Green bonds can help bride housing gap – Shelter Afrique

Pan African housing development financier Shelter Afrique is betting big on green financing to fund its affordable housing projects across Africa.

“Green financing offers cheaper options to fund projects whose bottom line directly impacts the environment, like the construction, and as such we are making a strategic decision to add it to our funding mix,” Shelter Afrique Chief Executive Officer Chimphondah Mr. Chimphondah said in Nairobi.

“We will engage with some of our partners to access this funding for affordable housing in Africa in the coming year,” the Chief Executive added.  

According to the climate bond initiative, green bonds issuance is expected to reach US$250 billion in 2019, up from US$170.9 billion raised in 2018.

In Africa, South Africa issued its first municipal green bond in 2014 worth R1.5bn (US$101.3 million) and the second green bond in 2017 worth R1bn (US$67.5 million)  in 2017.  Nigeria made a debut in the green bond market in 2017 issuing N10.69 billion (US$30 million), as Egypt plans a debut in 2020.

Kenya’s first green bond issued by Nairobi-based property developer Acorn Holdings for the construction of environmentally-friendly student this year raised KShs4.3 billion shillings (US$41.45 million). Egypt is expected to mark a debut in the green bond market in 2020.

“There is a market for green financing in Kenya, South Africa, and Nigeria since these countries have well-established capital markets. For instance, Kenya’s capital market has the capacity to support green bond not just for Kenya but also for the East Africa region. However, most capital markets across Africa need to be strengthened,” Mr. Chimphondah said.

In a 2018 report, “Climate Investment Opportunities in Cities”, International Finance Corporation (IFC) estimates a cumulative climate investment opportunity of US$29.4 trillion across six key sectors in emerging market cities through 2030.

The largest share of the opportunity is in green buildings (US$24.7 trillion), covering new constructions and retrofits, as cities race to accommodate their growing populations. Other key sectors identified for urban climate-smart investment include electric vehicles (US$1.6 trillion), public transport infrastructure (US$1 trillion), climate-smart water (US$1 trillion), renewable energy ($0.8 trillion), and municipal solid waste management (US$0.2 trillion).

The IFC report also indicates that more than half of the world’s population lives in urban areas, a number that is expected to reach 70 percent by 2050.

“Our research from Shelter Afrique Centre of Excellence (CoE) indicates that Africa is urbanizing at a very fast rate thus exacerbating the continent’s housing crisis. Our research also indicates that the continent requires more than US$ 1.4 trillion in funding to be able to effectively address this growing housing crisis and innovative funding options like green bonds comes in handy,” Mr. Chimphondah said.