The green bond has plenty of benefits

Do you know which other bond is more exciting than the James Bond movie? The Kenya Green Bond Programme.

This week, Treasury Principal Secretary Kamau Thugge revealed plans to float a green bond between July and June next year.

This will make Kenya the first country in East and Central Africa to issue a green bond and the second country in Africa after Nigeria.

Green bonds are regular bonds but with one unique characteristic: Monies floated are exclusively for projects with environmental benefits such as those in energy, agriculture, waste and water management, transport and urban planning.

CLIMATE CHANGE

Globally, the issuance of green bonds is driven by the 2015 Paris Climate Agreement, signed by almost 200 nations with the aim of ending the fossil fuel era and shifting to renewable energy in the second half of the century.

These green bonds are expected to continue gaining momentum worldwide.

Kenya’s quest for a green and sustainable economy has been met with many challenges, with access to finance being one of the key challenges.

This green bond will be an excellent way to raise funds for these activities, which require Sh2.4 trillion.

The projects will, in turn, help reduce carbon emissions, making Kenya’s climate resilient, as well as create employment opportunities.

ADVANTAGES
There are many reasons why we should consider investing in this bond, according to the Kenya Green Bond Guidelines, including financial returns with environmental benefits.

Two, it will allow people to invest directly in “greening” industries that produce brown goods such as televisions, mobile phones and other electronic devices.

Three, the bonds enable hedging against climate policy risks.

This means that they reduce or transfer risks, thus protecting an investor’s portfolio from uncertainties that may come up in the future like adverse price movements.

Finally, a green bond satisfies the environmental, social and governance requirements for green investments mandate.

DEBTS

For the issuers, green bonds provide an additional source of funding, attract high investor demand and enhance reputation.

The bond’s value is yet to be disclosed, and the Capital Markets Authority is yet to issue guidelines on its issuance.

The Kenya Green Bond Programme is set to run for three years.

The only matters that would reduce the uptake of this green bond locally would be the corruption scandals making headlines in the country as well the debt cycle we seem to have been accustomed to as a country.

The proposed green bond will be used to bridge a deficit in the 2018/2019 budget even as Kenya plans to borrow Sh300 billion from the international market in the same financial year.

COAL
Another matter that would derail the bond uptake would be the planned coal power plant in Lamu.

Coal has devastating effects on the environment from its mining, preparation, combustion, waste, storage and transport.

While we need energy to industrialise, coal is not the way to go. Plus, we already have enough waste to convert into energy.

Shouldn’t we deal with this waste before introducing coal into the equation?

If we continue with the coal plant, a serious sustainability-oriented investor will hesitate to put his money where he will not amass his ideal environmental benefits.

This investor will see that such an investment is futile. As the government waits to issue the green bond, let it put its money where its mouth is.

Ms Wanjohi is the founder, Mazingira Safi Initiative. [email protected].