‘We can be Richer by being Greener’
Environmental activist and founder of leadership-by-data, Babajide Ogunsanwo, speaks to the media about the role of green finance in growing the economy, sustainable waste management and preserving the environment.
Several analysts attribute the growing waste problem to the effect of population, lifestyle and indiscriminate littering by individuals. How severe are these problems, and how are highly populated cities like Lagos and Kano managing it?
“The greater the wealth, the thicker will be the dirt.” – J.K. Galbraith. In other words, when the economy grows, the waste grows. The problem of waste management is related to infrastructure. But can states invest in enormous waste infrastructure when civil servants have not been paid?
Though there is no city that is immune to waste management problems, Lagos and Kano have the highest population in Nigeria, so they need massive investment in modern waste management infrastructure.
Today’s evidence from the World Bank reveals that the higher the income level and rate of urbanization, the greater the amount of solid waste produced. The evidence shows that organic (mainly food), paper, plastics and glass account for 90 per cent of all waste generated in Nigeria. Our fast paced lifestyle also contributes significantly to e-waste; especially with the rate at which we discard household goods such as furniture, electronics, clothes and general utensils.
Take for example; Lagos, a city with more than 23 million individuals generates over 13,000 tons of waste daily. Put simply, the waste generated in Lagos will submerge the Titanic Ship in just FIVE days. Clearly, there is a need to swing into action.
In a recession, what is the most effective way for states to raise finance for waste management infrastructure; especially capital intensive waste to energy projects?
More than ever before, municipals have to creatively work with experienced private sector firms to achieve their waste management goals. The first step is for them to accept that they have a waste problem; the second step is to have and implement an effective law to manage the problem and the third step is to have a focused plan towards implementing the solution.
Recently, Lagos State approved an environment management and protection law. They seem committed to a modern waste management system that considers all aspects of the waste value chain. The city is also working with a private consortium to launch Nigeria’s first municipal backed Green Bond. If this is successful, it will reduce Nigeria’s waste infrastructure deficit.
Is a green bond different from an ordinary bond and can it really be used to reduce the waste infrastructure deficit?
Currently, there are no common definitions of what makes a green bond in the market, but there are several developments relevant to principles and standards. The key difference between conventional and green bonds is the specified use of proceeds. Consider a green bond to be a special type of debt instrument created to fund projects that have positive environmental impact.
They have also been nicknamed bonus bonds because as an investor you get similar returns like ordinary bonds with the advantage of making an impact on the economy, environment and society.
Though a bit late, Lagos is now working towards the global best practice for sustainable waste management. The Federal Government is also combining a growth plan with a sustainability agenda. The Federal Government’s goal of a 30 percent renewable energy mix by 2030 is a template for managing environmental problems that require the involvement of the private and public sectors.
How will the environmental impact of green bonds be measured? Most importantly, how will it benefit families that live and do business in Lagos?
Issuers of green bonds are mandated to release frequent reports on the use of capital raised and impact of capital deployed. Safe growth rather than fast growth is influencing the decisions of global wealth managers.
Responsible mega cities are now merging their economic development plans with an environment preservation agenda. Investors are increasingly focused on integrating Environment, Social and Governance (ESG) factors into their investment processes.
A bond issuance that is tied to improving waste collection and sanitation also helps to fight life-threatening diseases. Recent evidence from the Global Burden of Disease reveals that Nigeria suffers the world’s greatest malaria burden. Every three minutes a Nigerian dies of Malaria.
Buyers of labeled green bonds play a strategic role in the fight against the diseases that kill children and pregnant women. The alternative is investment that focuses on giving returns irrespective of activities that potentially destroy the environment we and our children will live in.
What role do public firms and private institutions play in environment sustainability projects? Which countries and cities have had success stories from green finance?
Do public and private institutions exist in a vacuum? No, they do not. They need a platform. The platform is called ‘The Environment’. Environmental sustainability is no longer an optional course, but a compulsory one. The most admired institutions no longer approach their environment sustainability projects as mere corporate social responsibility. It is the environment first.
To find a solution to this problem, the World Bank and the European Investment Bank (EIB) opened the green bond market in 2007. Then in November 2013, the first corporate green bonds were issued by EDF, Bank of America and Vasakronan.
Private sector, municipal and local government green bonds are now a growing trend. The first green municipal bond was issued by Massachusetts in June 2013. Gothenburg in October 2013 issued the first Green City bond. California New York State, City of Johannesburg and others have also issued green bonds.
It is estimated that $150B worth of green bonds will be issued globally in 2017. But who are those buying the green bonds? Reputable institutions! These institutions have realized that customer’s are willing to buy more from brands who play a positive role in sustaining the environment.
But why should investor’s be part of green finance and what are the benefits to them?
Globally, responsible businesses and institutions such as pension fund administrators, insurance firms and fund managers now focus on investing in assets that create positive impact.
More than ever before, business leaders have the ethical responsibility to diversify into high impact investments that improve the quality of life in the environment that they operate.
Green finance indirectly assists to raise potential economic growth, boost shared prosperity, and move closer to eliminating extreme poverty around the world.
Every company should have an environment sustainability plan. Investing in green bonds offers sustainability and suitability.
Moreover, these days the strength of a company’s balance sheet is no longer measured by how much debt it can leverage, but by how much leverage it can get from its reputation.
How do you build reputation? It is simple – Doing Good.