond is part of its mandate to develop sustainable financial markets in Africa, supporting instruments that directly address climate action and social development objectives across the region.
The 2022 Landscape of Climate Finance in Africa report, commissioned by FSD Africa and others, revealed that private sector financing represented only 14% of all Africa's climate finance from 2019 to 2020. GFANZ could also engage actively with domestic institutions to source and bundle viable, well-diligenced transactions to attract more private sector investment.
In conclusion, the successful issuance of the NMB Jamii Bond is a testament to the potential of sustainable finance in Tanzania and Africa at large. With the right support and strategies, it is possible to attract more private capital to climate and sustainability-focused projects, helping to meet Africa's ambitious climate goals and support sustainable development.
- The NMB Jamii Bond, successfully issued last year, is a significant milestone in the growing capacity of local investors to meet the rising demand for climate and sustainability financing.
- FSD Africa, a development agency, provided technical assistance for NMB Bank's portfolio review and securing a Second Party Opinion for its sustainable finance framework.
- The alignment of the NMB Jamii Bond with international organizations was assessed by the not-for-profit organization Climate Bonds Initiative (CBI).
- Despite the success of the NMB Jamii Bond, attracting private capital to climate and sustainability-focused projects in Africa remains a challenge.
- To address this, recommendations were made, including the use of blended financing structures and capacity building within domestic finance institutions.
- International networks like GFANZ could play a crucial role in supporting pipeline development and transaction accelerators, helping to meet Africa's ambitious climate goals.
- Information exchange platforms could make existing transactions more visible to investors, promoting green and social investments through capital markets and helping to bridge the financing gap for projects that advance Africa's climate goals.
