LocationsBIOFIN Zambia works with partners to catalyze investment towards an economically prosperous and climate secure Zambia
Green Bonds – A New Frontier in Zambia’s Sustainable Path
May 31, 2024
The mission team touring the CEC Solar Plant
The operative word change, in Climate Change, informs us of the shifting and unpredictable nature of the phenomenon that continues to characterise daily life for many across the world. As a result, combatting the effects of climate change and biodiversity loss and promoting adaptation calls for equally innovative and dynamic approaches that have the capacity to evolve with our changing environments, and even pre-empt climate and nature related shocks and disasters. Green Bonds are one such intervention which offers investors an avenue to pour financing into projects that directly address the shifting concerns and needs of communities and areas affected by climate change, environmental degradation, and biodiversity loss.
Born from a phone call in 2007 between a bank and a group of Swedish pension funds looking to invest in projects that address climate change, green bonds are a unique mechanism and specific innovative approach to using age old bonds for the express benefit of stimulating investments in projects that work to promote environmentally positive outcomes for example, mitigating or enforcing adaptative solutions to help resolve nature and environmental challenges.
In 2023, 15 years after the first Green Bond was issued by the World Bank, Zambia joined the green financing revolution, issuing its first ever green bond. These green bonds are the vehicle upon which Zambia can transform its approach to enhancing environmentally positive activities and initiatives and its response to climate and nature related shocks, like the ongoing drought caused by El Niño.
The mission team inspecting site the Copperbelt Energy Cooperation's solar panels
Aside from the fact that green bonds directly address climate change and enhance efforts to tackle climate and nature related risks and scale the implementation of adaptative measures, Green Bonds also stimulate financial investment in the country – making it possible to support Zambia’s economic development goals, all while offsetting the impact of climate change, environmental degradation, and biodiversity loss in the region. Analysts expect the global green bond market to be worth between $4.7 trillion and $5.6 trillion by 2035. Zambia is currently tapping into this market in the early adoption phase, ensuring that its position in the growing market is continuously strengthened.
UNDP’s Biodiversity Finance Initiative in Zambia (BIOFIN Zambia) is working hand in hand with the Securities and Exchange Commission, the Ministry of Green Economy and Environment, and other members of the Green Finance Mainstreaming Working Group to create an enabling environment that would enhance the utilisation of green bonds in Zambia by addressing market challenges and providing targeted support to scale development efforts in Zambia’s green bond market.
On a visit to the Copperbelt Energy Cooperation Limited (CEC) in Kitwe, the issuer of Zambia’s debut green bond, the BIOFIN Zambia team and its partners engaged key stakeholders to gain insights on the experiences, challenges, and bottlenecks that CEC faced during and after the green bond was issued.
The mission revealed a need for enhanced awareness among potential investors to educate them on the available opportunities for growth in the sector. Further investigations highlighted the need to refine existing regulatory frameworks through collaboration with regulatory bodies – leading to the establishment of clear guidelines and governance standards that will ensure transparency in green bond practices and mitigate the risk of greenwashing. Moreover, advocating for economic stability measures, improving credit ratings, and enhancing market infrastructure will be essential to facilitating a conducive environment for sustainable green investments in Zambia. Through addressing these issues, the Green Finance Mainstreaming Working Group will establish a robust green bond market that attracts diverse investments, promote environmental sustainability, and contribute to long-term economic growth in the country.
Although notable positive achievements have been observed from this landmark initiative, BIOFIN Zambia will continue to partner with Government agencies, financial sector regulators, investors, private sector bodies and other key stakeholders, to further explore the opportunities and challenges in developing Zambia's green bond market, and to catalyse increased investments in a climate and nature secure future for the country and its people. Bruno Mweemba, the Senior Technical Advisor on Environmental Finance for the African Region noted that,
Green Bonds in Zambia signify a pivotal shift towards sustainable finance, harnessing global capital to fortify our environment and economy against the uncertainties of climate change and biodiversity loss.— Bruno Mweemba, the Senior Technical Advisor on Environmental Finance for the African Region
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