Johannesburg, 8 March 2022: The Johannesburg Stock Exchange (JSE) today announced that it has amended its debt listing requirements, which will result in the introduction of a new segment, known as the Transition Segment and expansion of the current Sustainability Segment. These amendments have been approved by the Financial Sector Conduct Authority (FSCA) and will become effective from 11 April 2022.
The Transition Segment will be a platform to list Transition Debt Securities, where issuers can raise funds for the climate or just transition-related purposes. Transition finance is expected to play a significant role in enabling a just transition, and is of particular relevance to a carbon-intensive economy such as South Africa, in helping us achieve the national commitment to the Paris Agreement, and the associated goal of being net zero by 2050 within the context of our nationally determined contributions (NDC’s).
The Transition Debt Securities will take the form of either Sustainability Use of Proceeds Debt Securities or Sustainability-Linked Debt Securities. Sustainability-linked securities don’t require a ring-fencing of the use of proceeds, hence allowing the issuer flexibility on how it chooses to use the proceeds of a capital raise, as long as it meets the agreed goals and targets which it has set related to its sustainability objectives. These are forward-looking in nature and also referred to as performance-linked securities. The issuer will need to report annually on its performance against its targets, and the cost of capital is linked to the achievement of these targets with a “step-up” or “step-down” element.
“As a critical enabler of the South African economy , the JSE aims to support and facilitate a just transition which will be critical to ensure that our economy and our markets are resilient and globally competitive. Our Transition Bond segment will be an essential platform to access finance as companies with credible transition plans journey to becoming low carbon companies.
The JSE’s Sustainability Segment currently lists Sustainability Use of Proceeds Debt Securities, which require issuers to disclose in which sustainability assets they will invest the proceeds.
In June 2020, the JSE expanded the Green Bond Segment into a fully-fledged Sustainability Segment, where companies could for the first time list social, green, and sustainability bonds on one platform while allowing investors to trade in these securities.
Since its expansion in 2020, JSE’s Sustainability Segment has grown its market capitalisation to R21.421 billion and the introduction of the Sustainability-Linked Debt Securities to the Segment will grow market capitalisation further.
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