MUNICIPAL FINANCE INTERVIEW: “Green bonds are a viable source of funding and provide a platform for municipalities to demonstrate their commitment to increasing the footprint of climate resilience projects.”

Kevin Jacoby, CFO City of Cape Town, African Utility Week1)    The inaugural issuing of green bonds by the City of Cape Town last year was a great success, can you give us the numbers and stats on this? Does this show a great appetite among investors to invest in sustainable projects and/or in Cape Town?


City of Cape Town

Issue Type

Green Bond

Issue Size

ZA R1 billion

Issue Rating

National Scale (Global scale Baa3)

Pricing Date

12 July 2017

Issue Date

17 July 2017


17 July 2027


10 Years


10,17% fixed rate


133 basis points above R186

Issue Format

Dutch Auction



Governing Law

South African


Rand Merchant Bank


Rand Merchant Bank

Legal Advisor(s) to JLMs

Werksmans Attorneys

Legal Advisors(s) to Issuer

Werksmans Attorneys

The investor appetite was almost five times over-subscribed which led to a final pricing below pricing guidance on the day of the auction. This demand was a combination of both investor appetite to invest in sustainable projects as well as to invest in City of Cape Town, being considered to be a high quality liquid asset (HQLA) by the banks in terms of BASEL liquidity requirements.

The Environmental Finance portal has also just announced the City of Cape Town the winner of the Green bond of the Year Award for a Local authority.

2)    Which projects by the City are being financed by these green bonds?
The list of projects include water management initiatives (incl. water meter installations and replacements, water pressure management, upgrade of reservoirs), sewerage effluent treatment, rehabilitation and protection of coastal structures and energy efficiency in buildings.

3)    Why did the City choose this finance model?
To demonstrate its commitment to climate change initiatives and to tap a growing market of investors to invest in sustainable projects.

4)    Is the Mother City unique in this type of finance in the country?
It was the first issuer to be listed on JSE’s Green Sector, having had projects prior accredited by the Climate Bonds Initiative.

5)    Are you planning another round of green bonds soon?
The City has various options for funding its capital programme, which include green bonds, as well as concessional loans from development financing institutions (dfi) as well as financing from local financial institutions. The choice will be dependent on market appetite to achieve an acceptable market return.

6)    You are addressing the Finance & Investment session during the upcoming African Utility Week you will address the delegates on “Case study from the City of Cape Town: Issuing Green Bonds – what will be your message to the delegates?
Green bonds are a viable source of funding and provide a platform for municipalities to demonstrate their commitment to increasing the footprint of climate resilience projects.

7)    What advice can you give other cities or utilities in terms of issuing green bonds to raise finance for infrastructure projects?
Have green projects properly identified and accredited prior to embarking on a green bond raising process to increase investor appetite for finding green projects at a competitive rate of funding.