KENYA – Acorn Holding, a property developer, has listed the first shilling-denominated green bond programme on the London Stock Exchange (LSE), marking a step forward in the bid to open up Africa’s local currency bond market to international investors.

Low global rates have bolstered demand for Kenyan and other frontier market local currency government bonds, but corporate risk has proved a stretch too far for most international investors, meaning that access to funding for African corporates is limited to local sources.

Acorn Holding’s green bond comes with a guarantee by development agency GuarantCo and is dual listed in London and Nairobi. The structure and international listing should alleviate the concerns over transparency, lack of available data and low liquidity that have kept many investors on the sidelines.

The proceeds will be used to finance the construction of six green-certified student properties in Nairobi. It is the first non-governmental green bond rated by Moody’s in Africa.

“An international listing in Kenyan shillings, or any other local currency, can not only help issuers raise investment without bearing foreign-exchange risk, but can also provide increased visibility and profile to set benchmark yields for future issuances,” says Shrey Kohli, head of debt capital markets and funds at LSE.

Though small, at KSh4.3 billion (US$40 million), the programme “works well for a demo”, says Geoffrey Odundo, chief executive officer of the Nairobi Securities Exchange (NSE).

“Acorn has opened up a new avenue. Green bonds are one area we want to grow very aggressively.

“We know there is a lot of money out there targeting green assets so that is why the Acorn debut will be very good for future bonds.”

The bond is the first Kenyan shilling-denominated green bond listed on the LSE, though there are 101 African bonds currently listed there.

The deal is of particular importance to Kenya’s market because it is only the second corporate bond to be issued since the failure in 2016 of two banks, which resulted in large losses for the country’s pension funds.

“The market had expanded to well over 15 issuances until about three years ago,” he explains. “The private sector would bring out a bond and it would be fully subscribed, then we had two bond failures. There were some losses suffered in the bond market and [investors] were very unhappy.”

Investors are now demanding secured or collateralized bonds to ensure greater protection from default risk and the market is slowly regaining their trust.