ESG Development in Africa
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Adoption of ESG by African businesses
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Why businesses in Africa are increasingly interested in ESG
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Importance of ESG adoption throughout the world
Adoption of ESG
In late March of this year, Africa’s first sustainability-linked bond was concluded and raised R1 billion, with Clindeb Investments as the issuer and Netcare (a healthcare provider) as guarantor in a partnership with The Standard Bank of South Africa as the dealer. Netcare will benefit from a lower interest rate if they achieve the sustainability targets linked with this bond, including reductions in energy consumption and total carbon emissions, procurement of renewable energy, and improvements in water efficiency.
South Africa, in particular, has seen a rise in shareholder and civil society activism, and sustainability-linked bonds are beginning to attract more attention. But South Africa isn’t the only country on the continent increasingly showing interest in ESG.
A start-up called Eversend, founded by Ugandan CEO Stone Atwine, looks to develop banking in Africa, helping to fill an existing gap in the country and across the continent. The start-up is also taking a look at the well-documented effects of climate change and treating climate change as a factor that will substantially impact its business. New businesses, in Africa and other areas worldwide, are beginning to see the importance of incorporating climate change into their business models, due to an understanding of how climate will affect future returns and impact underlying business operations.
Reasoning for ESG Adoption
Why the sudden focus on ESG trends in Africa, which wasn’t as present before? The broader momentum to support ESG goals within financial markets is part of the reason. Still, the interest lies in the better terms offered with sustainability-linked bonds for many African loan borrowers. As long as the performance of the business follows the agreed-upon ESG metrics laid out for them by the bond, then the borrower benefits from more favorable terms like lower interest rates.
Another reason has to do with the benefit ESG funding will provide to Africa, particularly in funding sustainable development and other needs that align with the UNs sustainable development goals.
Importance of ESG Adoption
Businesses not only in Africa, but all over the world, are increasingly incorporating climate change into their business models. Financial markets, in particular, are encouraging the trend by providing bonds specifically linked to sustainability and creating strategies that align themselves with sustainable development goals. Investors should pay attention to the rising trend before they get left behind in the growing market.
At Physis, we can help investors stay ahead of the curve on ESG investing. Through our innovative platform, investors can align their portfolios with the ESG issues they would like to address. Join us today!
Sources:
I’m the Techstars CEO: Here’s why focusing on ESG drives wealth
Ghana plans to issue Africa’s first social bond: what you must know