Category: News

Africa Climate Ventures Raises Ksh.171M To Support Green Tech Start-Ups

Africa Climate Ventures (ACV), a venture capital firm focused on climate action start-ups on the continent, has announced a Ksh.171 million (£1 million) investment from FSD Africa Investments.

The investment is in the form of a convertible loan to support ACV’s formalisation and build additional ventures as demonstrations to attract investment from larger funds.

On top of the investment, FSD Africa said it will provide Ksh.13 million (£75,000) in grant funding to support the development of premium carbon credits and the marketing of portfolio and pipeline companies.

ACV seeks to build a portfolio of climate-positive start-ups across Africa, with the ultimate aim of launching and scaling 15 ventures in the next four years.

Moving forward, FSD Africa has secured the right to invest up to Ksh.1.4 billion (£8 million) in ACV’s planned 2024 close.

“The involvement of FSDAi has already been invaluable in refining the ACV model. As we work towards ambitious objectives, we believe FSDAi will be a key partner in ensuring our success,” James Mwangi, the ACV CEO, said.

Mwangi said they aim to eliminate one million tonnes of carbon every year by 2030, while improving the lives of 50 million Africans and creating at least 5,000 jobs on the continent.

The VC firm already has two ventures in its portfolio; KOKO Networks Rwanda, a co-venture between ACV and KOKO Networks which provides sustainable bioethanol cooking fuel in Kenya and Rwanda, and Great Carbon Valley, a Kenya-based developer of direct-use clean energy applications.

“In backing the ACV partners, FSDAi sees a tremendous opportunity to galvanise global investment and finance to promote Africa’s status as the pre-eminent climate investment destination,’’ Anne-Marie Chidzero, CIO of FSD Africa Investments, said.

FSD Africa receives funding from the UK government and provides tools and resources to drive large-scale change in financial markets and support sustainable economic development.

There has been increased interest in green technology ventures as the world seeks to reduce carbon emissions and transition to green energy.

Just last week, Kenya-based climate tech start-up Amini announced the closure of a Ksh.275 million ($2 million) pre-seed funding round led by Swedish climate tech-focused venture capital firm Pale Blue Dot.

Amini uses artificial intelligence and satellite technology to create data infrastructure and address climate data scarcity in Africa.

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Lab announces new class of ground-breaking solutions to drive public and private investment in emerging markets

LONDON – Members of the Global Innovation Lab for Climate Finance (the Lab) gathered in London to select the innovative climate finance solutions that will be accelerated in 2023. Lab members voted to choose six new models to channel investments in challenging sectors such as climate adaptation and gender equality.

“We are thrilled about the quality and breadth of the types of innovative financial solutions that we see in this new Lab cycle. It’s fantastic that our members continue to help the Lab expand our boundaries, focusing more on where we can have the highest impact on the ground,” said Dr. Barbara Buchner, Global Managing Director of Climate Policy Initiative.

The Lab is an investor-led initiative that identifies, develops, and launches promising solutions to drive critical public and private investment in climate change in developing economies. Each year, the Lab competition selects promising, early-stage ideas for sustainable investment and rapidly develops these ideas into fundable, scalable investment vehicles and business models.

“This year, we were excited to introduce a Gender Equality stream and expand our Africa program,” said Lab Associate Director Ben Broché. “We need to see a rapid scale-up of investment across sectors, and the Lab is always keen to take on new challenges: since we launched nine years ago, the Lab has developed 62 solutions that have mobilized USD 3.5 billion for climate action in emerging markets.”

In 2023, the Lab received around 150 applications from leading asset managers, development finance institutions, global NGOs, prominent project developers, financial services firms, and entrepreneurs. The winners will undergo seven months of analysis, stress-testing, development, and preparation for launch later this year.

2023 LAB WINNERS

Catalyst Climate Resilience Fund supports pre-seed climate adaptation startups that improve the resilience of vulnerable African communities, fostering a more robust ecosystem of climate adaptation innovations. Catalyst Fund and BFA Global, an innovation consulting firm headquartered in Kenya, spearhead the idea

Climate Resilient Landscape Finance (CRLF) is a first-of-its-kind model where financiers, conservancy management, and landowners collectively share the risks and rewards of sustainable land management activities. The proponent is Platcorp, an established microlender and asset manager in Eastern and Southern Africa.

Impact Financing Facility for Climate-Focused Social Enterprises offers blended finance instruments to support social enterprises adopting climate-smart technologies and establishing a track record to access commercial capital. The idea proponent is Villgro, an Indian social enterprise incubator.

Lendable Emerging Market Sustainability-Linked Loan Fund provides loans to SMEs for implementing climate solutions. Borrowers who reach targets get lower interest, and the fund earns carbon credits. Proponent Lendable offers financing solutions for companies with a positive impact.

Social Infra Ventures (SIV) is a pan-African rental platform to service low and lower-middle-income families and vulnerable groups in Africa’s secondary cities designed around women’s needs. SIV will partner up with Cardano Development to pilot the idea in Morocco.

The VOX VERT Land Use Transition Fund finances the transition to sustainable agriculture in the Brazilian Amazon and Cerrado regions through a private credit fund with a blended finance structureThe proponents are Vert, a securitization company, and Vox Capital, an impact investment house.

Lab Members’ Quotes

Ajibola Olalowo, Advisor, German Federal Ministry of Economic Affairs and Climate Action (BMWK), said: “The Lab has been successful in delivering impact over almost one decade. Investments in Lab ideas span the globe, including challenging sectors such as climate risk, nature-based solutions, sustainable cities, and gender equality. However, there is still work to be done in mobilizing private finance for climate action, and Lab’s ideas are crucial for strengthening private sector investments to keep 1.5° alive.”

Antha Williams, who leads Bloomberg Philanthropies’ environment program, said: “Innovative financial solutions that address the climate crisis are pivotal to transitioning to a low-carbon economy at the speed and scale necessary. The Global Innovation Lab for Climate Finance’s innovative approach helps identify, develop, and scale pioneering financial instruments that are making a tangible impact in combating climate change. Bloomberg Philanthropies is delighted to support the India Lab to help transform promising ideas into viable investment opportunities that drive climate action in India.”

Sumaiya Sajjad, Head of the Technical Assistance Facility, FinDev Canada, said: “FinDev Canada is committed to advancing opportunities in the gender and climate nexus area through our investments and partnerships, which includes our support to the Lab. Women are disproportionately affected by climate change despite being at the forefront of adopting climate-smart solutions. The Lab is well positioned to support innovative solutions with an intentional gender approach and to capitalize on the growing momentum across the investment landscape to increase gender-responsive climate finance offerings.”

Nine additional ideas made it to the finalist stage

  • Altree Kadzi Gender Climate Fund, Altree Capital
  • Climate Agriculture Debt Restructuring Facility (CADRF), Abt Associates
  • Food&Forest, Impact Bank Amazônia Securitizadora de Créditos S/A
  • Gender-Based Smallholder Economic Liberation Project, Prado Power Limited
  • Green India Fund, Green Artha
  • Infrastructure Climate Resilient Fund (ICRF), AFC Capital Partners
  • Mobilize: De-risking E-mobility, VAI Capital
  • Offgrid Finance Pop-up SPV, Offgrid.finance Limited

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Ethiopian Securities Exchange Invites Investors to Become Stakeholders

The Ethiopian Securities Exchange has started its Capital Roadshow aiming to attract actors in the financial sector into buying shares and becoming stakeholders of ESX. It also announced that it would commence issuing licenses to capital brokers, dealers, and advisors in September this year.

Foreign and domestic investors can purchase 75% of the shares of ESX while the rest of the ownership goes to the Ethiopian Government through Ethiopian Investment Holdings. It is expected that ESX will become fully operational as of January next year.

It is to be recalled that the National Bank of Ethiopia (NBE) announced in May 2022 that three well known global companies were desirous to participate in ESX. Financial Deepening Africa (FSD Africa) has already signed an agreement to become a shareholder in the securities exchange. According to NBE, IFC has also shown an interest to participate in the securities exchange.

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Holland firm to offer corporate debt guarantees

Holland-based fund manager Cardano Development has announced plans to establish a corporate debt guarantee company in Kenya to help firms raise funds from the capital markets.

The credit guarantee company set to be operational by year-end seeks to offer up to a 100 percent guarantee covering debt interest and principal for local currency capital market senior debt in the green (environmentally friendly) space.

Investors in Kenya’s corporate bonds have been relying on insurers to cover the risk of default by issuers while others take no protection, betting on borrowers to service their obligations as they fall due.

Kenya’s nascent debt guarantee space has mostly focused on bank loans, especially lending to small and medium-sized companies.

Cardano’s entry comes after it launched similar firms in Nigeria and Pakistan, targeting broad sectors including public and private infrastructure, financials such as saccos and corporates mostly in the form of commercial paper.

“About a year ago we decided to engage together with InfraCo Africa, to jointly develop with the assistance of FSD Africa a Kenyan guarantor which we hope will be operational by the end of this year,” said Cardano Development chief executive Joost Zuidberg.

InfraCo Africa is a European fund while FSD Africa is a research and advocacy firm specialising in the financial sector.

