African real estate markets are increasingly warming up to the concept of green financing. Green financing is the use of fixed income financial instruments to raise funding for projects that are sustainable. The concept has been deployed in many sectors of priority in sustainability including renewable energy, infrastructure and environmental projects.
Although a relatively new concept in many parts of the globe, Africa is a particularly new to this kind of financing. First used in South Africa when it issued its first municipal green bond in 2014 and later in 2017, other countries like Nigeria and Kenya have gone on to issue green bonds.
In October this year, Kenyan firm Acorn issued its first green Medium-Term Note (MTN) which hit 85 per cent subscription, raising KES 4.3 billion to fund EDGE certified student hostels. The EDGE (Excellence in Design for Greater Efficiencies) program is an innovative green-building certification from the International Finance Corporation (IFC) which aims to help developers reduce their buildings’ energy and water consumption by 20 percent while lowering greenhouse-gas emissions.
The company will deploy the funds to develop the Qwetu and Qejani student hostel brands between November 2020 and April 2022 according to its green bond framework.
But the rise in green financing has grown in direct relation to the increase in green building technologies. Green building technologies have been found to increase transparency, reduced long-term costs and improved asset value in the short and long-term.
Building Green has also enabled developers to secure access to new types of emerging funding such as green bonds. As a result, Green Councils have been established in many African countries including Mauritius, Kenya, Rwanda, Zambia, Ghana, Tanzania and Namibia with more expected across the continent.
The move could better position the continent in its quest to fund the mega housing programmes envisioned to ease the affordable housing crises. According to research by the Shelter Afrique Centre of Excellence, Africa needs $1.4 trillion to address the housing crisis and green bonds are well placed to cover significant grounds in the funding gap.