Low uptake worries SADC stock exchanges
Committee of SADC Stock Exchanges ( CoSSE) has attributed the low uptake of green bonds on the continent to lack of expertise in identifying and developing bankable projects.
“A common hindrance in this region appears to be the lack of expertise in identifying and developing bankable projects to be financed by green bonds,” said CoSSE in a statement issued after a virtual workshop held recently to discuss the SADC Green Finance Demand Study.
CoSSE is a collective body of 14 stock exchanges from 13 SADC countries.
The Committee said most potential issuers in the SADC region ( excluding South Africa) are unfamiliar with the specific internal and external processes required in raising a green bond.
CoSSE is further worried that the low demonstration of financial benefits of issuing green bonds poses a barrier for issuances, which can be circumvented through long- term strategic thinking.
“Other barriers discussed are the perceptions of higher transaction costs, the small size of issuance, rigid taxonomies, and minimal technical expertise at regulatory agencies and stock exchanges.”
To close the gap, CoSSE has resolved to strengthen regulators and stock exchanges’ expertise on climate finance, establish national champions for designing and implementing market development measures for the enhanced deployment of green bonds and incentivize the potential issuers, especially banks, to develop portfolios of eligible and bankable projects for green bonds.
In addition, use of demonstration effects to promote green bonds, promote the supporting instruments for climate market development in SADC countries such as regulatory requirements, subsidization, intrinsic motivation, and project identification.
CoSSE analysis indicates that there are investment opportunities for the regional pension funds, especially in Botswana, Namibia, eSwatini and Tanzania.
“However, the inadequate enabling environment ( regulatory and capital market barriers) limit uptake,” said the CoSSE statement.
Meanwhile, from the issuers’ perspective, positive outcomes of the study reveal that banks are a prime candidate group for green bond issuance in the SADC.
“There may be an acceleration of a paradigm shift among corporates as the global regulatory standards on corporate disclosure requirements increasingly integrate ESG information and sovereigns with outstanding international bonds, could explore if a portion of their remaining international bonds may be re- financed with green bonds as part of their broader debt management strategies,” said the study.