Bank Windhoek pioneers on sustainability bonds

BANK Windhoek has launched Namibia’s first ever sustainability bond, and raised about N$277 million privately.

The five-year instrument has a coupon rate of JIBAR + 1,50% and will mature in June 2026.

This issue, and its launch, come just six months before the bank’s N$66 million green bond matures, and is the first to be issued in Namibia, although it has been issued before in southern Africa.

It is not clear why the bank chose the private placement way, but this exclusivity normally carries a better interest rate for investors, as opposed to when it is offered to the public.

Sustainability bonds are those financial instruments, which take a form of a bond, but proceeds raised from such are exclusively applied to finance or re-finance a combination of both green and social projects.

It is not clear to which area of green and social projects the bank intends to distribute these funds, but it indicated that it will, at own discretion evaluate social projects, as it relates to funding needs, based on the “primary objectives and the underlying impact of the project”.

Normally, projects that would be eligible for funding include those focussed on renewable energy, energy efficiency, green buildings, sustainable waste management, sustainable agriculture and tourism, as well as investments into quality, accessible and innovative healthcare and education facilities.

According to the bank’s sustainable investments manager, Ruan Bestbier, Covid-19 has led to a steep increase in demand for innovative financial products like green and sustainable bonds that facilitate and promote a shift to a more sustainable economy.

“In Namibia, we experience global warming, and the effects of climate change on our local environment and businesses are evident. It is important to note that the proceeds of the sustainable bond will support a wide array of projects offering broad societal, economic and environmental benefits,” he said.

During 2020, sustainable debt issuances reached a record high of US$415 billion globally, up 60% from 2019.

Green bonds still dominate the sustainable finance market, however, other products, such as sustainability bonds, are playing catch-up, with the market increasingly becoming diversified in the low-interest-rate environment to meet growing investor and client demand.

The bank’s managing director, Beronice Hans, said both the green and sustainability bonds issued by the bank are milestones, not only for Bank Windhoek and Capricorn Group, but for Namibia as a nation.

“We unequivocally set the tone of our commitment to sustainable finance. We believe that the green and sustainability bond issuances enable our clients’ sustainability requirements. These bonds enable them to create a complete value chain, from raising favourable funding to offering green loans with attractive and competitive terms to facilitating the transition to a low-carbon and client resilient future,” noted Hans.

Sustainability bonds have also gained popularity in other parts of Africa such as Kenya, Ghana and Nigeria, as well as South Africa.

Last month, The Namibian reported that Ghana was planning issuing sustainable bonds in an attempt to broaden access to education.

According to a Bloomberg report then, if successful, this educational bond would be the first to be issued in Africa at government level. Ghana was also celebrated this year as the first African country to issue zero-coupon bonds – a move that sparked debate on how treading down this path might lead to more expensive debt issuance in the future.

There has been a need to move away from conventional forms of financing over the past year, and this sustainability bond is expected to lead to an increase in the issuance of several instruments.

Email: lazarus@namibian.com.na

Twitter: @Lasarus_A

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