Nedbank, AfDB Launch South Africa’s First ‘Green’ Tier 2 Capital Instrument

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Nedbank recently announced the launch of an innovative Sustainable Development Goal (SDG) linked, Tier 2 capital instrument.

The launch of the bond, in partnership with the African Development Bank (AfDB), builds on Nedbank’s established leadership in the sustainable development finance space, having previously offered two highly successful renewable energy ‘Green’ Bonds, the proceeds of which are now funding a number of high-potential solar and wind renewable energy projects.

Stefan Nalletamby, Director for the Financial Sector Department at the AfDB, expressed hope that the launch of South Africa’s first ‘green’ Tier 2 capital instrument would be the first of many such instruments, representing a groundswell of innovative capital commitment to sustainable development by the country’s financial institutions. The use of proceeds aligns with AfDB’s ‘Light Up and Power Africa’ High 5 priority, which entails providing clean energy to the South African/Southern African Development Community power pool.

“We are very pleased to be able to support the South African economy by injecting investment into the private sector through a responsible and trusted partner committed to responsible investing. This investment will help accelerate the recovery of the economy from the slowdown caused by the COVID-19 pandemic,” said Nalletamby.

According to Mike Davis, Group Executive: Balance Sheet Management at Nedbank, the SDG bond underscores Nedbank’s commitment to driving sustainable development in Africa through the deployment of innovative funding mechanisms, to ensure that capital flows are oriented towards responsible investing.

“Our renewable energy bonds clearly demonstrated Nedbank’s commitment to facilitating asset finance with a focus on moving South Africa’s renewable energy agenda forward,” Davis explained. “But we have always recognized that maximizing sustainable development funding requires capital or debt commitment as well, and this sustainable capital instrument, with its green use-of-proceeds commitment, is our way of meaningfully delivering on this responsibility.”

The significance of the sustainable capital instrument is further emphasized by the fact that it comes a little over a month after Nedbank’s shareholders unanimously voted in support of two new sustainable development resolutions. These resolutions commit the Bank to adopting and publicly disclosing an energy policy and reporting fully on its approach to measuring, disclosing and assessing its exposure to climate-related risks.

The Bond has been validated independently by the Carbon Trust, which provided a second party opinion and reaffirmed that this capital instrument aligns fully with the Green Bond Principles, thereby lending full credibility and transparency to the utilization of the proceeds to support sustainable development initiatives, and adding significant value to the instrument and its investors.