The need to finance more environmental projects in Africa is driving two entrepreneurs to start the first exchange dedicated to green bonds.
But it will not be based in Nigeria, Africa’s most populous country and largest economy.
The Green Exchange, to be based in Ghana’s capital Accra, aims to enable companies to issue billions in green bonds and for investors to trade the debt in a secondary market, said Orla Enright, its chief executive officer.
According to Bloomberg so far, Africa has missed out on a global boom in borrowing to fund projects that help mitigate climate change.
“The reaction from companies in the region to the opportunity to issue a corporate green bond has been highly positive,” Enright said in an interview in Accra. “They’ve seen the potential of green bonds and that the time is now.”
Sub-Saharan Africa urgently needs to mobilize $50 billion annually to address climate adaptation in agriculture, power and urban infrastructure, and green bonds offer part of the solution, the Overseas Development Institute said in a research note.
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The continent is among the most at risk from climate change yet suffers from a high cost of finance.
That was one of the key issues at the United Nations climate summit in Glasgow last year, which was criticized for not doing enough to raise financial support from rich countries. Discussions on financing will resume at the next UN gathering in Egypt later this year.
So far there’s only been limited green issuance from Egypt, Nigeria and South Africa, though in other regions China and Chile have been major sellers.
“While global investment in green bonds is expected to reach $1 trillion by the end of 2022, the African market contributes only 0.4% of the global market base for green bonds,” said Enright, who was previously a partner at fintech-focused venture capital firm GOODsoil.
