January 26, 2024
The Jamaica Stock Exchange (JSE) plans to introduce “blue-green” bond products by mid-year as part of Jamaica’s initiative to invest US$5 billion by 2050 to combat climate change. These sustainability bonds, labeled “blue” for water and the ocean and “green” for the land, will be the first of their kind in the region. The bonds aim to make large-scale sustainability projects less risky for the private sector by incorporating concessions or government equity involvement. The Jamaican government plans to inspire private sector involvement by taking the first loss layer, encouraging others to invest.
The move aligns with global efforts, such as the Paris Accord, to reduce carbon emissions and address climate change. Dr. Nigel Clarke, Jamaica’s Minister of Finance and Planning, highlighted the importance of blended finance arrangements to ensure returns on projects covering the cost of capital. Jamaica is collaborating with international partners, including the International Monetary Fund, Inter-American Development Bank (IDB), and the United Kingdom, to establish instruments for sustainability funding.
The investment target of US$5 billion by 2050 focuses on areas like energy efficiency, clean transportation, pollution prevention, sustainable agriculture, fisheries, forestry, protection of ecosystems, clean water, and resilient infrastructure against storms and floods. The funding also aims to address the potential cost of natural disasters, with a 1-in-100-year storm projected to cost between US$4.8 billion and US$5.9 billion by 2050.
The JSE has been working on sustainability initiatives, including the Green Bond Project in 2020, with support from the Green Climate Fund. Since December 2023, the JSE has partnered with IDB Invest to transform into a sustainable stock exchange, focusing on green, social, and sustainability+ bonds. The collaboration involves creating guidelines, establishing a green bond trading platform, and formulating a sustainability strategy and action plan.
According to the Jamaica Observer, Dr. Nigel Clarke addressed concerns about crowding out the private sector by acknowledging the country’s historical role as a source of investment. He announced plans to bring the Jamaica Mortgage Bank to the capital markets through a public offering within the next 12 months, providing private investors with incentives to innovate and generate their projects. Clarke highlighted successful government investments in various projects such as a 20 per cent stake in Trans Jamaican Highway, 10 per cent in South Jamaica Power, an LNG-powered electricity generating plant in St Catherine; and under 20 per cent in Jamaica Public Service Company (JPS) and further outlined plans to consolidate these assets into an infrastructure vehicle. This vehicle will be listed on the stock exchange, allowing private market exposure to infrastructure assets, with the government retaining a sizable stake initially. The specific stake the government will hold in the vehicle has not been disclosed as the initiative is still in the draft stage.
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