Skip to main content
Photo: A densely built-up area, with mainly one-storey houses, criss-crossed by roads.
© GIZ / VCP
(Inclusive Violence and Crime Prevention)

South Africa: green investing

Climate action and value for money are not necessarily contradictory: South Africa is now using green bonds to finance sustainable infrastructure.

Graphic: GIZ: SDG 8 Decent work and economic growth
Graphic: GIZ: SDG 11 Sustainable cities and communities
Graphic: GIZ: SDG 13 Climate action
Graphic: GIZ: SDG 17 Partnerships for the goals

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. 

Photo: Several people stand or sit around a wooden table outside. One person is holding sketched technical plans in both hands and looking at them.
© GIZ / VCP (Inclusive Violence and Crime Prevention)

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.

The current debates on green measures to recover from the COVID-19 crisis clearly show that the green economy can provide solutions to the challenges of the 21st century. However, this will require massive investment. Because public budgets are already strained, we need innovative financing to stimulate private sector investment. Green bonds are such an instrument; they are well suited for this purpose.

Portrait photo: Steven Stone
Steven StoneChief of UN Environment’s Resources & Markets Branch (R&M)
(© UNEP)

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.

More on the 2030 Agenda

Projects with this goal

Bosnia and Herzegovina: a magnet for adventurous tourists

Read more

Brazil and Mozambique: going digital

Read more

Democratic Republic of the Congo: a prescription for better health

Read more

Global: a new digital era

Read more

Global: artificial intelligence for all

Read more

Global: centres for digital transformation

Read more

Indonesia: ice from solar energy

Read more

Cambodia: no one is overlooked

Read more

Latin America: naturally cool

Read more

Lebanon: educational opportunities for all

Read more

Morocco: on track towards the technology of the future

Read more

Moldova: new patterns, new opportunities

Read more

East Africa: fighting infections

Read more

Sierra Leone: radio programme provides support in the crisis

Read more

South Africa: green investing

Read more

West Africa: disease control made in Nigeria

Read more