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JSE Seeks Climate, Sustainable Bonds as ESG Investment Jumps

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JSE Seeks Climate, Sustainable Bonds as ESG Investment Jumps

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  • About $4 trillion of ESG debt has been sold globally to date
  • JSE to create Sustainability and Transition Segments

JSE Ltd., which runs Africa’s biggest stock and bond exchanges, has changed its listing requirements to increase exposure to the rapidly growing environmental, social and governance investment sector and to allow the sale of bonds to raise funds to fight climate change. 

The move will allow the listing of debt securities with pre-defined sustainability or ESG objectives, it said in a statement on Tuesday. 

The South African exchange operator will also cater for climate-related bonds, the proceeds of which will be used to combat climate change or to fund responses to rising temperatures, including cushioning coal-dependent communities from the financial impact of a transition to clean energy. 

To date, about $4 trillion worth of ESG-related debt has been sold globally, according to data collated by Bloomberg Intelligence, as concern grows about the warming climate, treatment of communities and equality in the workplace. Of the 108 stock exchanges tracked by the Sustainable Stock Exchanges Initiative, which partners with the United Nations, 40 have ESG bond segments, including Nasdaq and Euronext.

Climate change is increasingly in focus in South Africa, the world’s 12th-largest producer of greenhouse gases, with the president appointing an advisory panel on the issue, adopting a tougher emission reduction target and winning a pledge of $8.5 billion in climate finance from some of the world’s richest countries.

At the same time, the country has the world’s biggest divide between rich and poor, and companies are under pressure to improve their performance in dealing with social concerns. 

Still, stalled programs that could have seen the issuance of such bonds will mean that the JSE will have limited initial success in attracting listings, said Peter Attard Montalto, head of capital markets research at Intellidex.

A change in regulations that allows companies to more easily build renewable energy plants with as much as 100 megawatts in capacity is yet to prompt significant development, while a government program to boost infrastructure spending hasn’t gained traction.

The JSE will set up two new segments to track the bonds: a Sustainability Segment and a Transition Segment.

“There is nothing to go into these things yet,” Attard Montalto said. “There are no transition bonds, there are no green bonds of any great number. This is all good for capital markets development, but we aren’t seeing the pipeline.”

Source: Bloomberg Green

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