With P70.7 billion or 61% of the country’s pension funds invested offshore as at May, the local bourse believes an opportunity exists for these funds to return home and help meet the country’s sustainable development projects, including those in energy and other sectors.
In addition, Parliament recently passed amendments to the Retirement Fund Act that allow pension funds to invest a minimum of 50% of their assets domestically, up from 30%, in a move that will see asset managers pursue opportunities in the local market.
This week, BSE head of product development, Kopano Bolokwe said there was a broad spectrum of opportunities across different sectors that could be funded through sustainable bonds.
“These include projects to do with renewable energy, smart transportation, green buildings, conservation, wastewater treatment, among others,” he said in a written response to BusinessWeek enquiries. “Increasingly, corporates are moving towards green buildings guided by the Green Building Council in Botswana.”
He added that other opportunities lay in the various clean energy initiatives under the country’s Integrated Resource Plan, government’s blueprint for electricity development and procurement over the next 40 years. In addition, some of the investment pitches received by the BSE under its Tshipidi Mentorship programme are “ripe candidates” for green finance, gender-oriented finance, and impact investment, Bolokwe said.
He explained that BSE was offering discounts to promote the issuance of sustainable bonds and mobilise funds for sustainable development by both government and private sector.
“According to various studies that have been conducted, these bonds, on average have yields that are lower relative to conventional bonds,” Bolokwe said. “This implies that investors in these bonds aren’t primarily chasing yield-enhancement or return maximisation, but are often investing because of the development impact that the funds raised will create. “In recognition of this, regulators such as stock exchanges and policymakers such as government and government agencies are increasingly seeing the need to create an enabling environment to incentivise issuance of bonds of such risk-return characteristics in a cost competitive manner, in order to achieve the various sustainable development projects.”
He continued: “In a number of jurisdictions you will find that expenses associated with listing green bonds are tax-deductible, or there are grant schemes to subsidise the cost of issuance, or the interest payment from these bonds is not charged any withholding tax. “In our capacity, and from our disposition as the BSE, we decided that in order to promote the issuance of sustainable bonds on the BSE, to mobilise funds for sustainable development by both government and private sector, we need to make the cost of listing these bonds lower relative to conventional bonds.”
Bolokwe revealed that the BSE has received enquiries from potential issuers of sustainable bonds, as well as from advisors such as law firms and arrangers. Enquiries have been around prospective issuances, as well as the process and requirements for such listings.
“Behind the scenes, there is traction in terms of preparations to come to market but concrete information will obviously reach the investing community once a formal application has been submitted for approval by the exchange. “It is important to emphasise that any issuer can issue green or social bonds on the BSE using the prevailing debt listings requirements and the global standards in respect of green or social,” he said.
Bolokwe said sustainable bonds were increasingly popular with investors who are looking for financial instruments which meet their Environmental, Social and Governance criteria. The standards certifying such bonds as sustainable are international and the BSE is in the process of embedding them into its debt listings requirements.
“As sustainable bond issuers provide periodic reporting of their projects which are financed by their proceeds, investors may also monitor the situation, providing them a sense of involvement,” he said.
By September 30, the BSE had 43 bonds listed, with a total market capitalisation of P25.4 billion.
