The Capital Markets Authority (CMA) has approved the first green bond to be issued by real estate developer Acorn Group and private equity fund Helios. This is for the purpose of increasing Ksh. 5 billion for the construction of student hostels.
Green bonds are essentially security instruments that aim to help investors raise funds for environmentally friendly projects, including renewable energies and environmentally friendly transport networks.
Acorn and Helios aim to build up to 3,800 university hostel units in Nairobi at a cost of around Ksh. 7.4 billion. They have already built over 1,000 units in Ruaraka, Jogoo Road and Parklands under the Qwetu brand.
The unlisted fixed rate bond is issued as a private placement, which means that it is marketed to a limited number of investors only. Therefore, its content and coupon were not disclosed in the CMA. Bond investors also get a partial guarantee from GuarantCo, which will allow them to recover up to 50% of their principal and interest in the event of default.
The global green bond market has grown significantly with issues totaling Ksh. 16 trillion in 2017 and around Ksh. 25.7 billion to 31 trillion last year. Kenya launched its green energy program in 2017, with the government initially setting the 2018/2019 fiscal year for the first publicly traded green energy bond.
CMA Managing Director Paul Muthaura said: “The show is a critical step in advancing the development of an effective ecosystem to support the creation of green capital markets in Kenya in accordance with the Marrakech Pledge 2016, now that The necessary legal instruments are in place to facilitate these issues.