The listing of Africa’s first Nature-Linked Performance-Based Bond on the JSE is being described as a milestone for finance. Refilwe Rakale, the JSE’s Fixed Income Primary Market Associate, explains what makes this transaction fundamentally different from other bond issuances, including green, social or sustainability-linked bonds listed on the exchange.

‘This transaction is different because it moves beyond the traditional use-of-proceeds and SLB [sustainability-linked bond] models. In a conventional green, social or sustainability bond, the key question is whether proceeds are allocated to eligible projects. The JSE’s Sustainability Segment, for example, allows issuers to raise debt where proceeds are ring-fenced for green, social or sustainability initiatives.

‘This issuance is structurally different. The proceeds are for general corporate purposes, and the instrument is not a sustainability-linked bond and is not listed on the JSE Sustainability Segment. Instead, part of the investor return is linked to the performance of the Cape Water Invasive Alien Plant Removal Project.

‘That makes it a performance-based bond where the defining feature is that investor economics are linked to an independently verified ecological outcome: the number of hectares of invasive alien plants cleared. This is Africa’s first nature-linked performance-based bond, with part of investors’ returns linked to independently verified ecological restoration.’

According to Rakale, the shift from funding environmental projects to rewarding measurable environmental performance is particularly noteworthy.

‘It is very important because it changes the conversation from capital allocation to verified impact. With traditional sustainable finance instruments, the market has often focused on whether money is directed towards eligible activities. That remains important, but it does not always answer whether the expected environmental outcome was actually achieved. In this transaction, the return mechanism is linked to a measurable result.’

Use-of-proceeds bonds and SLBs remain critical tools in the sustainable finance toolkit, particularly for financing eligible projects and incentivising issuer-wide transition strategies, she says. ‘The significance of this transaction is that it complements those models by going a step further – linking a portion of investor return directly to measurable, independently verified environmental performance. That is particularly important in nature finance, where the market needs credible ways to demonstrate measurable ecological value. This creates a stronger alignment between investors, the issuer, the project implementer and outcomes-based funders. If the project achieves full success, investors can receive a higher effective return; if the project underperforms, the return is lower.’

She says a performance-based structure improves transparency because the transaction must define the outcome clearly from the start. It also improves accountability because an independent technical agent, Conservation Alpha, is responsible for verification, while the Nature Conservancy South Africa is the project implementer. ‘It improves investor confidence because the financial terms are not based on broad ESG [environmental, social and governance] claims. They are linked to a pre-defined, measurable and externally verified KPI. For investors, this means the instrument provides a clear link between risk, return and impact.’

Rakale says capital markets have an increasingly important role to play in addressing SA’s water security, climate and biodiversity challenges. ‘Water security, climate adaptation and biodiversity restoration all require long-term, scalable capital. Capital markets can help mobilise institutional capital and channel it towards projects that deliver measurable public benefits. Capital markets are particularly useful because they can mobilise large pools of institutional capital; create tradable, transparent instruments; bring discipline through disclosure and reporting; enable risk-sharing between investors, issuers and catalytic funders; and support projects that may otherwise struggle to attract commercial funding. In this sense, the role of the JSE is not only to provide a listing venue, but to help create market infrastructure for sustainable investment at scale.’

She says the transaction demonstrates the next stage of market development: supporting more innovative structures that link capital markets to measurable environmental outcomes. ‘The listing is a milestone in the market, and it illustrates how listed instruments can align financial performance with measurable environmental impact.’

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