The role of Exchanges in accelerating the growth of the Green Bonds Market: the South African case

Transcription

1 The role of Exchanges in accelerating the growth of the Green Bonds Market: the South African case A Presentation to the Colloquium on Climate Finance (Townhouse Hotel, Cape Town) By: Shameela Soobramoney Senior Manager: Group Strategy and Sustainability

2 Overview The role of exchanges Global Green Finance needs What is a Green Bond? Market trends The JSE Green Bond Framework

3 The role of Exchanges Bringing together buyers and sellers of capital Risk mitigation and cost reduction Standards setting Transparent price discovery Information distribution Barometer for the economy and investor sentiment

4 Green Finance needs USD 6-7 trillion in annual investment will be needed globally over the next 15 years to meet the demand for green investment USD 1 trillion needed from Green Bonds by 2020 e.g. environmental remediation, energy efficiency, clean energy, clean transportation and green buildings, facilitate the global transition to an environmentally sustainable and low-carbon economy. Rising climate change concerns exacerbate the need to fund this transition to a low-carbon economy as soon as possible. South Africa has significant infrastructure financing needs: National Development Plan identifies R870 billion required over next 3 years for infrastructure investment in Energy, Clean Water Transportation, Waste Management, Climate adaptation etc. Scope to finance infrastructure through the private sector demand from this sector to reduce climate-risk as apart of their portfolio construction requirements; climate risk has been identified as a systemic risk to the economy and further needs to be addressed by investors and issuers to promote their need to address climate change in terms of their sustainability goals in terms of jobs and investments.

5 What is a Green Bond Green bonds are any type of bond instrument where the proceeds will be exclusively applied to finance or re-finance in part or in full new and/or existing eligible Green Projects and which are aligned with the four core components of the Green Bond Principles. The key feature of green bonds is the use of proceeds, which are described in the bond s legal documentation, that are separately managed within the company and monitored and reported throughout the life of the instrument. 5

6 Fad or permanent feature? 6

7 Who is issuing green bonds? Source: 7

8 Green bonds issuance by volume (Q1 and Q2 2017) 8

9 Who is issuing them and what are they being used for (2016)? Use of Proceeds Source: 9

10 Emerging markets leveraging green bonds Logical financing option for NDC s Frameworks and guidelines by national government: China India Brazil Africa: Kenya, Morocco and Nigeria (Nigerian sovereign green bond due December 2017) Poland issued first sovereign Green Bond Emerging nations players coming to market: Costa Rica, Philippines, Colombia, Latvia, Mexico 10

11 Appendix: The Green Bond Principle guidelines Update to Use of Proceeds Categories 11

12 Summarising the benefits of Green Bonds for Green Investment by the Public and Private Sectors 12

13 Why do Green Bonds work - What s in it for You? Investors -Achieve intelligence on climate related issues inside existing management structure Risk management Climate stress Regulations Technology transition - Live your values Issuers -Strengthen the financial position: Investor diversification Deepened dialogue Establish a targeted dialogue between operations (projects), Finance and Management - Live your values Society -Activate (mobilize) human capital inside finance for society goals 13

14 Local capital pools (bank vs. non-bank assets) Private sector as an enabler Unlocking non-bank assets to flow to broader infrastructure financing Non-bank assets approximately 2x size of bank assets (R9trn vs R2trn) Listed instruments play a key role

15 Introducing JSE Green Bonds

16 The JSE Green Bond Framework Researched international best practice Considered local needs and possible pro s and cons of various frameworks Stakeholder engagement (issuers, investors, government, auditors, etc) Non-negotiables: The green credentials i.e. credibility Clarity re practical application of principles Reporting requirements (disclosure)

17 The Five Pillars of Green Bonds Define What is Green Select Who decides Verify Credibility from external, independent environmental experts Monitor Keep track of proceed with an earmarked account Communicate Transparency through annual reporting to investors 17

18 Thank you Contact: Shameela Soobramoney Senior Manager: Group Strategy and Sustainability Tel: Akshar Sewkuran Primary Markets: Bond specialist Tel: