Original Research - Special Collection: Managerial Practices

Understanding the determinants of the development of the green bond market in South Africa

Harsha Dave, Sabastine Akongwale
South African Journal of Business Management | Vol 55, No 1 | a4065 | DOI: https://doi.org/10.4102/sajbm.v55i1.4065 | © 2024 Harsha Dave, Sabastine Akongwale | This work is licensed under CC Attribution 4.0
Submitted: 29 April 2023 | Published: 13 March 2024

About the author(s)

Harsha Dave, University of Stellenbosch Business School, Faculty of Economic and Management Sciences, Stellenbosch University, Cape Town, South Africa
Sabastine Akongwale, University of Stellenbosch Business School, Faculty of Economic and Management Sciences, Stellenbosch University, Cape Town, South Africa

Abstract

Purpose: The study aims at establishing the level of interest in the green bond market by investors and specific factors that influence stakeholders’ investment decisions in South Africa.

Design/methodology/approach: The primary data was collected through interviews leveraging survey questions from the Climate Bond Initiative survey and a thematic analysis conducted. Stakeholders involved in green bonds listed on the Johannesburg Stock Exchange were targeted.

Findings/results: Most respondents recognised green bonds as a critical enabler to support South Arica’s energy transition and the clarity on South Africa’s energy plan will catalyse investment. The study revealed a consensus for the application of strict definitions and standards for green bonds, whilst consideration should be given for leniency to increase issuances as the market matures. A barrier that was highlighted, was the slow development of a pipeline of large-scale projects. Majority of respondents indicated that beyond credit fundamentals; full or partial guarantees, subsidies and incentives will be most important in stimulating the development of the market.

Practical implications: There is strong potential to grow, as investors prefer green bonds with strong returns and green credentials. Incentives such as high tax rates for investments in fossil fuels, once-off incentives for new issuers such as anchor capital or subsidies to carry reporting cost can catalyse this growth.

Originality/value: This study surfaces the underlying dynamics that contribute to the growth and development of the green bond market in South Africa that largely align with that of European and Asian markets. This presents an opportunity to explore strategies that could be translated to grow the bond market.


Keywords

climate change; impact investing; green bonds; investor preferences; sustainable financing; energy transition.

JEL Codes

A11: Role of Economics • Role of Economists • Market for Economists; Q56: Environment and Development • Environment and Trade • Sustainability • Environmental Accounts and Accounting • Environmental Equity • Population Growth

Sustainable Development Goal

Goal 13: Climate action

Metrics

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