BSE’s green listings drive garners interest
Mbongeni Mguni | Tuesday April 25, 2023 06:00
Despite containing some of the world’s most climate vulnerable countries including many with the least electricity generation, Sub-Saharan Africa currently has about $1.4 billion in sustainable or green bonds, or less than one percent of the global total.
Much of Sub-Saharan Africa’s issuances have come from South Africa, which boasts the continent’s most sophisticated financial market. The BSEL, however, has been ramping up various initiatives to attract green bond listings, including becoming the third out of four stock exchanges in Africa to have published ESG Disclosure Guidelines.
The local bourse has also been conducting capacity building workshops in conjunction with local institutional investors and global partners and has also affiliated with global entities that advance the integration of ESG into investment processes. In addition, last year, the BSEL introduced incentives for sustainable or green bonds, offering a 25% discount on listing fees for issuers. The efforts are bearing fruit, BSEL head of Listings and Trading, Tsametse Mmolai, told a recent ESG Forum.
He revealed that the Exchange is working with the Committee of SADC Stock Exchanges (CoSSE), African Securities Exchange Association, Financial Sector Deepening (FSD) Africa and the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) to prepare the regulatory and operational tools to support green listings.
“There is increasing interest to issue sustainable bonds, and they can be issued even in the current environment while we await NBFIRA approvals. “As part of a CoSSE/FSD initiative, we are ready to speak to potential issuers and hand hold them through the process,” he said. With local pension funds reaching P123.7 billion as at January, and about 62% of these invested offshore, the BSEL believes an opportunity exists for these funds to support green issuances that will boost the sustainable development projects, including those in energy and other sectors. “Whilst most proven green investors are found in Europe and Asia, local pension funds are also coming on board,” Mmolai said.
“The underwriters will include all major banks in our market and these have shown skill and intent in this regard. “(In terms of) external reviewers and verifiers, the BSE invites the likes of the Botswana Environment Assessment Practitioners Association and other professional organisations in the sustainability space to help us develop a list of competent persons in this regard.” Green bonds are expected to be critical for the country’s funding needs going forward as government has officially invited private capital to help finance upcoming National Development Plans, saying its ability to keep funding public works is weakening.
Last July, the Finance Ministry called a funders’ conference where Finance Minister, Peggy Serame revealed that between 2012-13 and 2021-22, government funded 95% of the total development spending of P108 billion, a situation she said was unsustainable going forward.
The BSEL views green bonds as a key financing tool for the country’s sustainable development aspirations, particularly as local and global investor interest in these types of instruments continues at elevated levels. “COVID-19 has worsened the situation in terms of national budgets which are stretched,” Mmolai said. “Capital markets must be tapped to contribute to deficits “Africa has plenty of ideas and assets, natural and otherwise. “For example, as the population of young able Africans is forecast to continue to rise... a capital markets’ bridge is required to bring it all together.”