Cape Town to issue first green bond in 2017

Cape Town, will issue its first green bond on 1 July 2017, speakers at a C40 event Financing Sustainable Cities announced today in London.

The bond, which is valued at around 1 billion rand (US$68 million), has secured a lead arranger, though the formal roadshow for the instrument will target mostly South African companies, including some international firms listed on the German stock exchange.

“We want to test the market. If the market is interested in the green bond going forward, we do have permission to extend it further,” a source at the event told Cities Today.

South Africa’s credit rating was lowered from BBB- to BB+ by S&P Global on 3 April, putting it at speculative or junk level status after President Jacob Zuma’s contentious decision to fire the country’s finance minister, Pravin Gordhan.

The resulting political instability combined with slow economic growth (0.3 percent in 2016 compared to 1.3 percent in 2015) caused the rand to fall 4 percent against the dollar on 31 March.

Patricia de Lille, Cape Town’s Mayor and member of the C40 platform, is credited with starting the initiative to experiment with a green bond for the city.

The source commented: “We’re hoping that there are institutions that favour the economy, and that might attract them to have green bonds on their balance sheets after of this transaction.”