Ecobank is betting that saving Africa's biodiversity is good business – and investors are on board.
In May, Ecobank of Togo became the first commercial bank in Africa to issue an environmental bond, raising $450 million that will be used primarily to finance sustainable agriculture, biodiversity, and water infrastructure across sub-Saharan Africa. Floating on the main market of the London Stock Exchange, it is advertised as the first natural bond issued by a commercial bank that meets the standards set by the International Capital Market Association (ICMA).
ICMA last year introduced the environmental bond label as the second term under its Green Bond Guidelines framework. Ecobank therefore becomes the first commercial bank to issue a green bond with the environmental bond label.
This donation creates a new channel for investors who want to help protect the continent's biodiversity. Home to 1.5 billion people – about 20 percent of the world's population – Africa hosts 25 percent of the world's biodiversity, although it has lost nearly a quarter of its pre-industrial total, according to a study by the Stockholm Resilience Center (SRC).
Conflicts, chronic food insecurity, economic instability, and slow development are among the causes, and action is becoming more urgent as the climate worsens, yet Africa receives less than 3% of the world's natural resources.
Given the challenge, the Ecobank bond has generated unprecedented excitement. The 10.25-year, Tier 2 eurobond was oversubscribed almost four times, attracting more than 1.36 billion order books against an initial target of $350 million. Due to the high demand, Ecobank decided to increase the transaction by $100 million and strengthen the prices by 50 basis points. Moody's has awarded this project its Outstanding SQS1 score, the highest mark of sustainability quality.
“This transaction is a defining moment for sustainable finance in Africa,” said Jeremy Awori, CEO of Ecobank. “Investors didn't just support this bond. They wanted more of it, which allows us to increase the size and strengthen the prices.”
Biodiversity Investors
FMO, a Dutch bank for the development of entrepreneurs, was the leading investor in the participation of 50 million dollars, noting that the commitment is in line with their strategy to support sustainable financing that impacts biodiversity in sub-Saharan Africa. It was the second time FMO participated in Ecobank's investment. In 2021, it invested the same amount in the bank's $350 million Tier 2 sustainability fund.
Finnfund was another major investor, with a $15 million ticket; The bond is in line with the financier's development finance and investor's broader focus on protecting biodiversity.
“By supporting investments that promote sustainable land use and protect natural resources, Finnfund aims to contribute to preserving the natural capital that the economy and livelihoods depend on,” said Ulla-Maija Rantapuska, Finnfund's chief investment officer, in a prepared statement.
At Ecobank, the environmental bond started arriving on time, which enabled it to finance its remaining 350 million rands at 8.75%, due to mature in June 2031. The proceeds from this project will be pooled to support small farmers who use sustainable agricultural methods. Additionally, the funds will reimburse agri-processors with certified zero-deforestation chains. Funding will also target water infrastructure that protects the clean water environment that millions of people depend on.
Ecobank operates in 34 countries in sub-Saharan Africa, where it has 32 million customers and $801 million in pre-tax profit as of last year; has identified 24 markets as key to biodiversity lending. The main lending criteria favor countries where agricultural land use change is the main cause of biodiversity loss.
John Njiraini is a journalist based in Nairobi, Kenya.
