A Zambian energy company will issue a $54 million tranche of a green bond programme, the first from a firm in the country, by the end of the year with indirect benefits for forests.
The Copperbelt Energy Corporation’s $200 mln programme will look to generating at least 200 megawatts of solar energy – meaning the country will rely less on wood fuel sourced from deforestation, Biodiversity Finance Initiative (BIOFIN) Zambia announced at COP28.
BIOFIN Zambia is supporting at least five other companies on issuing green bonds with use of proceeds with a “significant inclination towards biodiversity”, it said.
Copperbelt’s bond proceeds will represent a “critical milestone towards reducing the direct pressures on biodiversity” in the country, BIOFIN Zambia said in a statement.
“Among the key drivers of deforestation and forest degradation in Zambia include unsustainable agricultural practices, as well as the heavy reliance on wood fuel, including charcoal use.”
London-headquartered investment bank Cygnum Capital was lead arranger of the bond, while Emerging Africa Investment Fund was a cornerstone investor in partnership with Johannesburg-based financial conglomerate Absa Group.
Bonds are seen by many financial actors as a key avenue for investing in nature, though they have only emerged with proceeds explicitly mentioning biodiversity in the last few years. The value of issuances tied to biodiversity rose 77% to over $160 billion this year up to the end of August, compared with the whole of 2022, according to Bloomberg.
The COP15 final agreement mentioned green bonds as one of the key ways of reaching its goal of raising $200 bln per year for biodiversity by 2030.
BIOFIN Zambia envisioned the Copperbelt programme as a “catalyst for future green bonds, whose proceeds can be channelled more significantly towards supporting biodiversity initiatives”.
UN Development Programme-managed BIOFIN plans to develop the green bond market in Zambia further through the creation of a green bond taxonomy, and an investment portal for “a pipeline of bankable projects”, BIOFIN said.
Technical support for green bond initiatives will involve reviewing project portfolios, crafting green bond frameworks, and developing reporting templates, it said.
The issuance from a Zambian company has been in the works for a few years, with BIOFIN Zambia saying it spearheaded the formulation of green bond guidelines for the country in 2019.
Sustainable Fitch noted in a report published in October how bonds with nature-related proceeds tend to offer broader opportunities for investors.
In February, International Finance Corporation updated its green bonds framework to allow the bonds to also fund biodiversity, ocean, and water protection.
By Thomas Cox – t.cox@carbon-pulse.com
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