BUSINESS REPORTER
The Green, Social and Sustainable (GSS) bond market remains a new frontier for Africa that will help the continent build a deeper, resilient and sustainable financing, experts have said.
Hanan Morsy, Economic Commission for Africa (ECA) deputy executive secretary, told a virtual workshop last week on GSS Bond Market Development GSS bonds help fill the SDG financing gap.
The workshop, meant to build awareness and explore the potential issuance of GSS bonds in West Africa by sovereign government issuers or subnational entities, was co-organised by the ECA, the World Bank and the United Nations.
“While sharing characteristics with traditional bonds, GSS bonds exclusively direct financing to projects with positive climate and environmental outcomes across energy, transportation, construction, agriculture and water sectors,” Morsy said.
“ECA has demonstrated that a green recovery, based on green investments, can generate up to 420% better returns in gross value added and up to 250% better returns in job creation.”
She noted that the workshop is the first in a series covering GSS bonds development in different sub-regions in Africa.
Given the vast investor demand and potential for GSS bonds to serve the sustainable investment needs of Africa, the workshop objective was to share information about the GSS bond market internationally and the potential for GSS bonds in West Africa.
World Bank vice president and treasurer said Bretton Woods institution “stands ready to partner with stakeholders across West Africa on this journey”.
Financing the critical needs of green growth and adaptation in Africa is a core mandate of the World Bank. Green and sustainable bonds, together with the increased level of transparency that they bring with them, can help many countries in the region in their journey towards securing market financing for future investments,” Familiar said.
The global sustainable bond issuance reached more than US$1.1 trillion in 2021 and is expected to surpass $1.5 trillion in 2022. However, sovereign sustainable bond issuance is still quite limited, representing 11% Of the total in 2021. In Africa, there have only been four sovereign issuers of GSS bonds.
Jean-Paul Adam, director, Technology, Climate Change and Natural Resources Management Division at ECA said Africa has low private sector investment and high costs of capital to invest in green, sustainable or social sectors.
“While Africa has 23% of official climate finance, it has less than 1% of global green bond issuances and is paying more than twice more than similarly rated peers to access markets,” Adam said.
He said Africa faces today multiple challenges that include, debt burden and historical high cost of borrowing, recovery post Covid, climate change related issues, energy and food shortages due to the Ukraine war.
These challenges makes it even more necessary for African States to benefit from new ways to raise money from private investors in a transparent and efficient framework and at reasonable rates.
Discussions at the workshop featured on the new market trends, practical experience from recent sovereign GSS bond issuers, requirements for GSS bond programs, a discussion of the benefits and costs associated with issuing different types of GSS bonds, and areas of potential ECA, World Bank and other donor support.
