London Stock Exchange welcomes first East African sustainability bond listing

London Stock Exchange welcomes first East African sustainability bond listing

In the face of Africa's estimated $2.5 trillion shortfall in financing needed to combat climate change by 2030, Tanzania is making significant strides in mobilising domestic institutional capital towards environmental and social goals.

Last year, the successful issuance of the dual-tranche Jamii Bonds on the Dar es Salaam Stock Exchange highlighted the growing capacity of local investors to meet the rising demand for climate and sustainability financing. FSD Africa, a specialist development agency, played a key role in supporting Tanzanian banks, including CRDB Bank Plc and NMB Bank Plc, by facilitating access to sustainable finance instruments such as sustainability bonds.

FSD Africa acted as a principal specialist in sustainable finance, helping unlock domestic capital for climate and nature-positive investments. By providing expertise and frameworks that align these bonds with international standards, Tanzanian banks were able to issue sustainability bonds, making them attractive to investors seeking climate-resilient and socially responsible investments.

One such example is NMB Bank, a commercial bank in Tanzania, which cross-listed its inaugural sustainability bond, the NMB Jamii Bond, on the London Stock Exchange. British International Investment (BII) and the International Finance Corporation (IFC) were anchor investors in the NMB Jamii Bond, launched in both Tanzanian shillings and US dollars on the Dar es Salaam Stock Exchange in December last year.

The NMB Jamii Bond aims to increase investment into Tanzanian climate finance and development projects. To ensure the alignment of these bonds with international standards, FSD Africa provided technical assistance for NMB Bank's portfolio review, which was assessed by the not-for-profit organisation Climate Bonds Initiative (CBI).

Moreover, FSD Africa contributes to addressing Africa's $190 billion annual climate finance gap by unlocking domestic capital that is otherwise locked in low-impact assets due to high returns on government securities and weak green investment pipelines. In Tanzania, this entails collaboration with government bodies like the Ministry of Finance and public institutions, as well as engagement with local banks, to shift investment portfolios towards sustainable outcomes, such as green bonds and sustainability-linked finance.

In addition to FSD Africa's efforts, the Glasgow Financial Alliance for Net Zero (GFANZ), a group of financial institutions formed during the COP26 climate conference in Glasgow, could make existing transactions more visible to investors, support pipeline development, and back transaction accelerators. This increased visibility could further attract institutional capital to sustainable sectors in Tanzania.

However, the report "2022 Landscape of Climate Finance in Africa" revealed that private sector financing represented only 14% of all Africa's climate finance from 2019 to 2020. The report found that actual risk, perceived risk, and ticket sizes dissuaded private capital players. To address this, recommendations were made to target higher leverage ratios through blended financing structures and support capacity building within domestic finance institutions.

The People's Partnership and Good Things Foundation aim to tackle UK digital and financial exclusion, while DEG signed a $50m funding agreement to support women-led Tanzanian businesses. These initiatives further demonstrate the commitment to sustainability and inclusive growth in Tanzania and Africa as a whole.

In conclusion, Tanzania is making significant strides in climate finance, with the successful issuance of sustainability bonds and the support of development agencies like FSD Africa. These efforts, coupled with initiatives like GFANZ, aim to bridge the gap in climate finance and accelerate the transition to a more sustainable and resilient future for Africa.

1. FSD Africa is playing a significant role in helping Tanzanian banks access sustainable finance instruments, such as sustainability bonds, which are attractive to investors seeking climate-resilient and socially responsible investments.
2. The successful issuance of the NMB Jamii Bond, a sustainability bond by NMB Bank Plc, is an example of domestic institutional capital being mobilized towards environmental and social goals in Tanzania.
3. The climate and nature-positive investments enabled by sustainable finance instruments like sustainability bonds contribute to addressing Africa's $190 billion annual climate finance gap.
4. Initiatives such as the Glasgow Financial Alliance for Net Zero (GFANZ) could make existing transactions more visible to investors, support pipeline development, and back transaction accelerators, further attracting institutional capital to sustainable sectors in Tanzania.
5. Private sector financing represented only 14% of all Africa's climate finance from 2019 to 2020, and to address this, recommendations were made to target higher leverage ratios through blended financing structures and support capacity building within domestic finance institutions.

Read also: