NSE proposes rules to guide listing of Green Bonds

Traders work at the Nigerian Stock Exchange in Lagos

As Green Bond issuance set to gain traction in the country, the Nigerian Stock Exchange (NSE) is proposing a set of rules that will guide the listing of those bonds on the exchange.

Green bonds are special bonds issued to finance or re-finance in part or in full new and existing eligible environmental or climate projects.

The federal government kicked off the issuance of green bonds by raising ₦10.69 billion last December and this was expected to be followed by more issuances by the government and other corporates.

And to facilitate the subsequent listing of those bonds, the NSE has exposed rules to market participants for their contributions.

The rules are titled: “Rules for listing of green bonds on Nigerian Stock Exchange.”

The NSE proposed that the green bonds shall comply with the core components of the Green Bond Principles (GBP), while the issuer shall demonstrate transparency. According to the proposed rules, the issuer shall also comply with the Securities and Exchange Commission (SEC)’s regulations.

Among the listing requirements stipulate that: “Issuer shall state clearly in the prospectus that the bond; Issuer shall demonstrate that the proposed Green Bond shall comply with the GBP.”

The GBP and the principles are a set of voluntary process guidelines that recommend transparency and disclosure and promote integrity in the development of the Green Bond market by clarifying the approach for issuance of a Green Bond.

The GBP were intended for broad use by the market: they provide Issuers guidance on the key components involved in launching a credible green bond; they aid investors by ensuring availability of information necessary to evaluate the environmental impact of their green bond investments and they assist underwriters by moving the market towards standard disclosures which will facilitate transactions.

Also, the proposed rules stipulate that proceeds shall be managed separately from other funds, and their use shall be monitored and reported throughout the tenor of the green bond.

“The bond prospectus and other relevant documentation shall clearly describe the purpose or projects towards which the proceeds shall be applied and how the projects address environmental/climate concerns. Use of proceeds for green projects aimed at addressing key areas of environmental and climate concern Include but shall not be limited to climate change adaptation, clean transportation, green buildings, sustainable waste management, natural resources depletion, renewable energy, energy efficiency, prevention of loss of biodiversity, pollution prevention and control, terrestrial and aquatic biodiversity conservation, sustainable water and wastewater management,” the NSE said.

It added that the issuer shall open an escrow account specifically for the net proceeds of the issue and shall prudently manage the proceeds from the offer in order to ensure strict allocation to identified proposed projects.