Capital Markets

Kenya makes entry in green bond market. So, What are green bonds?

British real estate developer Acorn Holdings and private equity fund Helios have issued the first green bond in Kenya raising Sh4.3 billion of the targeted Sh5 billion.

They target to build up to 3,800 student hostel units in Nairobi at a cost of about Sh7.4 billion and have already put up more than 1,000 units in Ruaraka, Jogoo Road and Parklands under the Qwetu brand.

Green bonds raise capital for climate-friendly projects. Here we explain what green bonds are.

So what are green bonds?

These are normal bonds (debt instruments) raised at the capital market to fund sustainable projects that have a positive impact on the environment. Qwetu hostels, for instance, will contribute to Kenya commitment to achieve a minimum 20 percent reduction in water energy and material efficiency through green buildings.


Who issues green bonds?

A green bond can be issued by a company (corporate entities), parastatals, governments including counties.

What is the process?

For a project to qualify for financing through a green bond, the issuer has to commit to use the money only for green projects.

The issuer also has to evaluate the projects independently, manage the proceeds and report at least annually on the impact.

Is there market for green bonds?

The green bond market has grown exponentially over the past five years, reaching Sh16.9 trillion ($167 billion) issuance in 2017. There is however more supply than demand.

Green bonds have been issued all over the world with the European Investment Bank issuing the first green bond in 2007 followed by the World Bank in 2008. Corporates and municipalities entered the market in 2013.

What are advantages of investing in green bonds?

Green bond investors tend to stay with the issuer rather than sell the bond in the secondary markets.

The bonds also attract a wide range of investors seeking to positively impact the environment and allow traditional investors like pension funds to diversify their portfolio.

For local corporates, to issue a Kenyan shilling green bond means as a local currency issuance it will not present a currency volatility risk for the issuer during repayment as compared to a foreign denominated loan.


Issuers of unlisted or listed green bonds in Kenya are required to appoint an independent verifier to conduct a pre-issuance review and confirm to the investors, the Capital Markets Authority, and the Nairobi Securities Exchange in the case of listed green bonds, that the issuance is eligible to be classified as a green bond in line with green guidelines and standards.


Unlike Climate Bonds Standards that will withdraw the certification and make announcement if there’s any violation for green bonds, issuers are exempted from liability if there is a violation of Green Bond Principles.


Did you know that Conservation Capital has been marketing the five year Sh5 billion black ‘Rhino Impact Bond’ the first financial instrument working toward the conservation of a species at the risk of extinction.

Investors in the bond will earn money if black rhino numbers go up in five sites across Kenya and South Africa over five years.