SA Affordable Housing November - December 2019 // ISSUE: 79 | Page 13

EAMONN
EVENTS
Speaking at the IHS Affordable Housing
Conference, Nedbank Senior Economist
Nicola Weimar predicted that South
Africa’s sovereign rating would definitely
be downgraded. One of the panel discussions at the IHS
Affordable Housing Conference held on
6 September 2019.
Bouma, Treasurer at Growthpoint; and
Arvana Singh of Nedbank Corporate
and Investment Banking’s Debt Capital
Markets. The moderator was Myles
Kritzinger, CFO of Transcend Property.
Singh says that Nedbank CIB has
long been involved in issuing Green
Bonds, and in April this year launched
a new model of Green Bond defined
by impact metrics, to test the market
and prove the concept as it relates
market incentives and access to
capital by developers.
“Nedbank CIB issued its first Green
Bond in 2013, a process really aimed
at creating a mind-set shift. Nedbank
is a constant, regular fundraiser on
the Debt Capital Market (DCM). The
Green Bond market – not being a
regular commercial bond – requires
a shift in transparency in disclosure
in respect of the proceeds of funding
– and it is this that the ‘impact
metric’ provides. To design that,
Nedbank looked at the business case
regarding ESG (environmental, social
and governance) criteria in terms of
measuring how assets can meet the
global test of limiting global warming
to two degrees Celsius in line with the
Paris Climate Accord. By testing those
assets as to whether they meet these
criteria, funders will be able to unlock
domestic as well as international
investment in local currency.
“The objective is that by adding
this impact metric to bond issuance
it will benefit the supply-demand
balance – albeit the evidence is
that the improvement is only slight
for the moment, in a market which has hitherto been reluctant to take
on US dollar risk. While the case
for pricing and the credit is not the
primary motivator of issuance right
now, Nedbank CIB believes it is only
a matter of time. The supply/demand
dynamic chasing green assets means
these assets are becoming ever more
valuable in the eyes of investors
investing from an ESG perspective. It
also makes it easier for issuers to raise
capital, as it really enhances our ESG
rating,” says Singh.
Nedbank embarked on a roadshow
at the end of last year, and from this
market intelligence constructed
the impact criteria instrument by
referencing four renewable energy
projects – in solar and wind energy
– and had bids of R4-billion for an
issuance of just R1-billion. Many fund
managers have a green mandate, so
this ‘ticks the box’. Consequently, the
evidence is that for funders looking at
this space, having a ‘green’ certification
compliant with CBI (Climate Bonds
Initiative) really assists in unlocking
new pockets of liquidity, and it also
deals with constraints to society in
terms of the value it brings. This is
becoming more and more topical.
More complex is the issue of
incentives available to developers
or borrowers for energy efficient
projects. International schemes
involve a reduction in interest rates,
improved gearing or better access to
capital in terms of LTV (loan-to-value).
One way to encourage green funding
is for developers to be incentivised to
apply for green funding.
www.saaffordablehousing.co.za
NOVEMBER - DECEMBER 2019
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