On April 30, 2019, Nedbank launched South Africa’s first Renewable Energy (Green) Bond at the Johannesburg Stock Exchange (JSE) through an auction process. The Renewable Energy Bond issue received bids worth R5.5 billion and raised an initial amount of R1.7 billion. According to Bruce Stewart, Head of DCM Origination at the bank, the uptake was phenomenal. “We left money on the table, lots of money.” The Bond that was certified by the Climate Bonds Initiative (CBI) and Carbon Trust, was issued to finance four renewable energy projects. These assets had already been identified by the bank in the areas of wind and solar energy. The issue was unique as it was the first such instrument in the South African capital market, considered among the most sophisticated on the continent. Given the absence of an existing template to learn from or on which to model its own issue, Nedbank was operating from limited market knowledge. The other peculiarity with this issue is the fact that despite its relative sophistication and depth, the South African capital market does not have a one-stop, state-sponsored regulatory regime for the issuance of Green Bonds. However, the JSE’s (Johannesburg Stock Exchange’s) Green Bond segment, which largely mirrors the ICMA (International Capital Markets Association) Green Bond Principles provides a universally accepted framework. The greater challenge was to determine a taxonomy internally that could withstand scrutiny from external as well as internal parties.
This case study seeks to document this issue and its origination, from conceptualization to the point at which it went to market. Of significant interest are its critical success factors, and how Nedbank was able to innovate in a virgin environment that did not have all the conventional prerequisites for a Green Bond issuance in place, but also lacked a precedent against which it could benchmark in South Africa. It also examines how private sector players can leverage existing government programs and non-state initiatives to craft capital market instruments that allow investors to underwrite not just sustainable financial returns, but also a sustainable society, in line with the United Nations’ Sustainable Development Goals (SDGs).