In a hurry? Here’s a quick summary…
- Safaricom is considering issuing a green bond to fund its Environmental, Social, and Governance (ESG) projects, following a Ksh.15 billion sustainability-linked loan.
- Economist Churchill Ogutu warns that Kenya’s inactive corporate bond market and potential lower interest rates may pose challenges for attracting investors.
Safaricom, a leading telecom provider in Kenya, has hinted at the potential issuance of a green bond to secure funding for its Environmental, Social, and Governance (ESG) projects.
This consideration aligns with the company’s recent acquisition of a Ksh.15 billion sustainability-linked loan, aimed at bolstering its sustainability efforts.
The push for sustainable financing is becoming increasingly relevant as Kenyan corporations look to diversify capital sources for impactful initiatives.
According to Karen Basiye, Safaricom’s Director of Sustainable Business and Social Impact, the market appears primed for green bonds.
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“I have developed the framework… the green bond framework is ready, just as we prepared the sustainability loan framework. When the business is prepared, it can take the green bond. I think the market and securities exchange are ready, and it would be a milestone for Safaricom to lead the way,” Basiye stated.
This comes after Safaricom secured the Ksh.15 billion loan from a consortium of four financial institutions, which has since supported eco-friendly upgrades to its network infrastructure.
However, economist Churchill Ogutu cautions that the local corporate bond market has been relatively inactive, which may pose challenges in attracting investors for a green bond issuance.
“I would assume they’ve pitched their sustainability agenda to potential investors already, establishing a critical base before going public with an issuance. Investors will likely focus on how the proceeds are allocated, specifically the projects Safaricom aims to achieve,” Ogutu explained.
Safaricom is optimistic that it can appeal to investors with a focus on ESG and sustainability.
“The framework for a green bond is structured to ensure funds directly support our ESG and sustainability goals,” Basiye added.
Yet, Ogutu warns that interest rate fluctuations may affect the attractiveness of a delayed issuance, as lower coupon rates could prompt investors to seek higher returns in alternative markets.
Reflecting on corporate bonds’ typical maturity of five years or less, Ogutu noted that waiting six months could result in a lower interest rate compared to the present.
Safaricom now faces a careful balancing act as it prepares to navigate these market conditions and secure impact-driven financing for its ESG projects.