Good news for the SA renewable energy sector as investors acquire bonds on the Johannesburg Stock Exchange (JSE) Green Bonds segment.
Recently, Nedbank listed a Renewable Energy Bond on the bourse and made history by becoming the first bank in South Africa to offer such an instrument to investors. Launched in October 2018, the JSE’s Green Bond segment provides an excellent platform for investors to acquire green securities and also enable companies to accumulate funds for their low-carbon initiatives.
Investment Banking Principal at Nedbank, Arvana Singh explains that the green nature of the asset provides investors with an opportunity to invest in an asset which would positively affect the environment thus ticking the Environmental factor in the Environmental, Social and Governance (ESG) screen that investors are beginning to employ when undertaking investment decisions increasingly.
On April 24, the bond’s auction opened much to investors’ high anticipation.
According to Head of Debt Capital Market Origination at Nedbank CIB, Bruce Stewart, the bonds were ‘significantly oversubscribed,’ which he states is a demonstration of healthy investor appetite for good-quality environmental, social and governance-focused assets. SAPVIA is excited to see the development of new innovative solutions in the renewable energy financing sector and more so being aligned with the Sustainable Development Goals. ‘Such a substantial over-subscription shows the investor appetite for all things sustainable,’ says SAPVIA Programme Manager Officer, Niveshen Govender.
‘Renewable Energy and Solar PV specifically has long been identified as the low hanging fruit for the low carbon/climate change agenda,’ he adds.
With a market capitalisation of R5.1 billion, the JSE currently lists three bonds in its Green Bonds segment. ‘We believe there is significant potential for growth in South Africa and on the continent,’ says The Director of Capital Markets at the JSE, Donna Nemer. She states that they were pleased to have been the vehicle of choice for the bank as responsible investments have become a business priority for many organisations across the globe.
The Nedbank Renewable Energy Bond was created as per International Capital Market Association Green Bond Principles and the Climate Bonds Standard.
‘This Renewable Energy Bond builds on our well-established experience in the renewables sector and allows us to extend our support of clean energy provision in South Africa through an innovative, sustainable development goals-focused capital market solution,’ said Stewart.
He further revealed that the bank put R1.7 billion in bonds. In any case, offers worth R5.5 billion were received from an assorted spread of financial investors.
With Renewable Energy Bond, the sector has access to new sources of liquidity through the capital markets. ‘This enables banks as intermediaries to access funding from both domestic and international capital market investors, which banks can utilise to on-lend to renewable energy projects, says Singh.
SAPVIA concurs. The investment into renewable energy projects will bolster confidence into the sector and thereby increase participation in the space. ‘Increased participation equals new skills, new jobs and a growing economy,’ adds Govender.
Recently, Nedbank underwent a process of aligning its commercial activities with those of the UN’s Sustainable Development Goals (SDGs) to remain in accordance with its sustainable development commitment. The bank is focused on contributing a significant portion of its lending towards renewable energy indicated Stewart.
‘Nedbank has committed itself to contribute meaningfully to the achievement of the SDGs and this new Renewable Energy Bond is a key way in which we are transforming that sustainable development intent into tangible action.’
The bank also participates in the SA Department of Energy’s renewable energy independent power producer procurement programme (REIPPPP) and has since 2011 funded 42 transactions totalling R40 billion. Proceedings from the bonds will offer support to the wind and solar renewable energy projects that have been identified by the bank.