30 April 2021
ALTERNATIVE INVESTMENTS SUPPLEMENT
Africa’s first sustainability-linked bond launched
J
SE-listed Netcare, which operates a network of hospitals and other healthcare services in South Africa and Lesotho, has launched Africa’s first sustainability-linked bond, in partnership with Standard Bank. The coupon rate of these bonds is linked to the issuer’s achievement of certain preagreed sustainability performance targets. In Netcare’s case, the group aims to reduce its energy consumption, procure more renewable energy, reduce total carbon emissions, and further improve its water efficiency – partly by increasing its capacity to recycle grey water. In addition, Netcare is developing systems to ultimately convert all infectious healthcare risk waste (HCRW) produced on-site to inert products and achieve zero waste to landfill, outside the HCRW stream, by 2030. Dr Richard Friedland, Chief Executive Officer of Netcare, says, “Our comprehensive environmental sustainability strategy developed in 2013 is firmly on track to meet our 10year goals and targets. Netcare is delighted to be part of a global community of healthcare institutions leading the transformation to climate-smart healthcare, and this innovative sustainability-linked bond will further assist us in achieving our longer-term goals.” On 16 March 2021, Netcare, with Standard Bank acting as Sole Arranger and Sustainability Agent, executed on the continent’s debut sustainability-linked bond (NTCG01). The bond was listed on the interest rate market of the JSE on the 19th of March. Netcare raised a R1bn, three-year, unsecured note priced at 5.4% (3 month Jibar +175bps). If Netcare achieves its climate change mitigation and water efficiency targets linked to the bond, it will benefit from a step down in the coupon rate. Carl Wiesner, Debt Capital Market Transactor at Standard Bank, says, “Through the offering of the sustainability-linked bond, Netcare was able to access a deeper pool of liquidity at a compressed upfront pricing level, with the added incentive of a quantifiable future pricing benefit, while investors are able to encourage positive forward-looking sustainable corporate behaviour. The large level of interest the market has expressed for this transaction demonstrates the increasing importance of ESGdriven investments in both the international and local capital markets.” Netcare has already made significant progress with its sustainability programme. As of 2020, the company has solar installations capable of generating more than 20GWh of renewable energy, and had achieved a 24% reduction in energy Carl Wiesner, Debt Capital intensity per bed since 2013, against a goal of 22% Market Transactor, by 2023. In 2020, scope 1 and 2 carbon dioxide Standard Bank emissions reduced by 37% from 2013. The progress that Netcare has made towards being a leader in environmental sustainability within the healthcare sector in South Africa, and the world, was recognised when the company achieved the distinction of being the only healthcare institution globally to have received gold awards – the highest accolade – in each of the four categories in the international 2020 Healthcare Climate Challenge Awards organised by Global Green and Healthy Hospitals (GGHH). The awards were for Greenhouse Gas Reduction [Energy], Renewable Energy, Climate Resilience and Climate Leadership. The company was also awarded the prestigious Association of Energy Engineers (AEE) Sub-Sahara African Corporate Company of the Year award in 2019, a global recognition across all industries. Nigel Beck, Global Head Sustainable Finance at Standard Bank, says, “Over the course of the last 12 months, Standard Bank has been working closely with Netcare and institutional investors on a sustainability-linked product offering, advising on meaningful sustainability performance targets aligned to Netcare’s corporate strategy. We are encouraged by the overwhelming level of interest and demand the market has expressed for sustainable product offerings, which was evidenced by the extent to which the bond was oversubscribed.” Along with other instruments, such as sustainability-linked loans, green bonds and social bonds, demand for sustainable finance solutions is rising fast in Africa. Sustainability-linked corporate financing facilities offer clients an opportunity to directly fund ESG improvements, or to refinance existing general corporate funding with a solution that also delivers an indirect socio-economic benefit for the communities and environments in which they operate. Investor demand is partly being driven by the recognition that companies that operate in a sustainable manner tend to have lower risk profiles and outperform over the long term.
40 www.moneymarketing.co.za
A retirement revolution BY ADAM BENNOT Senior Associate, Alternative Investment Services, RisCura
T
he focus in the retirement industry centres around there being enough reserves in the pension pot to go the distance, but a crucial consideration is the kind of environment that will be waiting to retire into. With the world changing rapidly through advancements in medicine and technology, what does a sustainable retirement plan look like? Cleaner and greener investing has become more urgent to achieve. The COVID-19 pandemic has been a stark reminder of the social, health and environmental issues South Africa faces. Pension funds have the ability to influence these issues through sustainable and impact investing. There is a growing need to invest responsibly in a world that is worth retiring into. If the environment is uninhabitable, what will retirement savings be worth? For long-term investors, retirement funds being key among them, sustainability should be the key objective. An unhealthy and unsustainable economy cannot serve investors who have a multi-decade investment horizon, and who are concerned about the livelihoods of future generations. Projections can help to quantify how much we might need as a pension, but these don’t account for the havoc
facing our ecosystems and planet due to climate change. Sometimes, imagining a dystopian future helps us to face harsh truths. Reimagine Imagine if, due to technology, the government increased the national retirement age to 85, for those who are able-bodied. Technology is already changing the narrative in real time for so many sectors of the economy, so it could conceivably contribute to see us living even longer. South Africa will be a large, aging population 30 years from now. Ages 55-65 may be the common retirement range today, but many are retiring later if given the choice (some out of financial need), and if you have access to technology to keep you healthy, this is likely to grow. Imagine a bionic hip and the extension it could bring to your working years. Imagine if there was a caste-system according to how much you’ve managed to save for retirement and if you didn’t meet a certain threshold, you could end up in a labour camp, farming waste into fuel for others to use. Retirement saving’s worst enemies are inflation and environmental risks. We must consider these risks, both the cost-of-living years from now, and the cost to our environment if we don’t invest appropriately. If we are living longer and can work harder, anything is possible. The future impact of today’s investment decisions matters most. It may have been a persistently low-return environment in South Africa for some time, but we believe that investing for developmental impact can drive sustainable returns and help tackle the imbalances that characterise our country.
“There is a growing need to invest responsibly in a world that is worth retiring into”
