On Friday, 17 April, the Johannesburg Stock Exchange (JSE) revealed a significant achievement in sustainable financing with the introduction of Africa’s inaugural Nature-Linked Performance-Based Bond, known as the FirstRand Bank Cape Water Performance Bond (FR3PB).
In a recent press statement, the JSE indicated that this bond is part of a larger transaction framework that aids The Nature Conservancy (TNC) South Africa, a non-profit organisation with established conservation initiatives, in executing a project aimed at restoring key water catchment areas by eliminating invasive plant species, thus enhancing water flow into storage dams.
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The issuance of R2.5 billion ties a portion of investors’ returns to independently verified ecological restoration efforts. This represents a notable progression in the contribution of capital markets to supporting nature and water security.
Bhulesh Singh, FirstRand Group Treasurer, expressed pride in having issued this innovative bond as part of the comprehensive transaction framework for the Cape water invasive plant removal project.
“One of our key objectives was to make nature an investable asset class and build a natural capital market in South Africa that accommodates diverse participants, crowding in new pools of both local and international investors, alongside additional outcomes-based funders, and aligning the interests of all stakeholders in the value chain,” Singh said.
The group’s corporate and investment bank, RMB, were instrumental in the structuring and execution of this transaction, and the FirstRand Foundation also played a key role as an anchor outcomes-based funder and coordinator for other philanthropic partners.
Singh highlighted that this bond signifies yet another important milestone in the enduring partnership between FirstRand and the IFC.
“The IFC’s investment was essential to achieve the target bond size, enabling the overall transaction. We are also pleased to have collaborated with FSD Africa, an African DFI, in their first South African listed debt capital markets investment. Strong support and early commitment from Aluwani Capital Partners, a South African asset manager, also enabled the successful conclusion of the book build,” Singh explained.
Head: Trading at the JSE, Helina Andhee said, “Linking part of investors’ returns to independently verified ecological outcomes shows how listed instruments can be used to finance nature‑based solutions. This bond illustrates how capital markets can align financial performance with measurable environmental impact.”
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“By listing this bond,” explained Andhee, “the JSE offers investors a market‑based mechanism to support an environmental project that mitigates climate‑related water risk, while aligning returns with long‑term water security outcomes.”
Strategic Water Source Areas (SWSA) constitute approximately 10% of South Africa’s territory, yet they provide 60% of the nation’s water supply and underpin two-thirds of its economic activities. This underscores the critical need for continuous investment in these regions.
The Cape water performance-based bond is a collaboration involving FirstRand Bank as the issuer, with RMB serving as the arranger and structurer. Additionally, a coalition of both local and international investors, along with philanthropic contributors, is involved. Notable institutions such as the International Finance Corporation, part of the World Bank Group, FSD Africa Investments, and Aluwani have participated as co-anchor investors. Furthermore, South African asset managers and pension funds have also engaged in this initiative.
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Performance-based financial products are investment instruments where returns are contingent upon the achievement of specific, verified results. The JSE regards this listing as a significant advancement towards establishing a domestic market for nature-linked, performance-based financial products. It illustrates how listed debt can be designed to promote environmental objectives while still providing the characteristics of an investment-grade note, including dependable repayment.
