South Africa has set itself ambitious climate targets. The country made a commitment to achieving long-term climate neutrality by 2050 in its first low-emission strategy issued in 2020. That can only be done by systematically putting the economy on a sustainable footing: more renewable energy from wind and solar power, greater energy efficiency and better mobility strategies. Financing all of that entails high expenditure, the burden of which is shouldered primarily by local authorities. However, these were chronically underfunded even before the COVID-19 pandemic began – and they most certainly are now. Higher spending for health care and social and economic programmes has now become a major cost factor for them.
To ensure that progress in protecting the environment and tackling climate change can nevertheless be made, South Africa has begun using green bonds. They enable local authorities to harness the capital market to mobilise money and invest in green projects. The advantage of this is that they also stimulate the economy because they attract external financiers and trigger local investment. This generates orders, creates jobs and alleviates poverty. The whole system is a prime example of a society moving towards a green economy. It illustrates a number of financing models that can be used to facilitate a green recovery following the coronavirus crisis.
Gradually increasing the use of green bonds
The German Government – in this case the Environment Ministry – is working in conjunction with the United Nations Environment Programme (UNEP) to support South Africa in making this transition. They are providing a type of start-up finance for the green bonds. The UN Development Programme (UNDP) is also involved because this is a good opportunity to combine poverty alleviation and environmental protection. GIZ is advising the South African Department of Forestry, Fisheries and the Environment and the city governments of Durban and Pretoria, both of which have shown great interest in issuing green bonds.
One of the measures that GIZ and its partners are taking to support them in this regard is to develop a manual specifically for local authorities, giving a general explanation of green bonds and also offering guidance on how to place bonds of this kind. Local authority officials will receive training as well. By participating in the project, the two cities of Durban and Pretoria have taken the first important step towards sustainable investment. Only a handful of countries and local authorities in Africa have used this innovative financing option to date. But with the right amount of political will and expertise, more of them could join in – including in Europe.
USING GREEN BONDS TO TACKLE CLIMATE CHANGE
Achieving the 1.5-to-2-degree Paris climate target is going to need huge levels of investment: estimates put the figure at many trillions of euros worldwide just up to 2030. Government funding will not suffice here, which is why private sources are necessary. Green bonds can make a key contribution to the required sums. They work in exactly the same way as normal bonds – with just one small but key difference. The proceeds are invested in climate-friendly and environmentally sound projects. In this sense they are unequivocally ring-fenced. The projects can be in any of a number of fields, for instance renewable energy, environmentally sound transport strategies or modern waste facilities.
Sustainable Development Goals (SDGs)
The Sustainable Development Goals (SDGs) in the 2030 Agenda provide the framework for our activities around the world. Click on a goal to find out which projects in this report are helping to achieve it.
End poverty in all its forms everywhere
End hunger, achieve food security and improved nutrition and promote sustainable agriculture
Ensure healthy lives and promote well-being for all at all ages
Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all
Achieve gender equality and empower all women and girls
Ensure availability and sustainable management of water and sanitation for all
Ensure access to affordable, reliable, sustainable and modern energy for all
Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all
Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation
Reduce inequality within and among countries
Make cities and human settlements inclusive, safe, resilient and sustainable
Ensure sustainable consumption and production patterns
Take urgent action to combat climate change and its impacts
Conserve and sustainably use the oceans, seas and marine resources for sustainable development
Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss
Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels
Strengthen the means of implementation and revitalize the global partnership for sustainable development
The 2030 Agenda and its 17 goals are important benchmarks for GIZ.