The yet-to-be-named firm has raised Sh6 billion in capital provided by eight founding providers including four international development finance institutions (DFIs) and four local private investors.

Aside from Kenya, the guarantee company will cover Uganda, Tanzania, Rwanda and Zambia, aiming to reach a guaranteed portfolio of Sh50 billion within five years.

Its value proposition is in better pricing, scale and superior products owing to the fact that it will be a locally-based company empowering domestic savings.

“It is a private sector institution with ultimately the aim to completely become local, presumably even be listed in the stock exchange,” said Mr Zuidberg.

He made the remarks during a roundtable by FSD Africa themed on mobilising long-term capital for sustainable development in Kenya.

FSD Africa has provided financial and technical support in establishing guarantee companies including developing business plans, engaging with institutional investors in the market and advising on the regulatory environment.

Kenya requires $61.7 billion to meet its global commitment to climate change by 2030 with the country’s annual infrastructure financing gap currently standing at $1.8 billion.

“There is a need for risk sharing and innovation in order to enable the private sector to play its rightful role and mobilise financing at a scale that is required for Kenya’s various needs,” said FSD Africa chief executive Mark Napier.

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FMDQ Group, FSD Africa help bridge gender finance gap in Africa

FMDQ Group Plc and Financial Sector Deepening (FSD) Africa – the Implementing Partners of the Nigerian Green Bond Market Development Programme (the Programme) – organised a two-day event in Lagos, to introduce the concept of gender bonds to key market players within the Nigeria financial markets space. The event examined the state of gender equality in Nigeria and discussed the opportunities for Nigerian issuers and investors to use gender-sensitive/intentional approaches in bridging the gender finance gap in Nigeria. Also, it afforded potential issuers an opportunity to learn from the Tanzanian experience in navigating the issuance process of a gender bond.

External shocks such as pandemics, climatic disruptions, and economic downturns, have continuously had adverse impacts on humanity, with vulnerable groups, such as women, and their businesses being badly hit. Consequently, financial market players globally, as well as in Africa, are now empowering women and expanding their access to finance and economic inclusion through a debt market instrument that seeks to support the advancement and equality of women – the gender bond. Although at its emerging stage, understanding the gender bond framework for Nigeria’s debt market can play a crucial role in supporting the efforts to attain the United Nations (UN)’s 2030 Sustainable Development Goals (SDGs) 5 and 10 – Gender Equality and Reduced Inequalities, respectively.

In attendance at the event were Ben Llewellyn-Jones OBE, Deputy High Commissioner, British Deputy High Commission, Lagos, Beatrice Eyong, United Nations Women Country Representative to Nigeria, Bola Onadele. Koko, Chief Executive Officer, FMDQ Group Plc, Ruth Zaipuna, Chief Executive Officer, NMB Bank Plc, Mary Njuguna, Principal Specialist, Capital Markets, FSD Africa, as well as other market stakeholders.

The first day featured a Breakfast Session for C-Suite Executives and highlighted the impact sustainable finance can have in driving women’s economic empowerment, as well as increased participants’ knowledge and awareness of gender bonds.
Welcoming participants to the event, Bola Onadele. Koko, Chief Executive Officer, of FMDQ Group Plc gave a broad overview of the Programme’s achievements from its inception in 2018 till date in the areas of policy advisory, technical support for green bond issuances, and market capacity building. He challenged everyone within their individual areas of expertise to be encouraged by the progress of the Programme as it relates to green bonds and similarly, push the envelope with gender bonds as we continue to develop and entrench the principles of sustainability in the Nigerian capital markets whilst facilitating prosperity for all.

The Breakfast Session featured a panel discussion themed, “The Role of Financial Markets in Strengthening Gender Financing in Nigeria”, with panellists including the Chief Executive Officer of NMB Bank Plc of Tanzania, a representative of British International Investment PLC, an Associate Director of PwC Nigeria, a representative of FMDQ Securities Exchange Limited, a Deputy Director of the Securities and Exchange Commission, Nigeria, and the Gender Network Manager, FSD Africa.

The panellists established the business case for investing in women-owned/led businesses, women-focused initiatives and the urgency for closing the $ 42 billion gender financing gap in Africa. Also, the panellists reiterated the importance of leveraging sustainable and innovative financial instruments such as gender bonds in financing women-owned/led businesses.

The second day presented a Masterclass which featured a deep dive into the modalities surrounding the issuance of NMB Bank Plc’s first gender bond in Tanzania (Jasiri Bond). The Treasurer of NMB Bank Plc, during his session, stirred the zeal of potential issuers to the impact of women empowerment through a gender bond as he shared the stories of the beneficiaries of the NMB Bank Plc’s Jasiri Bond.

