Sustainability-linked bond for Rand Water

The bond marks two firsts for Africa: Rand Water is the first stateowned company (SOC) to receive a sustainability-linked bond and it is the largest South African rand denominated sustainability bond issued in Africa.

RMB’s Debt Capital Markets and Sustainable Finance and ESG Advisory teams have arranged R1.2 billion in sustainability-linked bonds, as well as a R500 million 10-year bullet bond – taking the total raised for Rand Water to R1.7 billion.

“As companies across a range of sectors increasingly look to access the environmental, social and governance (ESG) debt markets, we are seeing corresponding demand from investors to put their capital to work in investments tied to ESG. Proceeds of the bond will be used to fund Rand Water’s efforts to translate the UN Sustainable Development Goals (SDGs) into concrete, measurable actions,” says Nigel Beck, head: Sustainable Finance and ESG Advisory at RMB.

Sustainability-linked bonds seek to integrate a company’s financial and sustainability performance. The coupon of the sustainability-linked bond is downwardly adjusted and linked to the achievement by Rand Water of ESG targets, including additional installed solar energy capacity, increased number of people with access to safe and clean water, and greater female representation at senior management level. Rand Water is committed to strategically embedding sustainability in its operations and has a vision to become a socio-economic change agent.

RMB acted as sole arranger and sustainability agent. To meet its issuance and sustainability strategy, Rand

Nigel Beck, head: Sustainable Finance and ESG Advisory at RMB

Water needed a partner that understands the key role debt markets can play in funding – and encouraging – companies that contribute to sustainability. Beck further adds that this capital raise is especially successful as it comes at a time when the capital markets are considered ‘closed’ for the funding of SOCs. “It makes this an important milestone for the sector and for South African capital markets. The issuance of a 10-year instrument in the current market conditions represents an outcome that is yet to be seen in the sector since pre-pandemic issuance dynamics.”