The Securities and Exchange Commission (SEC) has continued to champion efforts to deliver coordinated and coherent policy advice, capacity building and regulatory support to leverage actions across a broad spectrum of sectors to build the momentum for a green economy, which could bring socially inclusive and environmentally sound economic transformation, writes JOSEPH INOKOTONG.
The United Nations Environment Programme (UNEP) defines a green economy as low carbon, resource efficient and socially inclusive economy. An economy where growth in employment and income are driven by public and private investment into such economic activities, infrastructure and assets that allow reduced carbon emissions and pollution, enhanced energy resource efficiency, and prevention of loss biodiversity and ecosystem services.
Climate change is one of the major risks threatening the well-being of mankind. International efforts in combating climate change have gathered enormous momentum since the Paris Agreement was reached in December 2015. According to the International Monetary Fund (IMF), in the past four decades, nations have witnessed the warmest years on record, and the number of natural disasters more than doubled in that same time frame. Embracing green finance remains a critical approach to addressing these challenges.
Interestingly, over the past decade, the Nigerian capital market has experienced significant growth, characterised by heightened activities in both equity and bond markets. In line with global sustainability mandates, the Securities and Exchange Commission (SEC), the apex regulatory institution of the Nigerian capital market, having launched the rules for green bonds issuance in December 2018 has created an enabling environment and actively spearheaded transformative initiatives, including the introduction of innovative financial instruments such as Green Bonds and Green Sukuk.
In its efforts to consolidate on these gains, the SEC, having received financing from the Capital Markets Development Trust Fund (CMDTF), administered by the African Development Bank (AfDB), moved to enhance its regulatory processes to ensure that Nigeria’s capital market achieves the goal to be Africa’s deepest and most liquid capital market contributing to Nigeria’s socio-economic development. The project serves as a strategic initiative to further solidify these achievements, aligning the SEC’s vision of becoming a focal point for green and sustainable finance in Africa with global green standards.
The SEC engaged Climate Transition Limited (CTL) to facilitate a Capacity Building workshop for Capital Markets operators on green finance and post-offer regulatory processes in a strategic initiative aimed at empowering Capital Markets operators with the knowledge and skills needed to drive the green finance market in Nigeria. The transition to a green economy is essential for sustainable development in Nigeria. Green finance, which supports projects and initiatives that contribute to environmental sustainability is a critical component of the market’s transition to a green economy.
The primary objective of the workshop for capital market operators aimed at enhancing knowledge and understanding, develop skills and competencies, promote collaboration and networking, support regulatory compliance of SEC’s rules to attracting more sustainable investment, integrating ESG factors into their investment strategies, enhance the reputation and credibility of capital market operators and facilitate the funding of innovative environmentally friendly projects that will drive sustainable economic growth.
The event served as a platform to secure collective commitment from market operators to contribute towards the development of a sustainable financial ecosystem in Nigeria, promoting long-term economic growth and environmental stewardship.
As Emomotimi Agama, Director General of the Securities and Exchange Commission, said, “We are at a pivotal moment where we can shape the future of our investment practices to align with environmental, social, and governance (ESG) principles. Transitioning to a green economy is crucial for the sustainable development of Nigeria.”
All over the world, nations are witnessing a promising trend of sustainability-themed funds gaining prominence, especially in developed countries. This reflects a growing global acceptance, and adoption of green finance criteria within the investment community. Notably, green finance performance has shown a strong correlation with overall financial performance.
In Nigeria, Agama said, the country has a significant opportunity to drive positive change by promoting green finance as the Securities and Exchange Commission is steadfast in its commitment to champion sustainable finance initiatives, and the rules on Green Bonds have already facilitated a couple of sovereign and multiple corporate issuances.
In this regard, he reiterated that the Federal Government through the Debt Management Office (DMO) has led the way in Africa by issuing the first sovereign green bond in December 2017, and has since followed up with another N15 billion issuance in June 2019 specifically to fund renewable energy, afforestation and transportation. The Commission also approved two green bond issues by North South Power Services Ltd and Access Bank Plc worth N8.56 billion and N15 billion respectively to finance various infrastructural projects in the power, water and agriculture sectors of the Nigerian economy. The onus, therefore, lies with all stakeholders to continue to expand these issuances by locating a need and fashioning appropriate sustainable financing products to meet them.
Stakeholders, intermediaries, issuers, investors, and regulators have a pivotal role to play in facilitating the transition of Nigeria’s economy towards sustainable and low-carbon growth. This transition can be supported through business activities by directing financial flows towards more sustainable and climate-friendly solutions, divesting from unsustainable practices, setting standards and frameworks, and integrating green finance into investment decisions and practices.
It has been proven that there is no contradiction between sustainability and economic growth. There is enormous capacity in the country’s financial system to fund the transition to a green economy. However, for private investors to lead funding efforts, the right conditions and incentives need to be in place. “Providing the trust in green financial products, by giving clear and reliable information to those who invest in them; Improving access for retail investors, and supporting institutional investors to direct their capital towards a long-term impact; Incentivizing market participants to be more conscious of long-term risks and opportunities, and providing the necessary regulatory and policy support to create an enabling environment for innovative ideas in green finance to thrive,” are some of the prerequisites that are needed.
To this end, the SEC has continued to strongly support and champion efforts to deliver coordinated and coherent policy advice, capacity building and regulatory support to leverage actions across a broad spectrum of sectors to build the momentum for a green economy, which could bring socially inclusive and environmentally sound economic transformation.
The workshop, therefore, served as an avenue for further discussions and engagement on ways of taking advantage of the enormous resources and potential of sustainable finance to build a green climate resilient economy in Nigeria and create greater prosperity for investors and the people.
Moreover, the event fostered stronger collaboration and networking among diverse stakeholders within the financial ecosystem, including investors, issuers, regulators, government agencies, and market intermediaries. The collaborative environment encouraged the exchange of innovative ideas and best practices that will facilitate the development of new financial products and mechanisms that support green finance. The collective commitment secured from market operators is expected to drive the growth of a sustainable financial ecosystem in Nigeria, promoting long-term economic growth and environmental stewardship. In addition, it aligned Nigeria’s capital market with global green standards, positioning the country as a leader in sustainable finance within the African continent.
Indeed, government agencies, investors, issuers, regulators, market intermediaries, and other stakeholders have a huge role to play in promoting the growth of the green finance market that would usher in sustainable development for shared prosperity in Nigeria.
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