How to make money saving the world

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No to be dramatic, but climate change is a problem that we will spend the rest of our lives trying to correct. Green bonds are here to help.

How to make money saving the world
No to be dramatic, but climate change is a problem that we will spend the rest of our lives trying to correct.

Acceptance is the first step though, and at least we’re making progress in that regard. Since the Paris Agreement in 2015, governments, corporations, and people all over the world have made commitments to limiting the effects of climate change going forward.  But saving the world is expensive. And how do you convince people to help a worthy cause when they might not be around to reap the benefits?

Enter green bonds.

Green bonds, or climate bonds, offer a way to contribute to environmental projects while profiting from the returns. In recent years, the green bond market has exploded, growing in value to over $200 billion in 2018. As more investors are looking for environmental projects that make a difference, and more companies are trying to do their bit to move towards more climate-friendly infrastructure, manufacturing, and processes, green bonds are providing the missing link.

How they work

Green bonds can be government or corporate bonds that are earmarked specifically for environmental projects - any money invested can only be used for those projects.  The Climate Bonds Initiative plays a role in verifying eligible green projects and certifying green bonds so that investors are not blinded by greenwashing, and so that issuers are held accountable.

In South Africa, the JSE has introduced a green bond segment.

JSE green bonds are independently reviewed before they are issued, and issuers are required to disclose their profits generated from the bond, as well as how they plan to spend the proceeds throughout the lifetime of the bond.  Green bond investors also receive the advantage of added security and transparency.

The benefit

South Africa and other African countries present incredible opportunities for investment and growth in the green bond market.  Green bonds offer a way for investors to do good while doing well, and these days, who would turn down the opportunity to sleep better at night?  The green bond market also bodes well for the South African economy in general. They complement our climate action policies, and the JSE is banking on green bonds attracting international investment.

Where can I invest in South Africa?

South African issuers include government and corporate, meaning there is an ever-widening range of projects that you can choose from listed on the JSE Green Bond Segment.  Cities like Johannesburg and Cape Town have put up green bonds, which contribute to introducing more sustainable infrastructure in their cities. Corporates like Nedbank and Growthpoint Properties have been early adopters of green bonds over the past two years, and with the rate of growth, by next year, we’ll be seeing even more.

What can green bonds achieve in South Africa?

The limit does not exist.

The Johannesburg municipality has put their bonds towards a variety of projects across sectors, including low carbon infrastructure, while the City of Cape Town has focused on water management and protecting coastal structures. Nedbank green bonds have gone towards solar and wind renewable energy projects while Growthpoint Properties are focused on sustainable development. Moody’s credit rating agency predicts that the global green bond issuance for 2019 will exceed $200 billion. The impact of green bonds on combatting climate change can’t really be calculated yet, but it feels safe to be optimistic.

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