A green bond is a fixed income instrument whose proceeds are used to finance or refinance projects which generate climate or other environmental benefits that conform to green guidelines and standards.
Issuers of unlisted or listed green bonds in Kenya will be required to appoint an independent verifier to conduct a pre-issuance review and confirm to the investors, the Authority, and the Nairobi Stock Exchange(NSE) in the case of listed green bonds, that the issuance is eligible to be classified as a green bond in line with green guidelines and standards.
The procedures for listing of green bonds on the NSE are outlined in the NSE listing rules, which have been amended appropriately.
“Over the next five years and beyond, green instruments will play an important but niche role in driving the growth of Kenya’s capital markets, in line with the Marrakech Pledge which calls for an increase in the volume, flow and access to finance for climate projects, alongside improved capacity and technology from developed to developing countries,” CMA Chief Executive, Paul Muthaura observed during the launch.
He further noted that the NSE and Capital Markets Authority were among the founder signatories of the Pledge during the 22nd Conference of Parties in Morocco.
The amendments to the NSE Listing Rules will enable the Exchange to mobilize domestic resources and international capital flows earmarked exclusively for environmentally beneficial investments to support the country’s transition to a sustainable economy.
Additionally, this will enable investors balance financial returns with environmental benefits whilst hedging against climate policy risk.
Speaking during the launch, NSE Chief Executive, Geoffrey Odundo noted, ‘the approval of the amendments to our Listing Rules to facilitate issuance of green bonds will enable the NSE offer local and international issuers additional source of green financing, improve investor diversification as well as enhance issuer reputation thus leading to growth in our market.”
The launch of the regulatory framework is a culmination of the work undertaken by The Green Bond Programme established in 2017, whose aim was to develop a domestic green bond market.