Green bonds are becoming an increasingly popular form of financing worldwide as companies strive to improve their environmental, social and governance practices. Green bonds, or climate bonds, refer to a fixed-income instrument provided for climate-related or environmental projects. Institutions such as the World Bank and the European Investment Bank often issue green bonds to encourage companies to improve their environmental approach to new construction.
Between 2007 and 2020 the global green bond market achieved $1trn in the cumulative issuance of the bonds. However, fewer than 1% of these were issued in Africa between 2007 and 2018, with South Africa, Morocco and Nigeria accounting for the majority.
Commercial Real Estate
In 2021 Emergence Plaza, owner of the Cosmos Yopougon shopping mall in Abidjan, issued a corporate green bond at a value of $18.1m. This demonstrated a new type of financing that could boost sustainable construction across the country. Emergence Plaza sold the bond to Benin-headquartered Société Ouest Africaine de Gestion d’Actifs to improve its cash position. It was issued at a rate of 7.5% over eight years. Cosmos Yopougon achieved green status by way of the Excellence in Design for Greater Efficiencies (EDGE) certification from the International Finance Corporation. According to Emergence Plaza, the shopping mall used the EDGE system to reduce its carbon emissions by 44% in 2020.
This marks the first example of green bonds issued in francophone West Africa, as commercial banks typically do not issue climate financing – meaning companies rely on capital markets to connect them with buyers. Following the successful transaction, the UK’s HC Capital Properties intends to extend the programme to several of its future retail projects across West and Central Africa. “The development of this market is especially important in light of the UN’s climate change report, which underscores the need for issuers and investors to increase their focus on sustainability,” Kadi Fadika-Coulibaly, managing partner of Hudson & CIE, the transaction’s placement agent, told OBG. “Green bonds have the potential to support more environmentally friendly real estate investment and development, so this bond will pave the way for more issuance on that front.”
Potential For Green Bonds
With Côte d’Ivoire’s government announcing new environmental aims in its National Development Plan 2021-25, it is expected that private companies will be encouraged to strive for sustainable development. This will be supported by the government’s goal to source 42% of the country’s power from renewable energy by 2030.
The issuance of green bonds is a relatively new concept on the African continent. Between 2007 and 2018, 11 such bonds were issued across the region, most of which went towards the development of buildings and energy projects, at a total value of $2bn. This compares to the 222 green bonds, valued at $120bn, issued in the Asia-Pacific during the same time frame. However, there is significant potential for this figure to increase in the decade ahead as the African Development Bank Group (AfDB) develops its green bond programme. The initiative seeks to achieve green growth across the region by providing funding for climate change projects ,with additional support from private investors.
Viewed as the economic centre of francophone West Africa, Côte d’Ivoire is likely to attract greater attention from companies aiming to develop projects in line with AfDB climate goals. The country is developing several renewable energy projects, including a 44-MW hydroelectric power station and Africa’s first biomass plant. In addition, in 2020 public works developer PFO Africa completed the construction of the La Mé drinking water treatment plant for €45m. The government’s commitment to the development of a robust renewable energy sector and large-scale investment from private foreign companies in sustainable development could support greater investment in green bonds for infrastructure, energy and other climate projects in the coming years.
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