According to Sustainalytics, a global leader in Environmental, Social and Governance (ESG) research, and a technical partner for the gender bond awareness sessions, the key steps required for a gender bond issuance include the development of a framework, disclosure of information to an external reviewer, documentation of a second opinion, development of a pre-issuance report, and annual documentation of the impact of the gender bond.

The event ended with the Implementing Partners of the Programme reiterating their commitment to support institutions willing to bridge the gender finance gap, as well as other sustainable financing gaps in Nigeria, through financial instruments like sustainable or sustainability-linked bonds that is, gender bonds, green bonds, blue bonds, social bonds, and others. The Programme was launched in 2018 to create awareness and education on green finance, whilst serving as the primary vehicle to explore and implement initiatives geared towards accelerating the development of the Nigerian Green Bond Market and supporting broader debt market reforms that impact green bonds, through its Implementing Partners, FMDQ Group and FSD Africa.

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Kenya’s corporate bond market depressed – agency

In Summary

  • The Capital Markets Authority (CMA) has attributed the drop to slower economic growth, insufficient investment growth and macroeconomic instability.
  • Financial Sector Deepening Africa (FSD Africa) has however singled out readily available bank loans and disclosure issues as a major challenge.

Private firms and major corporates are not tapping opportunities in Kenya’s bond market, according to a financial markets agency.

This, it says, notwithstanding huge opportunities mainly in climate-friendly investments.

Financial Sector Deepening Africa (FSD Africa) cites readily available bank loans and avoidance of disclosures by private entities as the main drawbacks in issuance of corporate bonds

A corporate bond is a fixed income instruments issued by a company in order to raise capital.

The corporate bond market in Kenya enables companies’ access long-term capital at competitive rates, enhancing their growth and development.

Latest Nairobi Securities Exchange barometer shows bonds turnover recorded a 47.17 per cent decline in April, from Sh70.66 billion in March 2023, to Sh37.33 billion.

In the first quarter of the year, turnover fell 14.9 percent year-on-year with investors trading bonds worth Sh162.51 billion in the period, down from Sh190.9 billion in the first quarter of last year.

The Capital Markets Authority (CMA) has attributed the drop to slower economic growth, insufficient investment growth and macroeconomic instability.

“Most issuers don’t want to disclose, because when you come to the market with a corporate bond, the idea is you get less stringent requirements but in exchange for that, you offer to become more transparent,” director of capital markets Evans Osano said.

He spoke during a round table in Nairobi on Wednesday which brought together capital market stakeholders including potential issuers in both banking and non-banking sectors, intermediaries, fund managers and other sector players.

There have been little activities in the bond market in recent years despite their ability to raise long-term capital at affordable rates to fund growth.

Corporate bonds are less risky and less volatile compared to other asset classes.

Recent activities include the Kenya Mortgage Refinancing Company’s seven-year tap issue and Kenya’s first green bond by Acorn Holdings Limited.

The Sh5.7 billion green bond programme, partially guaranteed by GuarantCo, was cross-listed on the International Securities Market (ISM) of the London Stock Exchange, and at the Nairobi Securities Exchange (NSE) in 2020.

Others were East African Breweries five-year fixed-rate instrument floated in 2021 to repay debt with a maturity date of October 2026, Family Bank’s five and a half-year bond floated on 2021, and Centum Investment’s bond floated in 2020 with a maturity date of this December.

“The process of going to the market, including approvals and listing is discouraging some of the potential issuers. We have to make the process as seamless and cost effective as possible so that it is not a barrier or excuse for not coming to the market,” Osano said.

Data analysis and financial expert Mihr Thakar however notes rising interest rates have lead to losses for existing bond holders.

“New buyers from the secondary market will bid in a way that would result in losses for sellers of the older securities. A standoff between buyers and sellers results in lower bond turnover at exchange,” Thakar told the Star yesterday.

FSD Africa called for tapping into green investment bonds in the country saying they provide a huge opportunity.

Some of the potential sectors include built environment, ICT, telecommunication, agriculture (climate smart), green manufacturing and carbon markets.

Fund managers, who are said to be conservative, need to switch from looking at risk returns towards green opportunities, the agency notes.

The outstanding corporate bonds in Kenya are 0.2 per cent of GDP, of which 99 per cent is from banks and a mere one per cent from corporate bonds.

CMA has since committed to accelerate growth of the capital markets.

“The Capital Markets Authority will continue to develop and enhance its regulations to support and accelerate the growth path of Kenya’s capital market enhancing mobilization of domestic resources and international capital in Kenya through the NSE,” chairman Nicholas Nesbitt notes.

