29 April 2024

Corporate Blue Bonds: A First In Africa



ENS is an independent law firm with over 200 years of experience. The firm has over 600 practitioners in 14 offices on the continent, in Ghana, Mauritius, Namibia, Rwanda, South Africa, Tanzania and Uganda.
Within the global trend towards sustainable finance opportunities and initiatives, green bonds have gained significant attention. Perhaps less well known, a sub-category of green bonds...
South Africa Finance and Banking
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Within the global trend towards sustainable finance opportunities and initiatives, green bonds have gained significant attention. Perhaps less well known, a sub-category of green bonds called 'blue bonds' has started appearing more commonly in the market and arguably serves equally important sustainable targets and projects around the world.

What distinguishes different types of green bonds is driven in part by the purpose (or initiatives) for which funds are being raised and the intended effect of these initiatives. As can be gleaned from its name, a blue bond is a green bond that is focused on initiatives related to the sustainable use or protection of water resources and the promotion of sustainable activities within the blue economy.

What would these "blue" initiatives look like?

One guide to the types of initiatives which would be suitable for blue bonds has been provided by the International Capital Market Association ("ICMA") in their voluntary guide released in September 2023, entitled "Bonds to Finance the Sustainable Blue Economy – A Practitioners Guide".

In this guide, ICMA details several kinds of suitable "blue" initiatives in an indicative and non-exhaustive list.

This list includes initiatives focused on:

  • coastal climate adaption and resilience;
  • marine ecosystem management, conservation and restoration;
  • sustainable "blue" tourism; and
  • sustainable shipping and marine transport.

Kelp Blue: a first for Africa

Two teams within ENS, those led by Clinton van Loggerenberg and Wolf Wohlers (together with Jordan Maze and Wayne Rukero), are currently advising the Namibia-based sustainable kelp farming business, Kelp Blue Trading Proprietary Limited ("Kelp Blue"), in the establishment of an innovative blue bond programme which is intended to be listed on the Namibian Stock Exchange ("NSX") and the issuance of blue bonds thereunder.

The funding raised by Kelp Blue is intended to be utilised for, amongst other things, the planting and maintaining of up to 1,000 hectares of sustainable kelp forests offshore Lüderitz, Namibia. These kelp forests are expected to play a pivotal role in carbon sequestration, fostering biodiversity, enhancing marine wildlife abundance and facilitating employment generation for economically vulnerable costal communities. A percentage of the blue bond proceeds are also intended to be committed to supporting the effective implementation of the Namibian Islands Marine Protected Area ("NIMPA") management plan, which is aimed at enhancing marine wildlife conservation and conservation and protection along the southwestern coast of Namibia, in Africa's second largest marine reserve/protected area.

At the time of writing, Kelp Blue's blue bonds are, set to become the first blue bonds to be listed on the NSX and the first issued by a corporate/non-sovereign issuer in Africa, representing a new channel for the flow of capital to similar blue projects and initiatives in the region.

Reviewed by Clinton van Loggerenberg, an Executive in ENS' Banking and Finance Practice.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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