Scoping the sustainable finance landscape in Africa: The case of green bonds

This report uses data to explore the structure and progression of the green bonds market and the challenges and opportunities which accompany it. The idea of green bonds as a means of investing in climate mitigation and adaptation has been gaining traction in Africa, but remains underdeveloped as a tool.

It also makes recommendations on how the market might be developed further:

• Conduct research on current bond issues to identify good practices and challenges. This analysis can be used to educate and raise awareness among stakeholders as a first step to mobilizing more issuers. 
• Develop the capacity of all stakeholders through training, dialogue, cooperation, research, and investment in data and knowledge sharing. Governments, auditors, local governments, corporate entities, banks, advisers/deal managers, reviewers, regulators and stock exchanges will all require training to sustain the demand and develop the market for green bonds in Africa. 
•  The processes supporting the green bond market should reflect local market conditions and involve local stakeholders in the design and rollout of appropriate national guidelines, regulations and rules. No single, universally accepted framework can satisfy every context in Africa. Guidelines should be as simple and robust as possible, with sovereign backing and international support
• Conduct research on and trial fiscal incentives to assess whether they stimulate interest and demand for green bonds in Africa.
•  Identifying the quality of the pipeline of projects – either green or perhaps brown, that is projects that are heavily dependent on fossil fuels, that require (re)financing to transition towards green – and structuring such deals will be critical. The current portfolio of eligible pipeline projects and assets is likely to be of insufficient quality or quantity to attract large-scale capital flows through green bond investments in Africa (Kidney 2019). 
• For the green finance market to thrive, a prudent mix of fiscal and monetary policy will be important in many African economies in order to maintain investor confidence.