As businesses and governments worldwide seek to finance the vast investments required for projects to combat climate change and make the global economic model more environmentally sustainable, green bonds have become a popular capital market vehicle. The products are typically structured like a corporate or sovereign bond and asset-linked, but are used to raise money exclusively for sustainable climate and environmental projects. Interest in the environmental, social and corporate governance agenda has also been an important driver of the segment’s expansion. As of early 2020 there had been five green bonds issued in Morocco to fund projects such as solar power plants, energy efficiency and sustainable buildings.
Regulatory Framework
In recent years Morocco has developed regulations to encourage the proliferation of green bonds. In 2016 – ahead of the country’s first green bond issuance – the Moroccan Capital Markets Authority (Autorité Marocaine du Marché des Capitaux, AMMC) published guidelines developed in partnership with the International Finance Corporation that set the ground rules and operational framework for green bonds. The guidelines explained how potential issuers should identify and select applicable projects, have the projects independently reviewed, and secure necessary authorisations from the regulator. The document also outlined reporting requirements.
From a regulatory standpoint, green bonds are treated similarly to traditional bonds, albeit with additional steps to ensure the funds raised are environmentally conscious and sustainable. The offerings have been successful, and authorities from around the region are taking note. “Green bonds are becoming increasingly important, and we are seeing significant interest from investors,” Nasser Seddiqi, director of financial operations and markets of the AMMC, told OBG. “Because Morocco is among continental leaders, regulators from other African countries are coming to us to learn how we adapted our regulations to support green bonds.”
In 2018 the AMMC published additional guidance on green bonds that updated the first guidelines and expanded the market financing opportunities available by introducing social and sustainability bonds.
First Issuances
Morocco’s first green bond was issued in November 2016 to coincide with the UN Climate Change Conference hosted in Marrakech. The Moroccan Agency for Sustainable Energy ( Marocaine pour l’Energie Durable, Masen) issued the 18-year, Dh1.2bn ($125m) offering. The funds were raised to finance the 160-MW Noor I concentrated solar power plant, with construction commencing in 2018. The bond was followed by a Dh355m ($37m) issue from Casablanca Finance City in September 2018 to finance three LEED-certified buildings.
As of early 2020 Morocco had issued five green bonds valued at Dh4bn ($416.7m). In addition to Masen and Casablanca Finance City, green bonds were issued by two banks for financing and refinancing sustainable energy and energy efficiency projects. In November 2018 another issue was made by state-owned housing developer Al Omrane Holding. Half of the Dh1bn ($104.2m) offering was in green bonds, while the remainder was conventional. The Al Omrane offering – more than eight-times oversubscribed – used the funds for energy efficiency and pilot housing projects that incorporated technical solutions based on different climate zones. Each of the offerings were over-the-counter deals, although the Casablanca Stock Exchange has signalled its interest in incorporating green bonds in the future.
Given the greater flexibility in broadening beyond green bonds to include social and sustainability bonds, it is expected that green bonds will play an important role in financing Morocco’s shift towards a sustainable and climate-conscious economy.
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