Qwetu residences developer gets nod for Kenya’s first Ksh.5B green bond


Qwetu residences developer gets nod for Kenya’s first Ksh.5B green bond
An artist's impression of Acorn's Qwetu residence in Ruaraka, Nairobi. PHOTO | COURTESY

In Summary

  • The approval makes for Kenya’s first ecologically pegged debt-instrument and follows the subsequent launch of the green bonds markets and the development of the market’s guiding principles by the CMA in February 2019.
  • CMA Chief Executive Officer Paul Muthaura expects the approval of the bond to open the door for the adoption of the contemporary financing instrument in the country.
  • Participation in the bond is however limited to targeted investors as opposed to being publicly listed with participants receiving a 50 percent guarantee on principle and interest payments from the GurantCo

Qwetu students’ residences developer Acorn Holdings Africa has received the green light to raise a total of Ksh.5 billion in investing funds by way of a green bond following regulatory approval from the Capital Markets Authority (CMA).

The approval makes for Kenya’s first ecologically pegged debt-instrument and follows the subsequent launch of the green bonds markets and the development of the market’s guiding principles by the CMA in February 2019.

Acorn’s green bond is aligned with its ongoing student accommodation construction project in Kenya’s urban centers’ which it describes as safe and affordable housing.

The soon to be issued bond will however be restricted to targeted investors as opposed to being publicly listed with participants receiving a 50 percent guarantee on principal and interest payments from the GurantCo private development group as per the issuer’s memorandum disclosed by the capital markets regulator.

CMA Chief Executive Officer Paul Muthaura expects the approval of the bond to open the door for the adoption of the contemporary financing instrument in the country.

“The issuance is a critical step in advancing the development of an effective ecosystem to support the establishment of green capital markets in Kenya in line with the Marrakech Pledge 2016,” he said.

“We will continue engaging with potential issuers in order to create a pipeline of green bond issuers to facilitate effective matching of demand and supply of green-centric capital and climate-resilient investing opportunities”.

Proceeds from green bonds are exclusively earmarked for projects with environmental benefits related to climate change mitigation.

The description which set green bonds apart from other debt raising instruments is in the face of elevated climate-change consciousness by capital markets’ investors.

According to the Green Bonds Kenya Annual Report for 2018, the green bond market globally has grown tremendously with net issuance ranging between Ksh.16 trillion ($155 billion) and Ksh.31 trillion ($300 billion) between 2017 and 2018.

Kenya’s high dependency on natural resources whose contribution to output in GDP terms stands at a minimum 50 percent is expected to make the case for sustainable investing through green bonds, defined in the country’s risk exposure from climate change.

Acorn Holdings is expected to employ the proceeds under its Acorn Project II Partnership in plugging the financing of its student’s accommodation projects with the firm lining up new student facilities in Hurlingham and an additional pair of students housing around USIU environs in the near-term.

The firm which began developing the youth accommodation’s portfolio in 2015 has long-term plans for the setup of accommodation built specifically for young professionals in the country.

Acorn current portfolio has seen its set up student residences along Jogoo Road in Nairobi, Ruaraka, Parklands and Madaraka.

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Story By Kepha Muiruri
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