As one of the Top 20 largest exchanges in the world by market capitalisation ranked by the World Federation of Exchanges, the JSE provides Issuers with access to deep and liquid capital markets in a regulated and secure marketplace for over 130 years.
The JSE’s capital markets enable innovation, raising capital and shared prosperity. As a leading global exchange, the JSE co-creates and unlocks value through innovative products and services that meet the needs of our clients.
In addition to being the first stock exchange globally to introduce a sustainability index and to incorporate a move toward integrated reporting, the JSE once again paves the way towards a sustainable economy by introducing the JSE’s Sustainability Segment, a first for Africa. This segment enables companies to raise debt for green, social and sustainable initiatives on a trusted, global market place.
What is a Sustainability Bond?
Bonds are fixed income investments. Borrowers (usually governments or large corporations) issue bonds in order to gain access to capital, which is used to fund operations, investments or projects.
The bond specifies its maturity date (the date on which bond holders will be repaid the principal of the loan) as well as the interest to be paid (which may be fixed or variable). Once issued, most bonds may be traded. Bonds issued in terms of JSE regulations may be traded on the JSE Debt Market.
Sustainability Bonds are specifically designed to raise money for environmentally- and socially responsible initiatives. In practice, a Sustainability Bond combines the features of Green- and Social Bonds.
To qualify as “Sustainable”, bonds must meet certain criteria, such as those contained in the Social Bond Principles and Sustainability Bond Guidelines issued and governed by the ICMA, the Climate Bonds Standard issued by the Climate Bonds Standards Board, or any other standard acceptable to the JSE. The JSE is a member of National Treasury’s Sustainable Finance Strategy workgroup, and is an active contributor to setting benchmarks and standards relating to sustainable finance in South Africa.
What does it do?
Sustainability Bonds are designed to finance socially responsible or environmentally friendly initiatives or projects, such as employment creation, building low-cost housing, providing accessible education and training opportunities, supporting sustainable agriculture, reducing greenhouse emissions, combating climate change, rolling out green transportation systems, etc.
The bonds provide Bond Issuers with access to the capital needed to fund these projects, as well as a way to diversify the available funding instruments. The societal benefits and disclosure requirements associated with Sustainability Bonds tend to result in improved market perceptions of Bond Issuers.
For investors, Sustainability Bonds provide an opportunity to support socially and environmentally responsible projects and to meet client mandates, along with the additional benefits associated with investing in highly regulated instruments with a strong emphasis on transparency.
Who is it for?
Bonds are generally issued by governments, government agencies and relatively large private corporations (since the bonds are typically backed by the Issuer’s balance sheet). The JSE provides prospective Issuers with easy access to a deep capital pool in a well-regulated, robust market environment.
Investors benefit from easy access to globally-recognized socially responsible investment options, a high level of transparency and exposure to an increasingly important component of economic activity. Sustainability Bonds are appropriate for consideration by institutional, professional and individual investors.
What are the requirements?
Once a bond is listed on the JSE interest rate market, the Issuer can apply to be eligible for the Sustainability Bond Segment. JSE Issuer regulation will assess whether the application complies with the Sustainability Bond Standard. The criteria for the Sustainability Segment are based on the following principles:
- Disclosure of proceeds: The Issuer most provide clear disclosure that the proceeds of the bond will be used for financing or refinancing new or existing eligible sustainable projects (i.e. projects which will have a positive impact on the environment or society).
- Provide an external review: An independent assessment is required with respect to the use of proceeds, the selection process and the management of proceeds. This may take the form of a second opinion, certification, verification or a rating report issued by a qualified third party.
- Commit to regular post-issuance reporting: Reports should cover the actual use of proceeds and the expected and actual impact of the allocated projects against the KPIs/benchmarks disclosed ex-ante. The first post-issuance report is required one year after listing a security.
How to access Sustainability Bonds?
Investors may trade in Sustainability Bonds in the same way as any other security.
Prospective Issuers must be registered clients of a JSE member.