Lack of ESG-premium deters SA green investors

Climate-friendly projects in South Africa aren’t providing enough premium over other businesses to lure investors, Nedbank Group Ltd. said.

Companies with a lower carbon score are reporting higher profits compared with green projects, according to a report by the Johannesburg-based lender.

“That’s why I don’t think there’s an impetus to rush into this from any point,” Nedbank’s senior credit strategist Jones Gondo said at a briefing. “On their own, ESG factors are not drivers of relative value or outperformance.”

While in Europe bonds linked to sustainable assets enjoy a significant premium, in South Africa they are priced almost in-line with more traditional debt, with spreads of as little as five basis points. That’s hurting efforts to ramp up green projects in a nation that depends on coal for more than 80% of its electricity.