London Stock Exchange lists initial East African sustainability bond offerings
NMB Bank Cross-Lists Inaugural Sustainability Bond on London Stock Exchange
NMB Bank, a leading commercial bank in Tanzania, has made a significant stride in sustainability financing by cross-listing its inaugural sustainability bond, the NMB Jamii Bond, on the London Stock Exchange. This move cements NMB Bank's position as a trailblazer in sustainability within the African capital markets.
The listing of the Jamii Bond was facilitated by a series of preparatory steps. FSD Africa, a specialist development agency, provided technical assistance for NMB Bank's portfolio review. This review, assessed by the not-for-profit organisation Climate Bonds Initiative (CBI), ensured that the projects align with the eligibility criteria for green projects.
However, during the period the report was undertaken, actual risk, perceived risk, and ticket sizes dissuaded private capital players. This reflects a broader challenge in Africa, where private sector financing represented only 14% of all Africa's climate finance from 2019 to 2020, according to the 2022 Landscape of Climate Finance in Africa report.
To address this, initiatives like South Africa’s Just Energy Transition Plan, Egypt’s Country Platform, and the World Bank/AFDB’s Mission 300 aim to crowd in private finance via policy reforms, blended finance, guarantees, insurance, and local currency financing that de-risk investments.
Strengthening and expanding country climate finance platforms under strong government leadership is key to improving and scaling private climate finance. These platforms provide clear policy signals and aligned investment frameworks, reducing investment risks and uncertainties, making climate projects more investable for private actors.
Utilizing blended finance models, guarantees, and risk mitigation tools like local currency facilities and insurance products also attract private investors who seek reasonable risk-return profiles. Improving transparent, comprehensive tracking and reporting of private climate finance flows, especially for adaptation, demonstrates viable business models and unlocks more private capital.
The successful issuance of the dual-tranche Jamii Bonds on the Dar es Salaam Stock Exchange last year highlights the growing capacity of local investors to meet the rising demand for climate and sustainability financing. The bond, launched in both Tanzanian shillings and US dollars, raised a total of TZS 400bn (€142m) from both local and international investors in its initial offering.
Information exchange platforms and financial alliances, such as the Glasgow Financial Alliance for Net Zero (GFANZ), could make existing transactions more visible to investors, support pipeline development, and back transaction accelerators. Development partners could also support private insurance and partial guarantees to encourage private sector participation.
As Africa is projected to be $2.5trn short of the finance it needs to cope with climate change by 2030, these measures are crucial in closing the financing gap. Africa's climate finance needs are estimated to be $277bn (€255bn) annually in order to meet its Nationally Determined Contributions. The NMB Jamii Bond aims to increase investment into Tanzanian climate finance and development projects, contributing to this needed finance.
- NMB Bank, a trailblazer in sustainability finance within the African capital markets, has cross-listed its inaugural sustainability bond, the NMB Jamii Bond, on the London Stock Exchange, marking a significant step in development finance.
- To attract more private equity and ensure alignment with green projects, NMB Bank sought technical assistance from FSD Africa for a portfolio review, which was assessed by the Climate Bonds Initiative.
- Despite the eligibility criteria being met, private capital players were deterred during the review period due to actual risk, perceived risk, and ticket sizes- a challenge that affects 86% of Africa's climate finance, according to the 2022 Landscape of Climate Finance in Africa report.
- To address this challenge, initiatives like South Africa’s Just Energy Transition Plan, Egypt’s Country Platform, and the World Bank/AFDB’s Mission 300 aim to crowd in private finance via policy reforms, blended finance, guarantees, insurance, and local currency financing, addressing the de-risking of investments.
- Strengthening and expanding country climate finance platforms, led by strong government leadership, can significantly improve and scale private climate finance by providing clear policy signals and aligned investment frameworks, thus reducing investment risks and uncertainties, making climate projects more investable for private actors.
