One of Trump’s main arguments for repealing Obama-era environmental regulations is that they hurt economic growth.  In addition to his recent rollback of vehicle emissions standards, Trump now wants to essentially make it easier for companies to release methane into the air in the name of saving the oil and gas industries. However, as industries whose profits reach billions of dollars per year, they are not exactly in peril. If Trump really wanted to see growth and innovation in the country, he would look within his own borders and follow the example of California.

Groundbreaking climate change legislation in California 

The fifth largest economy in the world, the state of California has actively been pushing for more renewable energy. California committed to following the Paris Agreement when Trump decided to pull out of it, and in doing so has recently enacted powerful legislation to curb greenhouse gas emissions. Just last week, Governor Jerry Brown signed an executive order calling for the entire California economy to become carbon-neutral by 2045.

According to the Paris agreement, the whole world must become carbon-neutral by 2060-2070 in order to keep global temperature increase below 2°C; by pledging carbon-neutrality by 2045, California is showing itself to be a leader in fighting climate change and can provide an example for the rest of the world to follow.

California reduces emissions while boosting growth

Such bold steps to lower greenhouse gas emissions are happening as the state’s economy has been growing. Specifically, since 2001, emissions have gone down by 12% while the state’s GDP has grown by more than 80%.

The renewable energy sector in particular has been thriving.Solar energy alone employs nearly 250,000 Californiansand in 2017 provided 10% of electricity in the entire state– up from 0.5% just 7 years prior in 2010. This is on par with nationwide trends which show that most new jobs in the energy sector are in renewables.

Despite population and job growth, statewide demand for electricity has not risen at quite the same rate. From 2000-2016, population rose 15%, job growth increased 13%, while electricity consumption only grew by 9%. In fact, California has the lowest per capital electricity consumption in the state. 

Furthermore, both the public and private sectors have made investment in green technologies a priority. From 2007-2009, the state granted the highest number of patents for clean tech in the whole country. Additionally, Californian venture capitalists have demonstrated their interest in renewable energy, even though it is typically assumed that venture capital is ill-suited to the long-term nature of such investments. These investments have allowed for innovation in the field of clean energy technology. Added to the presence of Silicon Valley- a hub of cutting-edge enterprises and skilled labor-, it has allowed the state to develop energy sources such as hydro, wind, and solar.

Thus, reducing greenhouse gas emissions not only does not spell death for the economy but can in fact spur it. 

Move forward, not backward, to realize economic growth

It is clear that economic growth is driven by innovation. Old, polluting energy sources may have boosted growth when they were considered new in the 20^thcentury, but in 2018 it’s time to approach the economy with a 21^stcentury mindset. While Trump might be worrying that more regulations hinder economic expansion, places like California have shown the opposite to be true. Policy that strives to mitigate climate change can in fact spur on innovation as entrepreneurs and established businesses seek to stay competitive and comply with the law.

Earlier this year, California surpassed the U.K. to become the 5^thlargest economy in the world. With a GDP of more than $2.7 trillion, policies such as Governor Brown’s are key to confronting the catastrophic effects of climate change while enhancing growth. If only Trump would realize that, perhaps the rest of the country could be on the same path to sustainable prosperity.

As the consequences of global warming are multiplying across the globe, green bonds have become popular among several nations as a leading means of mitigating the impacts of climate change in accordance with the Paris Agreement. Africa has not been left behind in this wave of initiatives aimed at building green bonds as an enabling path towards enhancing the transition to a sustainable and prosperous economy.

In Africa, Nigeria issued its first sovereign green bond in December 2017- the first one in the African continent. In Kenya, the Green Bond Program which was established to develop a domestic green bond market is on progress under the leadership of the Kenya Bankers’ Association, Nairobi Securities Exchange Climate Bonds Initiative and Financial Sector Deepening Africa, in collaboration with the Dutch development bank FMO and the International Finance Corporation.

According to Climate Bonds Initiative, the green bond market has grown significantly in the past few years, with the market commencing in 2014 when USD37Bn was issued. In 2017 issuance reached USD162.5Bn. This momentum has been persistent with over USD419Bn in green bonds currently outstanding. There are projections for issuance to reach USD200-225Bn in 2018.

Before delving deeper into what the future holds for green bonds and other sustainable finance instruments, let us examine the meaning of green bonds. Climate bonds are fixed-income financial instruments created to fund projects that have positive environmental and/or climate benefits. Overall, green bonds are regular bonds with one distinguishing feature: proceeds are earmarked exclusively for projects with environmental benefits, mostly related to climate change mitigation or adaptation but also to natural resources depletion, loss of bio-diversity, and air, water or soil pollution.

