ZIM NEEDS IMPROVED INVESTMENT CLIMATE TO LURE GREEN CAPITAL
Zimbabwe needs to improve its investment climate to attract international capital through issuing fixed income instruments whose proceeds would be channelled towards financing climate-friendly projects such as renewable energy, pollution prevention and conservation.
Speaking at Zimbabwe’s green investment catalysts round-table in Victoria Falls last week, several speakers concurred that the country had potential to attract “green capital”, but this could only be achieved if the Government implemented the necessary reforms.
“Capital flows to stable markets and we need policy consistency with other markets,” Infrastructure Development Bank of Zimbabwe head of resource mobilisation Willing Zvirevo said.
“The major obstacles that we face is an unstable macroeconomic environment and issues to do with policy inconsistency, but we are hoping that under the new dispensation, some of these issues will be addressed immediately.” Zimbabwe is a signatory to the Paris climate change accord agreed in 2015, which seeks to reduce and hold the global average temperature below 2 degrees celsius.
At the forum, Zimbabwe submitted a conditional 33 percent energy sector per capita greenhouse gas emission reduction target. The submission was conditional on the means of implementation namely technology development and transfer, relevant training and financial support. The country needs about $90 billion to meet its climate goals. Of this, $55 billion is targeted at clean energy. Studies have shown that Zimbabwe is emitting an estimated 26 000 giga grammes of carbon dioxide, equivalent to 0,05 of the global emissions.
Launched by multilateral institutions such as the World Bank and European Investment Bank, the green bond market was originally viewed as niche. But not so now.
In the first half of 2017, about $55 billion worth of bonds labelled green notes were issued, an increase of 38 percent year-on-year from the $40 billion issued in the first six months of 2016. The Climate Bond Initiative estimates that the total amount of green bonds issued in 2017 could reach $150 billion.
Developed and developing countries face rising financial challenges from climate change and green bonds have been viewed as perfect tools to finance railways, roads, airports, buildings, energy and water infrastructure, while at the same time achieving positive returns for the environment and society.
All the projects financed from green bonds have positive, climate-friendly spillovers, mitigating the downside risks of traditional fixed income instruments.
Since green bonds have a high degree of transparency, investors can also quantify the benefits of investing in them using accessible metrics. Zimbabwe Microfinance Fund operations director John Banda said the country’s “Arab spring”, which ended former President Mugabe’s 37- year rule should provide an opportunity to create an enabling and conducive environment to attract domestic and international capital.
Steward Bank chief executive Lance Mambondiani said the current environment was not enabling for purposes of raising long term to funds green projects. He also said the country’s rating was also key if Zimbabwe was going to attract takers for the green bonds.