Monday, August 21, 2017 3:00PM /Municipality Waste Mgt Contractors Ltd
The Impact Investments Market
Environmental and Social Governance and Impact Investment have become key principles for investors which seek to align corporate objectives with investments decisions. Impact investments are aimed at creating an impact/measurable benefits in the community via investments in sustainable social projects. Environmental Impact Investments are even more so at the forefront of investment decisions given global policies being adopted by major economies to address climate issues and corporate objectives aimed towards creating a clean environment. Industries that fall under Environmental Impact Investments include renewable energy, energy efficiency, waste management and materials recycling etc.
Studies have shown that returns from Impact Investments are higher than that from traditional investments in the long run given the stable and pre-determined revenue as well as stakeholders (corporates, government, government parastatals and citizens) commitment to the various social or environmental projects.
Impact investments have grown rapidly in advanced economies such as United States of America and Europe and even emerging economies such as Latin America. Groups such as the European Commission Capital Market Union and G20 are conducting research on mobilizing private investments towards sustainable projects through green instruments. As at 2014, the impact investments market was valued at US$109 Billion. Goldman Sachs has been at the forefront of Impact Investments in the last decade issuing instruments under this category worth over $3 billion. In 2014, Goldman Sachs acted as Joint Lead Book Runner on a $204 million green bond issued by a Peruvian wind farm operator, Energia Eolica.
In Emerging economies, impact investments are not as prominent and as investors typically take up positions in traditional corporate, state and federal instruments which seeks to address a variety of objectives. In addition, state and federal instruments are targeted at projects which may or may not be revenue generating in most cases.
The need to issue instruments specifically targeted at critical social and environmental infrastructure necessary for growth and development in emerging markets such as Nigeria has become imperative. This is premised on the dynamic economic landscape and the need to establish distinct governance and operations systems for each project being embarked on.
Impact investments presents a sustainable approach for governments to address deficiencies in public infrastructure and the Nigerian economy presents a viable platform for Impact Investment to ensure:
· Accountability on the part of the various stakeholders such as Private sectors participants and governments
· Implementation of appropriate governance structures
· Funds are directed towards specific projects with visible measurable benefits
· Revenue generated by projects are directed towards meeting specific obligations and not towards other expenses of the government
The Cleaner Lagos Initiative
With a population of over 20 million as at 2015, Lagos is the largest city in Africa and the 3rd largest in the World with Internally Generated Revenue in excess of N300 billion1. Based on an average annual growth rate of 3%, it is estimated that the population of Lagos would be over 30 million by 2025. Over 13,000 tonnes of waste are produced by residents and corporates in Lagos State each day and this level of waste generation is expected to rise as a result of expected population growth.
The Lagos State Waste Management Authority (LAWMA) currently operates in partnership with Private Sector Participants for collection of waste within the Lagos State. The current Waste Management framework, specifically, the residential and general waste management, has degenerated over the years due to increased waste production resulting from high migration rate, inefficient service fee collection, lack of infrastructure and ability to scale up to required capacity on the part of the Private Sector Participants.
To address waste management, the Government of Lagos State of Nigeria through the Ministry of the Environment introduced the Cleaner Lagos Initiative (CLI) in 2016 with the objective of achieving a clean metropolis through a sustainable waste management framework. This is expected to eliminate indiscriminate waste disposal and the resultant health risks while ensuring waste management and recovery systems are in place.
The CLI entails the reform and consolidation of various environmental policies including restructuring of the existing waste collection and management system to ensure efficiency, incorporate global best practices and adopt best in class technologies.
The reform will involve the engagement of Contractors to implement residential and general waste collection and disposal, revalidation of existing Private Sector Participants, introduction of a Public Utility Levy, establishment of an enforcement task force- the Environmental Sanitation Corps Agency to facilitate enforcement, development of engineered sanitary landfill as well as secondary and tertiary drainage management and the creation of an Environmental Trust Fund. The CLI is backed by the recently passed Environmental Management and Protection Law.
Benefits of the CLI
· Implementation of efficient waste management Infrastructure and processes within the State including bin placements and collection route-planning; construction and operation of material recovery centers and sanitary landfills.
· Increased collection capacity via availability of new compactors and upgrade of existing waste depots and transfer loading stations.
· Direct payment of the Public Utility Bill to designated accounts which is thereafter pooled into the Environmental Trust Fund (“ETF”). The ETF is managed by independent trustees and monies held therein are used to pay service charge to service providers.
· The revamp and transformation of solid waste management systems and processes in Lagos State will result in improved flood control and management
· Reduction of environmental pollution and water contamination
· Promotes renewable energy through the conversion of waste to sustainable energy
· Environmental protection awareness programs amongst corporates and individuals to be developed by MWMCL in conjunction with the Ministry of the Environment will lead to a shift in waste disposal practices. These programme include Nature, Eco clubs and youth city volunteers
· Improvement in the standard of living for all Lagosians through access to cleaner water resulting in reduction in mortality rate largely driven by environmental epidemics.
· Generation of over 27,000 new jobs and development of robust training programs for the 377 wards within the State thereby fostering Environmental entrepreneurship across the waste management value chain.
· The reform and financing structure can be replicated in other States of the federation to ensure nationwide adoption of efficient waste management processes
Visionscape Consortium led by Visionscape Sanitations Solutions Limited (“Visionscape”) was selected via a public tender process to implement the CLI via the provision of an integrated statewide, residential, and general waste collection services for a ten year period. Visionscape Sanitations Solutions Limited, is one of Africa’s leading environmental utility group focused on Sanitation, Energy and Water Resources with operations in United Arab Emirates, United Kingdom, South Africa, India and recently Nigeria. Visionscape combines extensive expertise and innovative technologies to ensure that fully integrated waste management and recycling solutions are designed, through reduction, recycling and reuse, to help drive businesses towards zero waste and in the process satisfy the unique needs of its clients.
Municipality Waste Management Contractors Limited (“MWMCL”) is a Special Purpose Vehicle incorporated by Visioscape Consortium for the purpose of issuing Medium Term Notes to finance implementation of the CLI through establishment and operation of key infrastructure.
The MWMCL Series 1 Green Notes is a 5 year Note issued under a N50 Bn Medium Term Note Programme. The Note has strong investment grade ratings by Agusto & Co Limited - A+ and Global Company Rating Limited – A, the two foremost rating agencies in West Africa. The Note is fully backed by an Irrevocable Payment Order issued by the Lagos State Government of Nigeria, one of the key financial and commercial centres in Africa. The Green Notes presents a viable financing structure for environmental and social impact investments in Nigeria as it seeks to create efficient waste management infrastructure and processes while creating awareness and training citizens on waste disposal and treatment practices across the State.
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