Green bonds are debt instruments issued by Governments, Public institutions, or Private institutions to fund projects that have a positive impact on the environment, such as renewable energy or responsible waste management.
The key attractiveness of Green bonds is that they are able to attract a broader range of investors, specifically those who are stricter in terms of investing in Environment, Social and Governance (ESG) investments.
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To promote the development and growth of the domestic Green bond market in Kenya, the Green Bond Program Kenya was formed. The program is managed by various stakeholders such as The Kenya Bankers Association (KBA), Nairobi Stock Exchange (NSE), Climate Bond Initiative, Financial Sector Deepening (FSD) Africa and FMO – Dutch development bank.
In Kenya, Acorn Holding Limited issued the first Green bond on the Nairobi Stock Exchange on October 2019, with a tenor of 5 years and a coupon rate of 12.25%. Through the green bond, Acorn Holding Limited was able to raise Kshs 4.3 billion out of the targeted Kshs 2.0 billion for the development of environmentally friendly student accommodation in Nairobi.
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On January 2023, the Capital Markets Authority announced that it would support the county Government of Nairobi in issuing a green bond. The green bond targets raising a total of Kshs 17.0 billion to address the sewerage situation and expand the water pipes to meet Nairobi’s growing population.
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The Green bond market in Kenya is still young; however, it has a lot of potential, considering the success of Acorn Holdings Limited. The County governments and companies should take advantage of the green bonds to raise funds to support environmentally friendly projects.
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