Building Zambia’s Green Bond Market: Pioneering a New Pathway to Financing Biodiversity Conservation

Zambia, like many developing nations, faces a significant financing gap in addressing urgent biodiversity and environmental challenges. As the country grapples with deteriorating natural resources, finding innovative financing solutions has become essential to achieving the goals outlined in its National Biodiversity Strategy and Action Plans (NBSAPs). The global call to action—particularly through the Kunming-Montreal Global Biodiversity Framework’s (GBF) Targets 19b (to substantially increase financial resources for biodiversity conservation) and 19c (to mobilize and align all relevant financial flows and develop effective financial instruments)—has heightened the need for strategic interventions to develop sustainable financing instruments and accelerate resource mobilization for biodiversity. In response, BIOFIN Zambia has positioned the country as a prime candidate for green financing, harnessing innovative solutions such as the emerging green bond market to drive sustainable investments.

Where it all began

BIOFIN Zambia’s journey began with a clear vision—to secure financial resources for biodiversity conservation through innovative financing mechanisms. Recognizing the growing global interest in green bonds as a tool for sustainable finance, BIOFIN Zambia initiated efforts to develop a green bond market that would unlock new streams of financing for conservation efforts. By forming strategic partnerships with the Green Finance Mainstreaming Working Group, which brings together key financial sector regulators, government ministries, and other stakeholders, BIOFIN Zambia has been instrumental in shaping the country’s green financial landscape.

UNDP Zambia and SEC Zambia sign an MoU to strengthen collaboration on sustainable finance and biodiversity conservation. Photo credit – UNDP Zambia

Milestones achieved

Since 2018, BIOFIN Zambia has provided critical technical support to the Securities and Exchange Commission (SEC) Zambia, laying the groundwork for a thriving green bond market. The first major achievement came in 2019 with the efficient development of Zambia’s Green Bonds Guidelines, achieved in record time of within a year. This established a comprehensive framework for green bond issuances. In the following years, several key incentives were secured, including:

• The exemption of a 15% withholding tax on green bond investments listed on a Zambian exchange with a tenor of more than five years.
• A 50% reduction in green bond registration fees with SEC Zambia.

All these milestones, achieved through BIOFIN Zambia’s efforts in collaboration with various stakeholders and partners, along with extensive sensitization initiatives and capacity-building programs, have contributed to creating an enabling environment for green bonds in Zambia.

A historic green bond issuance

The most significant milestone to date came in December 2023, when Zambia secured its first-ever US$ 200 million tranche green bond registration through Copperbelt Energy Corporation (CEC) Renewables. By January 2024, CEC Renewables successfully issued its first tranche of USD 53.5 million, which was oversubscribed, highlighting the significant demand for green financial instruments in the country.

This landmark issuance marked a pivotal moment for Zambia’s energy sector, providing critical funding for renewable energy projects. One of the benefits of renewable energy is that it helps reduce the country’s reliance on charcoal—a major contributor to deforestation and ultimately biodiversity loss. While climate change was the primary focus of the use of proceeds from Zambia's inaugural green bond issuance, there were some co-benefits for biodiversity through the mitigation of deforestation, a major driver of ecosystem loss (Deforestation rates, estimated between 250,000 and 300,000 hectares annually[1]). In addition, there is increased advocacy for a greater proportion of future issuances to support biodiversity initiatives directly. This strategic shift aims to achieve the dual benefits of addressing both climate change and biodiversity loss, highlighting the interconnectedness of environmental sustainability.

This debut green bond issuance not only showcased the potential of green bonds to finance sustainable projects but also highlighted Zambia’s commitment to biodiversity conservation and environmental restoration.

What’s next: paving the way for future success

UNDP BIOFIN, the Green Finance Mainstreaming Working Group, and Fund Managers meet with CEC Renewables to advance Zambia's green bond market development following the inaugural issuance. Photo credit – UNDP Zambia

Building on this success, BIOFIN Zambia has since embarked on Phase 2 of the green bond market development initiative. This phase is focused on expanding the green bond ecosystem through:

• Conducting a capital market readiness assessment for future green bond issuances.
• Developing a Green Investments Portal, an online platform showcasing a viable pipeline of green investable projects in Zambia that can be financed through various green financial instruments and mechanisms, including green bonds and green loans, among others, to attract local and international investors.

• This initiative will provide hands-on technical assistance support to green bond issuers, service providers, and market stakeholders to enable five green bond issuances in the Zambian market. This support will encompass services such as drafting green bond frameworks, identifying viable project pipelines, coordinating with investment banks, and engaging second-party opinion providers.
• Provision of capacity-building for local investment brokers in Zambia, through focused training on green bond categories, deal structuring, risk management, and regulatory compliance, complemented by the development of training materials for future use.
• Provision of capacity-building to the Green Finance Mainstreaming Working Group on project review, reporting, environmental risk assessment, market development, and regulatory frameworks, with materials prepared for continued use beyond the initiative.

In addition, BIOFIN Zambia is conducting a gap analysis to identify barriers and opportunities in the green bond market, ensuring Zambia’s green finance sector remains competitive on the global stage.

Expected results: holistic impact

BIOFIN Zambia’s efforts go far beyond issuing green bonds; they are about driving transformative change that creates lasting impact across environmental, social, and economic dimensions. These include the following:

• Institutional Results: BIOFIN Zambia’s efforts are strengthening the capacities of financial institutions, regulators, brokers, and policymakers, fostering a robust green finance ecosystem.
• Policy Results: The introduction of green finance policies, guidelines, and incentives is driving Zambia toward an inclusive, environmentally sustainable financial system.
• Financial Results: The continued development of the green bond market is expected to unlock significant funding for green projects, helping to close the biodiversity financing gap.
• Biodiversity Results: By unlocking financing for green projects, BIOFIN Zambia is directly contributing to the conservation and restoration of Zambia’s biodiversity, reducing pressures on ecosystems, and supporting sustainable livelihoods.

A future rooted in sustainability

As Zambia strives to achieve Targets 19b (increasing financial resources for biodiversity) and 19c (mobilizing and aligning financial flows for GBF implementation) of the GBF, BIOFIN Zambia continues to play a pivotal role in reshaping the financial landscape for conservation. By leveraging innovative solutions such as green bonds, the country is building a solid foundation for sustainable economic growth, environmental protection, and biodiversity preservation. With continued efforts, Zambia is set to become a leader in green finance, paving the way for a future where development is not at odds with nature, but in harmony with it.