Green Bonds in Africa

Johannesburg Stock Exchange (JSE) has an established Green Bond segment established  to unlock the investment potential of green infrastructure, technologies and services. Growth point Properties was the first corporate in South Africa to issue a green bond in JSE in March, 2018. The R1.1 billion ($94 million) Green Bonds issued by Growthpoint will be used to fund the green buildings and green initiatives in South Africa.

The Kenya’s National Green Economy strategy postulates that Kenya needs approximately $24Million to kickstart the transition to sustainable economy in sectors such as afforestation, renewable energy and public transport. The Green Economy Strategy and Implementation Plan (GESIP) identifies green bonds as one of the channels for raising funds required to support this transition. A new study commissioned by Strategic Business Advisory (SBA) in partnership with the Kenya Bankers Association revealed that Kenya’s demand for climate-friendly bonds will accrue to KES 91 billion in the next five to 10 years. This opportunity will attract major investments in transport and agriculture with the biggest green-financing demand within that period being bus rapid transport (BRT) in Nairobi and Mombasa with the projection that it can raise up to KES 36 billion.

Benefits from Green Bonds

Despite the increase in uptake of Green Bonds across Africa and the world at large, little is known about the impact of these bonds. Do they have the ability to yield positive environmental results? Are they beneficial to the issuing companies? Well, I can confidently respond to these questions with a conclusive yes.

In her analysis of 217 corporate green bonds issued by public companies globally from January 1, 2013 to December 31, 2017, Caroline Flamer discovered that they lead to positive stock market reaction, improved financial and environmental performance, an increase in green innovations, and an increase in stock ownership by long-term and green investors.

1. Improved financial performance to the issuer

Firms that offer green bonds realizes a 2.4% increase in long-term value as measured by the ratio of the firm’s market value to the book value of its assets. Again, issuers of green bonds attract more improvement in operational performance as measured by the return on assets as compared to firms that issue non-green bonds.

2. Improved environmental performance 

Many studies firms tend to easily balance financial returns with environmental benefits after issuing green bonds. A recent study shows that the environmental performance score of the issuers rose 6.1 percentage points on the Thomson Reuters’ ASSET4 scale. The firms also indicated a reduction of more than 17 tons of CO2 per $1 million of assets. Moreover, this enhanced their reputation which attracted strong investor demand.

3. Increase in ownership by long-term and green investors

Corporate green bonds attract investors who are concerned with  the long-term and sustainability. Issuers of green bonds are more oriented to the longer time horizons hence benefiting from the shares of long-term investors. The Green bonds also enables such investors to benefit from hedging against climate policy risks.

Overall, there are indications everywhere that green bonds trigger a positive market response, helps investors to balance financial returns with environmental benefits, satisfy Environmental, Social and Governance (ESG) requirements for green investment mandates, improves investor diversification and attract buy-and hold investors.

Despite the significant promise held by green bonds as an emerging impact investment instrument in corporate finance, there are some barriers that need to be addressed to see its growth in Africa. The need for an enabling policy environment in majority of African countries is a concern, inadequate data on sustainable investment opportunities and technical know-how is a key hindrance to the scaling up of the green bonds market in the continent.

Private sector and market driven interventions will definitely play a key role in the economic development of the African continent. The traditional private sector intervention has played a significant role in the development in Africa especially where the business models allows for benefit sharing with other stakeholders. 

The matter is, however, complicated when it relates to provision of social or public good. In most instances the citizens’ as well as the private sector has expected this to be provided by the government. Unfortunately, this has not been the case due to limited resources. 

To bridge the gap, the emergence of social/mission-driven enterprises has been on the rise and have a huge potential in moving developing countries to development and at the same time solving those challenges being faced by such developing countries. 

There has been a huge global movement toward impact investing which is giving rise to social enterprises aimed at solving the challenges that will have been resolved by government on market-based approach. Impact investing in Africa remains nascent and has the potential to resolve the African challenges especially in health, education, social services, provision of energy etc. and at the same time contribute to the continent’s economic growth and development objectives. This will be going a long way in replacing official development assistance (ODA) which has predominately been the source of development finance in the continent.

In the past the continent was focused on official development assistance (ODA) from developed and other emerging markets, to meet the basic service needs of their populations. Due to the uncertainty faced by the global economies, it is expected that ODA will no longer be the major source of development financing in developing countries. 