African startups need more than just funds from their investors

At a business breakfast last week, FSD Africa and the Financial Sector Conduct Authority issued a call to action to commit to the Nairobi Declaration on Sustainable Insurance as a first step toward creating a sustainable insurance industry and building resilience for the continent.

The Financial Sector Conduct Authority (FSCA) plans to host stakeholder engagements and public workshops with the aim of releasing a Final Sustainable Finance Roadmap during the course of this year. It is estimated that South Africa holds 70% of the African insurance industry’s market premiums.

Formally launched in April 2021, the Nairobi Declaration on Sustainable Insurance (NDSI) is a declaration of commitment by African insurance industry leaders to support the achievement of the UN Sustainable Development Goals (SDGs).

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African startups need more than just funds from their investors

At a business breakfast last week, FSD Africa and the Financial Sector Conduct Authority issued a call to action to commit to the Nairobi Declaration on Sustainable Insurance as a first step toward creating a sustainable insurance industry and building resilience for the continent.

The Financial Sector Conduct Authority (FSCA) plans to host stakeholder engagements and public workshops with the aim of releasing a Final Sustainable Finance Roadmap during the course of this year. It is estimated that South Africa holds 70% of the African insurance industry’s market premiums.

Formally launched in April 2021, the Nairobi Declaration on Sustainable Insurance (NDSI) is a declaration of commitment by African insurance industry leaders to support the achievement of the UN Sustainable Development Goals (SDGs).

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GVCA hosts maiden conference to leverage Private Equity for Ghana’s economic recovery

The Ghana Venture Capital and Private Equity Association (GVCA) has held its maiden conference at the Marriott Hotel in Accra.

The conference was a platform to illuminate Private Equity as a catalyst for the recovery of Ghana’s economy.

Capital owners including pension trustees, insurance companies, asset managers as well as members of the association explored the full spectrum of private capital models.

Speaking on the sidelines of the conference, Matthew Boadi Adjei, Board Chair of the GVCA and CEO of Oasis Capital, emphasised the potential of private equity in providing patient and long-term capital to SMEs in Ghana.

With his extensive experience in private equity, he notes that “private equity can help SMEs set up proper management structures and governance, navigate pervasive risks, and provide sustainable jobs, while intentionally pursuing a double bottom line – providing returns for investors and fostering sustainable job creation”

“Despite the economic challenges faced by the country, private equity can provide an alternative option for investment, leading to inclusive and innovative solutions to navigate the storm,” Mr. Adjei added.

Hamdiya Ismaila, General Manager of Venture Capital Trust Fund and a member of the GVCA also stated: “The GVCA’s goal for 2023 is to build the capacity of emerging managers to ensure that there are enough managers to mobilize and invest capital, supporting SMEs that create jobs and livelihoods for Ghanaians.”

The fund is looking to deploy a commitment of about 200 million Ghana cedis towards this goal.

Members of the association called for the implementation of a Limited Partnership Act that would support the development of the private equity/venture capital industry, which is currently limited under the Companies Act.

On her part, Mirabelle Moreaux, Partner at Injaro Investments Limited and a member of GVCA alluded that Investor comfort with regulations and trends is critical for attracting capital into Ghana’s private equity industry.

She said the GVCA conference is a unique opportunity for businesses, investors, and fund managers to connect, explore and dialogue on how to tap into private capital, a critical source of financing in an emerging market like Ghana where the capital markets are not deep and traditional debt financing is expensive.

“It is our firm belief that at the end of the conference, members will walk away with innovative financial solutions for small and medium enterprises. These solutions will provide the government with additional taxes, the investors with financial and social returns and ultimately aid in the development of Ghana’s real economy.”

The two-day GCVA conference 2023 brought together nearly 200 members from across Africa and was under the theme “Leveraging Private Equity for Ghana’s Economic Recovery”

The conference 2023 featured expert panel discussions, PE/VC case studies, project launches, research paper presentations, training sessions, and deal room sessions.

Two panel sessions explored “how private equity fund managers create value for investors” and “the role of domestic institutional investors in building a resilient economy.” Other discussions also focused on alternative models for deploying and measuring the impact of private capital in Ghana.

This year’s conference was sponsored by FSD Africa, Ghana Venture Capital Trust Fund, British International Investments (BII), Mastercard Foundation Africa Growth Fund, Axis Pensions Trust Ltd, Stanbic Investment Management Services, Impact Investing Ghana, Citi FM and SoftTribe.

Other sponsors include Oasis Capital Ltd, Mirepa Investment Advisors Ltd, and Injaro Investments Limited.

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