Safaricom mulls issuance of green bond

In its efforts to ensure a consistent flow of capital to support its Environmental, Social, and Governance (ESG) projects, telco service provider Safaricom has hinted at the possibility of issuing a green bond in the future.

The revelation comes on the back of a Ksh.15 billion sustainability-linked facility that the telcos received.

As the sustainability conversation takes center stage for business operations in the country, corporations are being forced to diversify their sources of capital to fund impact-related projects.

According to Safaricom’s Director of Sustainable Business and Social Impact, Karen Basiye, the market is ready for another green bond issuance.

“I have developed the framework…the green bond framework is there, just the same way we developed the sustainability loan framework…the frameworks are in place, when the business is ready they can take the green bond. I think the market is ready, the securities exchange is ready, and it would be good if Safaricom was the first one to do this around here,” said Basiye.

Her sentiments come on the back of a Ksh.15 billion sustainability-linked loan that the telco received from four financial institutions, which has been channeled towards funding the greening of the telco’s network.

However, according to economist Churchill Ogutu, the corporate bond market in Kenya has been dormant and that could prove an uphill task for the telco in attracting investors upon issuance.

He said: “I would expect then that they have had some pitches to potential investors just to walk them through the sustainability agenda, so you can sort of assume that a critical mass that they will be able to look at before they even publicise a particular issuance. So probably it will stem down to the use of proceeds, basically what are the projects that Safaricom intends to achieve?”

This is an issue that Safaricom hopes to navigate by targeting impact-driven investors.

“You know the beauty of a green bond from the framework we have developed for it, we are very clear where the money will go; into enhancing our ESG and sustainability agenda,” noted Basiye.

With interest rate volatility, Ogutu also warns of a lower coupon rate owing to the easing monetary policy that could see the central bank cut rates further.

That may disadvantage a delayed issuance by the telco, as investors opt for higher returns in other markets.

“So far [from] what we have seen, corporate bonds are five years and below…what we have seen typically in the corporate bond space…so that speaks to a potentially lower interest rate, an issuance six months down the line as compared to right now,” added Ogutu.