Capital Markets Authority approves Kenya’s first green bond

Capital Markets Authority Chief Executive Paul Muthaura

NAIROBI, KENYA: Capital Markets Authority (CMA) has approved the issuance of Kenya’s first unlisted green bond.

Green bonds are regular bonds whose proceeds are earmarked exclusively for projects with environmental benefits, mostly related to climate change mitigation or adaptation but also to natural resources depletion, loss of bio-diversity, and air, water or soil pollution.

The green bond seeks to raise Sh5 billion to finance sustainable and climate-resilient student accommodation and is structured as a restricted public offer for sophisticated investors.

Being a restricted public offer, the issuer will raise the funds from only targeted sophisticated investors

“The issuance is a critical step in advancing the development of an effective ecosystem to support the establishment of green capital markets in Kenya in line with the Marrakech Pledge 2016, now that the necessary legal instruments are in place to facilitate such issuances,” said CMA Chief Executive Mr Paul Muthaura.

The Authority was one of the pioneer signatories to the 2016 Pledge. The approval will enable the issuer to raise funds to undertake sustainable and climate-resilient development.

As per the issuer’s Information Memorandum, Climate Bonds Initiative certifies the fixed-rate bond as a green bond.

Sophisticated investors participating in the bond will benefit from a 50 per cent guarantee from Guarantco on principle and interest payments.

Muthaura added that the Authority would continue engaging with potential issuers in order to create a pipeline of green bond issuers to facilitate the effective matching of demand and supply of green-centric capital and climate-resilient investing opportunities.

The bond, to be issued by a Nairobi-based property developer called Acorn, comes after authorities unveiled new rules in February designed to guide the issuance of green bonds.