Kenya’s first unlisted green bond has received the go-ahead from the Capital Markets Authority (CMA), after the regulator announced the approval of its issuance on August 15.
The green bond, which seeks to raise Ksh5 billion, will be issued by Nairobi based house developed Acorn under the Acorn Project (Two) Limited Liability Partnership, the regulator said. Kenya’s first ever green bond is geared at financing sustainable and climate-resilient student accomodation.
Acorn Holdings which was formed in 2015 as a joint investment with private equity firm, Helios, provides student accommodation for university learners through their commercial brand Qwetu Student Residences,
Green bonds are distinguished from regular bonds in that 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.
According to CMA, the unlisted green bond 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 regulator said in a statement.
Investment website Investopedia describes sophisticated investors high-net-worth investors who are considered to have a depth of experience and market knowledge that makes them eligible for certain benefits and opportunities.
“A sophisticated investor becomes eligible for certain investment opportunities unavailable to other classes of investor, such as pre-IPO securities and, in some cases, hedge funds. Generally speaking, sophisticated investors are seen as those who will not need to liquidate investment assets in the short term, and can even sustain a loss of their investment without damage to their overall net worth,” Investopedia says.
Kenya’s First Ever Green Bond
On the approval of the issuance of green bonds in Kenya, CMA chief executive Paul Muthaura said, “The issuance is a critical step in advancing the development of an effective ecosystem to support the establishment of green capital markets in Kenya.”
The move comes following the launch of the Policy Guidance Note on Green Bonds in February.
CMA added, “As per the issuer’s Information Memorandum, the fixed-rate bond is certified as a green bond by Climate Bonds Initiative. Sophisticated investors participating in the bond will benefit from a 50 percent guarantee from Guarantco on principle and interest payments.”
The regulator’s CEO said that CMA will continue engaging with potential issuers in order to create a pipeline of green bond issuers. Muthaura said that this will facilitate effective matching of demand and supply of green-centric capital and climate-resilient investing opportunities.
Green bonds have been hailed as having potential benefits for investors in Africa, even though they are yet to pick up on the continent.
Most of the green bonds on the continent have been issued by the Africa Development Bank (AFDB), with Nigeria, and the Southern Africa region also issuing green bonds. The Southern Africa region is served by a green bond from Bank Windhoek Ltd.
Kenya’s unlisted green bond will be the first in the region.
“Green bonds offer easy access to a large and diverse funding pool, providing a source of low-cost and much-needed capital to finance infrastructure projects and set up green funding programmes,” CMA CEO Muthaura has previously stated.