•The government also initiated the Kenya Sovereign Green Bond to deal with the challenges brought by climate change and high levels of pollution.
•Tanzania also issued a gender bond to support small businesses and create more job opportunities for women.
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Financing approaches have evolved over the past decades, adapting to the challenges faced by our society. While our focus may have shifted, one constant has remained: the imperative to preserve our environment and social capital.
As campaigns for equity, inclusivity, and environmental protection have gained traction, they have spread to a variety of sectors, including the financial markets.
Environmental, Social, and Governance (ESG) Investing is one such approach that has become more popular in recent times.
For instance, the National Environment Trust Fund (NETFUND) received funding approval of $1,785,422 bringing the total project cost up to $12,471,799 to restore Lake Naivasha Basin’s forest ecosystem.
The government also initiated the Kenya Sovereign Green Bond to deal with the challenges brought by climate change and high levels of pollution in the country.
Under this ESG framework, innovative sustainability instruments like gender based bonds have been developed under this framework to integrate investment with social impact objectives, in this case, gender equality.
Gender bonds are sustainability or social impact bonds whose proceeds are used to finance activities that promote gender equality.
Their aim is to bridge the gender gap by promoting women empowerment. Gender bonds are under the Gender Lens Investing approach.
The increased interest in sustainability bonds like gender bonds has increased in line with the UN’s Sustainable Development Goals, particularly SDG5 (Gender Equality), as a means of raising private capital.
Gender bonds help push the Sustainable Development Agenda narrative through ESG principles.
The International Finance Corporation (IFC), International Capital Markets Association (ICMA) and the United Nations Women gave guidance to sustainability bond issuers that primarily focus on women empowerment.
A number of countries have already seized the opportunity for these niche bonds like Spain, which offered a sustainability bond to support victims of gender based violence (GBV).
Tanzania also issued a gender bond to support small businesses and create more job opportunities for women.
These thematic bonds are issued to promote themes such as reducing the gender pay gap, supporting victims of gender-based violence, promoting gender equality, and equal opportunities for women across the board.
The social aspect of ESG focuses on the evaluation of and instruments impact on the society.
This includes a wide range of issues such as human rights, labour practices, inclusion and diversity among others.
Gender bonds fall under the social aspect of ESG investing. This social component allows investors to focus on inclusion and diversity which includes gender equality.
Gender based bonds have spiked interest from investors all around the globe. They are increasing in popularity and demand due to their core objective which is a growing concern for everyone.
They are being used to promote financing for women-owned enterprises, support victims of GBV, or promote/create opportunities of employment for women.
The IFC, ICMA and UN Women have issued a guidance framework for gender bonds. To date, an excess of 13 gender based bonds have been issued by a variety of entities in different jurisdictions.
The reach and impact of these bonds is important to investors today as it tackles one of the primarily glaring issues that faces the society today.
It is very telling when investors are no longer driven by just high returns; they want high returns as well as positive impact to the society and the environment.
This shift in focus indicates a positive step to a more vibrant future in all societal aspects. Wanjira Mathai, Managing Director at the World Resource Institute and daughter of Nobel Peace Prize Laureate Wangari Mathai, recently won USD 100 million (approximately KES 13.5 Billion) for a local restoration project.
Her dedication and unwavering commitment to environmental conservation is laudable and inspiring and creates significant impact in the society. Her work reflects the significance of these initiatives in creating positive change.
Gender based bonds within the broader ESG framework help in driving positive change. They align investments with values by considering factors that are gender specific, like creating employment opportunities for women.
These bonds help in driving Corporate Social Responsibility (CSR) by incentivizing corporations to promote diversity and inclusion within their structures while also directly supporting global objectives, the UN 2030 Agenda for Sustainable Development, by promoting gender equality.
Gender based bond issuance has been viewed as a complex implementation due to the lack of set guidelines.
The lack of know-how and smaller markets have generally resulted in integrating gender equality objectives into other sustainability linked solutions.
In addition to that, there is insufficient data on gender bonds and their tracking, which makes it harder to assess their impact.
Gender bonds can create long-term financial and social value as well as the awareness of the importance of funding women-owned/led businesses.
There has been a number of ESG focused funds in Kenya, that serve as an example of the impact sustainable investments have in the country.
The Climate Bonds Certified KES 4.3 billion Acorn Green bond paved the way for the development of green finance in East Africa.
There also exists the Kenya Green Bond Programme that was formed through a partnership between the Nairobi Securities Exchange, Kenya Bankers Association, and the Sustainable Finance Initiative to develop a domestic green bond market.
Market regulators in Kenya have set guidelines for ESG reporting for companies in Kenya and more companies have introduced ESG framework into their governance. Unfortunately, there is no gender based instrument in the Kenyan market.
It is important to note that the gender-based bonds, although used contextually to refer to women empowerment, encompasses all genders and is aimed to improve gender equality.
It is glaringly obvious that historically, women have faced systemic disadvantages, but these bonds address gender disparities and promote gender equality. However, we are yet to see any bonds targeted to men empowerment.
The effectiveness of gender bonds relies on the credibility of their initiatives, programs, and policies that actively confront gender inequality.
Investors evaluating the potential contribution of thematic bonds to sustainability will consider not only the risk profile of the bond issuer but also the alignment of these bonds with genuine efforts to address gender disparities. By supporting these bonds and demanding transparency and accountability,
investors can actively contribute to creating a more inclusive and equitable society. It is through sustained efforts and a collective commitment to progress that we can achieve meaningful advancements in gender equality and build a better future for all.
The writer is Financial Literacy Associate for the Kenya Association of Stockbrokers and Investment Banks