Big news for the green bonds market with the issuance of a first emerging market green bond. We’re not 100% sure on the size yet but we know they were aiming for R1.5bn ($139m) and it seems as though they were more than successful.
It’s been a while in the making... the Jo'burg mayor Parks Tau made an announcement about a potential green bond at the C40 Cities Mayors’ Summit earlier this year. This is the first time in 3 years that the City of Johannesburg has raised finance through the bond market. Johannesburg has a BBB rating from Fitch.
Details are still coming out (we will update you asap) but here is what we know: the bond was priced at 185bps above the 2023 government bond, it was 1.5x oversubscribed and it’s a 10 year bond. Underwriter was Standard Bank Group.
Proceeds to be used for:
- Renewable Energy: solar-panel power generation, water heaters
- Other energy: Waste-water plants modified to generate electricity, Landfill methane gas capture and energy generation
- Transport: 152 hybrid-fuel buses
We have been told that they have followed World Bank guidelines which is a good starting point but we’ll need a bit more transparency than that. A more in-depth analysis will be published as soon as more information is available.
It’s small but very important. We think City and muni bonds are a huge potential area of growth for the green bonds market as cities raise money to finance low carbon and climate resilient infrastructure. Emerging markets are an essential part of this so bravo to Johannesburg for leading the way! We hope to make an announcement later on in the year about the work we’re doing with other organisations to grow the green city bond market.
More detail will be out on Joburg as soon as we get it but wanted to break the news to you first!
In the meantime, a little history lesson... Themed bonds and City bonds were first issued by Italian States during the Renaissance – mostly to fund wars but also to build infrastructure. The muni market as we know it was really pioneered in the US and this remains the largest muni market (by a substantial margin).The green labelled muni/city market was started with a few French regional bonds including Ile-de-France in 2012 and has since grown to include Gothenburg, Massachusetts and now Johannesburg. (We also expect that Ontario and perhaps New York might join this illustrious group very soon)
