We connect sustainable capital allocation to real world economies by breaking down market barriers.
We connect sustainable capital allocation to real world economies by breaking down market barriers.
What is green finance, and why is it of interest to me?
Green finance is any type of financial instrument (such as loans, bonds, grants or equity) where the issuer is providing investors with a positive environmental result in addition to the financial result. There are potential green projects in almost all sectors.
The green results need to be credibly measured and reported to investors. To build trust, most issuers will need third-party validators to verify projects and green results.
As the investor appetite for green finance is exploding, validating green projects will quickly become an important sector in most African markets.
The demand for green finance products is exploding. Globally, bonds are so far the largest market and has grown 25 times since 2013. Even though it is projected to quadruple is size in 2020 it will only represent a small fraction of the total global bond market, illustrating the long-term growth potential.
Case highlight: Municipal green finance
In June 2017 Cape Town (SA) raised ZAR 1billion / USD 76 million for green municipal projects, with a special focus on transport and water issues.
KPMG in South Africa provided pre-issuance assurance services for the bond. This involved evaluating the bond management frameworks, green bond criteria and reviewing management and reporting on the use of bond proceeds.
Validation in green finance is actually a set of different services, providing opportunities for a number of actors, from consultancy companies to research institutes and NGOs:
Second-opinions on green frameworks
(certifying or validating the logic of the proposed green results, the set-up of management and reporting).
Validation of green results
(validating the project outputs, such as energy produced by wind or solar projects).
Audits of financials/financial management
(auditing financial set up, both pre-issuance and during project implementation)
The Green Assets Wallet provides issuers and validators with the tools needed to report and validate all aspects of green finance products.
With the Green Assets Wallet validators have a service to instantly build their own track-record in the new market that is green finance.
Case highlight: Different validation roles
Nigeria issued a sovereign green bond issued a N10.69bn USD 29m sovereign green bond in 2017 to fund local solar and forestry projects.
To build market credibility Nigeria had a process that certified and verified both the financials and the green credentials of the bond.
The bond was certified as fulfilling Climate Bond criteria by the Climate Bonds Initiative.
This was verified by DNV GL, who also validated that funded projects fulfill Green Bond Principles.
Finally Moody’s worked with the Climate Bonds Initiative in their review, providing the bond with a Green Bond Assessment of GB1 (Excellent)
The Green Assets Wallet is a unique service for green finance actors (validators, issuers and investors). The service supports all steps in issuance and validation of green finance products. For validators the Green Assets Wallet is a tool that supports them in their assignments, but also in expanding their service and finding new potential clients:
1. For validators the Green Assets Wallet support validators with pre-issuance assessment, second opinions, impact validations and audits. All reports are instantly connected to the reviewed projects but stored on the blockchain to provide complete trust and immutability.
2. The Green Assets Wallet makes all green finance products instantly searchable for investors, issuers and validators alike. That creates an opportunity for all actors involved to build their market track record. All validations provided are accessible for issuers and investors globally, providing a strong marketplace for green finance validators.
Case highlight: transaction support that brings green projects to the market
In October 2019 Acorn issued Kenya’s first green bond, to finance the construction of 6 green-certified student properties in Nairobi, creating clean, safe and affordable accommodation for 5,000 students. The transaction was supported by GuarantoCo, who provided investors with a partial credit guarantee to cover 50 percent of the KES 5 billion bond.
A special thank you to the Nairobi International Financial Centre Authority for their feedback on the Guides, as well as all participants at the Green Fintech Opportunities Workshop which was hosted by the Nairobi Securities Exchange. The Guides would not have been possible without their input and collaborative effort. Thanks also to the Emerging Markets Sustainability Dialogues (EMSD) programme of Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, commissioned and financed by the German Federal Ministry for Economic Cooperation and Development.