Private sources of capital will play a larger role where it will be used to improve access to social services in Africa. In other ways as noted above, ODA will be more innovative and will be based on market based approach which will be more efficient and effective. 

In the last decade, there has been a significant increase in the private financial flows to Africa as the traditional ODA declines. This will mean that there is need for the African Governments to provide the relevant space to attract even more private funding and especially where those funds will be able to provide for the public goods in a market-based approach. 

This will, in turn, be of help in addressing the socio-economic challenges by providing market-based solutions that address the priority areas such as health, education, water and energy supplies among others. 

Impact investment has the potential to fill in the above space and to complement public spending and ODA. This will be achieved by bringing in private sector capital and skills to reduce African economies’ vulnerability to external shocks, providing a market-based solution to address socio-economic needs. 

In some instances, there will be need for allowing ODA and other public funds flows to focus on addressing social needs for which there is no viable market-based solution.

In other words, the room for ODA is not completed vanished only that it will become more innovative and in fewer and fewer cases it will be done on a non-market basis.

Now and in the future Africa, long dependent on aid, will instead rely on investment to fuel its growth. Rapid growth is expected, because of the rise of the middle class, stable governments, urbanization, and improved infrastructure. Both large-scale institutional opportunities and smaller-scale opportunities for direct investment will be prevalent in the future. 2019 will present a good year for the continent to encourage more social enterprises and mission driven investment with the aim of resolving some of the challenges that the continent is faced with in a more market-based way. This call for innovative financing, innovative business models and innovative technologies.

By the year 2050, world population is expected to reach almost 10 billion people according to research by the United Nations. In addition, it is projected that more people will join the middle class resulting in enhanced human well being globally. Despite these improvements in socioeconomic and demographic developments and their associated benefits to individual prosperity, humans will have to exert further pressure on the limited and already depleting natural resources to keep the status quo.

Additionally, calculations reveal that with the current way of global production and consumption patterns we already need 1.7 planet Earths and humans’ ecological footprint is only projected to increase. From these numbers,it becomes evident that society needs to find responsible and sustainable ways to meet individual needs, establish economic growth and secure the demands of future generations, all within the ecological boundaries of the planet. Thus, this requires us to rethink our current economic models.

Sustainable Development Goal 12 for Responsible Consumption and Production

The urgency to reduce our ecological footprint through changing current production and consumption patterns is formulated in Sustainable Development Goal 12: Ensure Responsible Consumption and Production. SDG 12 is one of the 17 Sustainable Development Goals, which is a framework that can be considered as the world’s strategy to address the global economic, social and environmental challenges our planet is currently facing.

With the forecasts of a rising world population, an acceleration of global development and the related rising demand and usage of resources, SDG 12 underlines that business, as usual, is not an option for a sustainable future. More and more businesses have become aware of these sustainability issues and along with increased societal pressure, corporations have started to explore alternative ways of doing business.

The pursuit of businesses towards more sustainable business practices and processes has led to the emergence of new and innovative sustainable business practices and models, including the circular economy business model.

Moving from a linear to a circular economy

The circular economy framework is an alternative to the common, traditional linear economy, and requires a shift from a ‘take, make and dispose’ economy, to a ‘reuse, redesign and regenerate’ production model. In this latter model, waste streams are considered as input for new products and processes.

The circular economy model follows the following three principles:

1. Design out of waste and pollution
2. Keep products and materials in use
3. Regenerate natural systems

Moreover, this economic model is a response to the worldwide growing waste streams and the increasing pressure on natural resources. By circulating resources again and again through closed loops, the maximum value of resources is extracted.

Upcoming circular business models are turning trash into treasure

The circular economy model has been researched and praised already by many organisations in developing countries, especially within Europe. Nextto that, it has become part of various corporate strategies and has been adopted in numerous business models.

Global sportswear company PUMA is one of the companies that has been experiencing with circular product lines a few years ago. They launched a certified Cradle-to-Cradle product line, which included a shoe, shirts, a jacket and a backpack. The shoe, for example, is entirely made from organic cotton, linen and bio plastic, which PUMA promises to shred and compost it when customers recycle the shoe.

In contrast, this new economic model just started to gain attention in Africa with the launch of the African Circular Economy Alliance at the end of 2017, initiated by Rwanda, Nigeria and South Africa in cooperation with World Economic Forum and Global Environment Facility. This alliance was started to fast-track the adoption of the circular economy model here in Africa. There is a lot of potential in Africa to adopt a circular business model, as waste management in many countries is still an issue, making it a perfect chance to deal with this challenge.