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Cape Town - The City of Cape Town’s inaugural green bond of R1bn went on auction on Wednesday morning in a closed bidding process.
Within two hours, 29 investors made offers totalling R4.3bn in response the R1bn that was being sold. The R1bn cleared at 133 basis points above the R186 government bond.
According to Cape Town's executive mayor Patricia de Lille, this response from the market was overwhelmingly positive and demonstrates the great appetite among investors to invest in sustainable projects.
"The market’s enthusiasm is also a resounding vote of confidence by investors in the City's governance, strong financial standing and ability to deliver on sustainable projects," De Lille said in a statement.
"Today's auction is a demonstration that it pays to go green. This is a first for Cape Town and South Africa. It has been a tremendous learning curve and it proves that there are many innovative ways to raise the finance to address infrastructure needs and to respond to climate change."
She said green bonds will be the way forward for the City in terms of how it finances projects.
The City's green bond has been certified by the Climate Bonds Initiative, while international ratings agency Moody’s also awarded the bond a GB 1 rating. This means they have been impressed enough with the green credentials and controls around this bond to name it "excellent", according to De Lille.
The projects to be funded by the green bond are a mix of adaptation and mitigation initiatives, all of which are aligned with the City’s Climate Change Strategy.
Some of the projects include procurement of electric buses; energy efficiency in buildings; water management initiatives; sewerage effluent treatment and the rehabilitation and protection of coastal structures.
The Cape Chamber of Commerce and Industry has congratulated De Lille on the success of the municipality’s green bond.
The chamber’s president, Janine Myburgh, said the success of the bond was “a clear indication of the high regard in which the City of Cape Town is held".
The fact that it comes at a time when the country as a whole has major credit problems and a junk status in international financial markets, makes it all the more remarkable, in her view.
“We believe one of the main reasons for the success is the way in which Cape Town has embraced the idea of a greener future and its enlightened approach to renewable energy. It is also a clear indication that the financial world believes that green investment makes economic sense, something we wish the rest of the country would realise,” said Myburgh.
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