Green Bonds as a Sustainable Way of Financing Green Projects in Cameroon
Posted: 10 Sep 2016
Date Written: September 8, 2016
Abstract
The explosive growth of green bonds in the capital markets is increasingly attracting attention from investors. In simple terms, a bond is a debt instrument with which an entity raises money from investors to obtain capital while the investors receive fixed income in the form of interest. With green bond, the issuer of a bond publicly states that capital is being raised to fund ‘green’ projects, which typically include those relating to renewable energy with emission reductions. Thus, green bonds are created to fund projects that have positive environmental and/or climate benefits, but with lower interests. Therefore, why should an investor get excited with lower interest in green bonds? Because green bonds inherently carries lower risk than other bonds and proceeds are raised for specific green projects, but repayment is tied to the issuer, not the success of the projects.
Cameroon has embarked on an ambitious target of building multi gigawatt of renewable energy capacity projects that requires a massive FCFA billion in funding. Further, Cameroon has big goals in terms of renewable energy installations, but a big hurdle has been financing and the cost of financing. For the recent past, budget allocations have been insufficient.
The paper is structured around three parts. The first part defines the concept of green bonds. The second part describes the depth of renewable infrastructure requirements in Cameroon, especially in areas of huge thick forests. The third part provides a roadmap for issuing sustainable green bonds by the Cameroonian government.
Keywords: Green Bonds, Cameroon, Forest
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