How COVID-19 is making green investing more attractive

Netbank is making waves in the financial world with the launch of South Africa's first green tier two capital instruments. Bruce Stewart, Head of Debt Capital Markets Origination at Nedbank Corporate and Investment Banking, discussed the success and impact of these green bonds in a recent interview with CNBC Africa. Stewart highlighted the significant interest in the tier two capital green bond, with a single investor from a developmental financial institution injecting two billion rand into sustainable initiatives in solar and wind energy. This move not only attracts much-needed capital into the country but also contributes to environmentally friendly projects, setting the stage for a future of green investing. The COVID-19 pandemic has played a crucial role in boosting momentum and awareness around green bonds and sustainable investing. Stewart pointed out that the pandemic has heightened awareness around personal and environmental health, making green bonds an attractive investment option. Green bonds offer transparency in the use of proceeds, allowing investors to understand the impact of their investments and potentially mitigate risks. This shift towards sustainable metrics alongside financial credit metrics is reshaping the investment landscape and driving increased interest in green instruments. When comparing returns, Stewart emphasized that while green bonds may not yet offer significantly different pricing compared to traditional bonds, the broader investor audience they attract can lead to better pricing due to price compression. As mandates develop across the investment universe, competition for green assets is expected to increase, potentially leading to tighter pricing for green instruments in the future. This trend aligns with the growing focus on impactful investments that generate both financial returns and measurable social and environmental benefits. Looking ahead, Netbank remains committed to driving sustainable development in Africa through innovative funding mechanisms. Stewart highlighted the need for financial institutions to play a leading role in reorienting capital towards responsible investing, particularly as countries seek sustainable recovery strategies amidst the COVID-19 crisis. Beyond green bonds, Netbank aims to address a wide range of social impact initiatives, such as infrastructure development, access to water, education, and employment, all of which contribute to the broader goals of sustainable development. As the popularity of green bonds rises, novice investors may wonder about the risks associated with such investments. Stewart emphasized that investing in green bonds still carries the credit risk of the issuing institution, such as Netbank, rather than specific project risks. While green bonds may offer a more favorable risk profile compared to traditional bonds, investors should carefully assess the credit metrics of the issuing entity before making investment decisions. In conclusion, the future of green investing looks promising, with Netbank leading the way in driving sustainable financial practices in Africa. Green bonds offer investors a unique opportunity to support environmentally friendly projects while potentially earning competitive returns. As the world shifts towards a greener economy, green bonds are set to play a vital role in shaping the future of finance.