Funding low-carbon transitions to address climate change is one of the major challenges of our time. Green bonds have emerged as a powerful tool to enlist institutional investors’ wealth for these transitions. But despite exponential growth in many parts of the world, the green bond market in South Africa has been stalling. This book project grapples with this puzzle. Firstly, it debunks some of the promises underpinning green bond markets and traces the manifold practices undergirding its promotion. Secondly, it identifies some barriers prohibiting the expansion of green bonds in emerging markets and zooms in on the depoliticizing tendencies a transition premised on financial innovation produces. Thirdly, this work discloses the idiosyncratic political economic challenges of a fossil-based economy in transition and shines a light on the competing elements of a ‘green’ and a ‘just’ transition. It argues that the limited uptake of green bonds can best be explained by the instrument’s inability to adequately incorporate the various demands levied on South Africa’s contested transition trajectory. In so doing, this book contributes important new qualitative insights into green bond markets-in-the-making and extends political economic scholarship on finance-led transition endeavors in emerging markets.Chapters 3 and 6 is available open access under a Creative Commons Attribution 4.0 International License via link.springer.com.
Author(s): Manuel Neumann
Series: International Political Economy Series
Publisher: Palgrave Macmillan
Year: 2023
Language: English
Pages: 294
City: Cham
Acknowledgments
About This Book
Contents
About the Author
Abbreviations
List of Figures
1 Green Bonds and the Long Way to Paris
The Research Puzzle—South Africa’s Green Bond Market
References
2 What Do We Already Know About Green Bonds? A Literature Review
The Marketeers
The Reformists
The Critics
The Gaps in Green Bond Literature
References
3 Towards New Approaches of Understanding the Greening of Capital Markets
Discourse Analysis Intervening in International Political Economy
Cultural Political Economies—Squaring the Debate
Insights from Ferguson’s Anti-Politics Machine
The ‘Financial Turn’ in Transition Endeavors—Discussing Financialization
Sorting Through the Varieties of Financialization
The ‘Wall Street Consensus’ Meets Socio-Technical Understandings of Financialization
Transition Studies—A Toolbox for Political and Socio-Technical Aspects of Transitions Endeavors
The ‘Just Transition’
The Multi-Level Perspective (MLP) and Its Application on the Global Green Bond Market
Further Research Questions
References
4 The Political Economy of Greening South Africa’s Capital Markets
Early Extractivism and Lasting Path Dependence—The Emergence and Persistence of the Minerals-Energy Complex
The Crisis of Governance Exemplified Along Mandela’s Successors
The Financial Sector Lessons from the Global Financial Crisis
The Energy Sector—Incremental Reforms Amid Loadshedding
Covid-19 Exacerbating Socio-Economic Challenges
References
5 A Stalling Green Bond Take-Off
The Purported Opportunities of Green Bonds Hardly Transpire in Emerging Markets
The Climate Bonds Initiative and Its Crisis Interpretation
The ‘Other’ Side of the Investment Gap
From Opportunities to ‘Bankability’ as the Binding Constraint for Capital Markets
The Dearth of Bankable Projects in South Africa
Public Sector Struggles Around Meeting Bankability Requirements
Investor’s Reluctance to Shoulder Construction Risks
Patchy ‘Greenium’ for Issuers in Emerging Markets
Zooming into Pricing Factors in South Africa’s (Green) Bond Market
The Story Matters—Whether in the Absence of Success Stories or Through Stories of Failure Elsewhere
The Cape Town Bond—A Success Story
The Threat of a Failed Story: Reception of Nigeria’s First Sovereign Bond
Green Bonds’ Need for Simplicity Carries Trade-Offs
The Lack of Actual Innovation
The Questionable Resilience of Market Actors Amid Crises
Technical Shortcomings
The Lack of Sanctions in Case of a Green Default
The Missing Impact from Green Bonds
Green Bonds and Omnipresent Concerns Around Greenwashing
South Africa’s Taxonomy Risks Perception of Greenwashing in International Markets
Contested Inroads in the Global Labeled Bond Market
South Africa’s Green Finance Taxonomy—A ‘Living Document’ for Transitioning Actors
The Peculiarities of South Africa’s Capital Markets Inhibit Green Bond Uptake
A Mature Regional Market at the Soft Currency Frontier
The Downsides of a Soft Currency Market—Demand Could Outstrip Funding Supply
A Market with Few Tradeable Assets
The Role of Reputation Within a Small and Risk-Averse Capital Market
A Knowledge Gap Inhibits Green Bond Uptake
The Prevailing Regulatory and Policy Vacuum
The Regulatory Framework—Disclosure Trumps Prescribed Assets
The Ambiguous Greening Drive of the Johannesburg Stock Exchange
Asset Consultants as Hidden Gatekeeper of Greening Finance
Supply-Side Regulation, Its Artificial Ceilings, and a Stuttering Rollout of Renewables
The Renewable Energy Independent Power Procurement Program
Actors That Could Drive Market Development
Other Crises Overshadow and Compete with Climate Policies
Financial Sector Fear of a Populist Backlash
A ‘Natural’ Transition with Self-Fulfilling Properties
A Contested just Transition
Green Bonds—A Political Economic Question Over Sharing of Benefits and Public Support
The Depoliticizing Elements of South Africa’s Green Bond Taxonomy
The Right to Refinance—A Battle Between Market- and Bank-Based Lending
References
6 The Limits of Green Finance in Fossil-Based Emerging Economies—Lessons Beyond South Africa
Discussing the Results in Light of the Theoretical Framework
Cultural Political Economy
Financialization
Transition Studies
Insights on Green Bonds in South Africa and Beyond
Beyond Green Bonds—Financial Tools to Address Climate Change?
Concluding Remarks
References
Index
