Rules for issuing Green Bond and Sustainability-themed products in the Ghanaian capital market have been approved by the Securities and Exchange Commission (SEC), Managing Director of Ghana Stock Exchange, Ekow Afedzie, has revealed.
A green bond – a type of fixed-income instrument – is specifically earmarked to raise money for climate and environmental projects. The green bond market should provide diversity in investment securities; and the investor base in the Ghanaian fixed income market, given pension funds and other fund managers, needs an extra class of securities in its portfolios to reduce risk
Available information indicates that the Exchange has already begun engagement with potential issuers and market operators, as well as training investors ahead of officially launching the green bond and sustainability-themed products market before end of the year.
Following the UN Sustainable Stock Exchange initiative’s signing, Mr. Afedzie said: “Being part of this initiative further reinforces our commitment to ESG, following the recent approval of green bond and sustainability-themed product rules in the Ghanaian capital market”.
As a way to mitigate the effects of climate change and environmental degradation, a legal and operational framework for the capital market in Ghana has become crucial in order to pave the way for issuances of green and social bonds.
According to Ghana’s intended nationally determined contribution (INDC) document, over a 10-year period the country needs about US$22.6bn in investments from domestic and international public and private sources to finance its climate actions, starting from 2020. Out of the total, US$9.81bn representing 45 percent is needed for mitigation – while the remaining US$12.79bn will be required for adaptation.
“Joining the UN Sustainable Social Exchange initiative could not have come at a better time, when there is a global trend toward sustainability-themed products by most Exchanges across the world to support Environmental, Social and Governance (ESG) initiatives,” the Exchange’s Managing Director highlighted.
The framework for green and social bonds will increase the range of product offerings in the market while addressing important environmental and social issues which have gained the attention of financial markets over the last two decades.
The market, when developed, will support Ghana’s transition to a lower-carbon future, as specified in the country’s agreed contributions under the Paris Climate Agreement.
The government of Ghana signalled its intention to issue green and social bonds of up to US$2billion by November 2021, which would have made it the first African country to sell such debt to fund development programmes and refinance debt used for social and environmental projects and pay for education or health.
The GSE has emerged as a major provider of investment capital inflow in Ghana, operating in three markets: namely the Equity Market which is the main market; the Ghana Fixed Income Market (GFIM) which is the bonds market; and the Ghana Alternative Market (GAX), which is the market for small and medium businesses.
