Mauritius: Envolt launches MUR 2bn green bond

In a significant move towards promoting renewable energy consumption in Mauritius, Envolt, with the support of MCB Capital Markets and FSD Africa, has launched a green bond issuance of MUR 2 billion. The bond, with a tenor ranging from three to seventeen years, aims to finance solar power projects in the nation, further boosting its renewable energy capacity. Vimal Parmar, Assistant Director and Senior Capital Markets Specialist at FSD Africa, highlighted that the current renewable consumption in Mauritius stands at 10 per cent of the total energy consumption, showcasing a positive trend towards sustainability. The Envolt green bond, totaling 510 million Mauritian rupees in its first issue, will be utilized to finance the construction and operational setup of 13 new solar farms in Mauritius. This initiative is expected to increase the aggregate capacity of solar power in the country to 14.4 megawatts over a period of 10 to 17 months. The project aligns with Mauritius' national strategy, aiming to derive 60 per cent of its energy needs from renewable sources, making it a significant step towards achieving energy sustainability and independence. One notable aspect of the Envolt green bond issuance is the decision to issue it in the local currency, a move that sets it apart from many other green bonds typically issued in hard currencies. Mr. Parmar explained that issuing in the local currency attracts local investors, such as pension and insurance funds, while also shielding the issuer from the risks associated with currency depreciation. He further emphasized that issuing green bonds in local currencies is becoming a trend that appeals to investors and supports market development. When discussing the potential impact on capital markets with a domestic focus, Mr. Parmar expressed confidence in the uptake of the green bond. Anticipating oversubscription rather than undersubscription, he noted that the pricing aims to attract both local and foreign participation. This positive outlook reflects a growing interest in local currency financing within African capital markets, signaling a shift towards greater investor engagement in local economies. Regarding potential challenges associated with keeping the bond in the local currency, Mr. Parmar remained optimistic, suggesting that it could lead to increased local participation, particularly from pension funds. This influx of local investment stands to strengthen the local economy and capital markets, fostering sustainability and resilience. In terms of transparency and avoiding 'greenwashing' practices, Mr. Parmar highlighted the importance of a robust Green Bond framework that outlines the proper utilization of proceeds and impact reporting. By adhering to these standards, issuers can provide clear information to investors, ensuring that the funds are allocated appropriately and in line with the green objectives of the projects financed. This commitment to transparency not only builds investor confidence but also safeguards against misallocations that could undermine the integrity of green initiatives. As Mauritius embarks on this green bond journey to finance solar projects, supported by local and international stakeholders, the nation sets a precedent for sustainable investing and renewable energy development in the region. With a strong focus on local currency financing and transparency measures, the Envolt green bond represents a step towards a greener and more resilient future for Mauritius.