The Rise Of Sustainable Finance In Namibia

• Published date: 24 May 2023
• Subject Matter: Finance and Banking, Environment, Financial Services, Commodities/Derivatives/Stock Exchanges, Environmental Law, Climate Change
• Law Firm: ENSafrica
• Author: Twapewa Mwashindange and Cornelia Hausiku

The Government of Namibia has expressed its commitment to ensuring the effective implementation and achievement of the regional and international climate change agreements to which it is a party. Chief among them, is Namibia's Development Plans, Agenda 2030 with its 17 Sustainable Development Goals ("SDG's"), and the UN Paris Agreement (in which governments all over the world have agreed to tackle climate change by reducing greenhouse gas emissions to net zero by 2050).

In order to achieve its ambitious goals, significant investment is required to reduce reliance on fossil fuels and facilitate this transition towards cleaner sources of energy by tapping into Namibia's world-class renewable energy resources. To initiate a positive transformation and tackle the environmental challenges in Namibia, this investment requires a blend of financial and non-financial resources from various sources. There is also a need for the integration of public, private, domestic, and international funds. Sustainable finance emerges as a crucial illustration of the investment approach needed to drive meaningful change and address the pressing environmental concerns that Namibia is presently confronted with.

In this article, we consider the growing trends in sustainable finance in Namibia, the role of the Namibian Stock Exchange (the "NSX") in the fight against climate change and the need to establish a Namibian green finance taxonomy.

Sustainable Finance: What is it and why is it important?

Sustainable finance has become a hot topic in Namibia in recent years. It is a broad term including various financial instruments such as green bonds and loans and other sustainability-linked financial instruments that incorporate non-financial factors, such as ESG considerations, into the instrument's terms and conditions for:

• identifying material risks and growth opportunities which are becoming increasingly relevant for the financial sector; and
• making business decisions and formulating investment strategies.

While there are several financial products and financial instruments being developed to scale the flow of sustainable finance, the most main stream of these in Namibia are arguably sustainability-linked loans, sustainability-linked bonds, green loans and green bonds. Sustainability-linked loans are made available to borrowers for general corporate purposes but which provide an economic benefit to the borrower for achieving negotiated sustainability performance targets. Green loans...