SA Gender Bond Landscape Report Abridged v2

16 June 2021 SA GENDER BOND LANDSCAPE REPORT An abridged version of the South African Pre-Feasibility Study By Dr Khetsiwe Dlamini et alia

Purpose This is an abridged version of a South Africa Gender Bonds Landscape report which was commissioned by UN Women South Africa in support of the Government’s desire to build forward better as part of its COVID 19 Economic Reconstruction and Recovery Plan (ERRP) with women and youth at the center. The report assessed the possibility of a gender bond as a method of mobilizing significant capital in this regard. June 2021

Executive Summary The SA Gender Bond Landscape report shows that capital markets can be leveraged to include women and the youth of South Africa in ways that address national priorities for all, Despite COVID-19 having worsened the burden of care for women, investment in women is not strongly reflected on the COVID-19 Economic Reconstruction and Recovery Plan (ERRP). There is opportunity for gender mainstreaming both in the National Budget and in the ERRP, with the success of efforts contingent on the participation of women in the fiscal planning; increased availability of gender disaggregated data as well as the smart and sustainable use of capital instruments such as bonds. The landscape report indicates that a sole focus on the bond instrument may not be enough to make the difference. A broader SDG lens is required. In assessing the feasibility of a gender bond in South Africa, it was found that the gender bond market is a small share of the bond market, and more momentum exists for green bonds tagged to infrastructure projects. The landscape report thus recommends the pursuit of a broader sustainability frame under which gender bonds and other capital market products would fall. Given South Africa’s widening fiscal deficit, this landscape report recommends a combined commercial and concessionary Sustainability Plus Facility (SPF) which positions GEWE as a catalyst to and booster of sustainable socio-economic investments as measured by 2X gender finance and UNDP’s SDG investment indicators. STRICTLY PRIVATE AND CONFIDENTIAL 3

Introduction The Brief: UN Women (UNW) is supporting the Government of the Republic of South Africa regarding the feasibility of issuing a deficit neutral Sovereign Gender Bond (SGB) Methodology: (i) Desktop report (ii) Consultations (iii) Analysis (iv) Landscape report Method of Analysis of Qualitative Responses: Grounded Theory Method – open, axial and then selective coding to extract key themes 4

Context o Gender Equality in South Africa: review of the progress on gender equality and women’s empowerment (GEWE) in o South Africa South Africans, especially women are facing increasingly poor indicators in health, education, GBV, social welfare o and protection, access to the economy and land access This is happening on the back of a struggling economy, o with rising debt, poverty and unemployment Women’s participation in decisions that affect their money, taxes development outcomes is crucial for o economic recovery and growth In budget decisions there are winners and losers – women influencing prioritization and negotiating for their o needs is important as when they win everyone does An intersectionality lens will go a long way in ensuring that the most marginalized and vulnerable populations are prioritized 5

Gender Responsive Budgeting (GRB) Combining the economic upside of gender parity and capital markets in SA for economic recovery · In South Africa COVID 19 has worsened an already fragile economic outlook - Government's economic recovery plan includes a comprehensive health response intended to kick start · economic recovery The time is now to combine the economic upside of gender parity and capital markets in SA for · economic recovery Government’s commitment to gender equality, can be assessed through a budget analysis of ministries, departments, programmes, projects, initiatives that give effect to the number of · gender-specific policies and laws that government has committed to In December 2020 reports showed that there was considerable spending towards meeting women’s needs during COVID-19 pandemic - 18 million women have benefited from social and · economic relief spending Building forward better from COVID 19 should include a care economy that will convert women’s efforts into to increased family income. Women are forced to use their skill, time teaching and caring for children, looking after sick or elderly relatives, ensuring that domestic work is conducted for no pay in patriarchal markets; South Africa included. STRICTLY PRIVATE AND CONFIDENTIAL 6

The National Landscape for Gender Bonds South Africa is a prime market for gender bonds · Gender bonds are described as bonds that support the advancement, empowerment and equality of · women - 13 gender-labeled bonds across the world; none in Africa Impact of Gender Bonds are determined by 2x criteria: Entrepreneurship, Consumption, Leadership, · Investments through Financial Intermediaries, Employment South Africa is a prime market for gender bonds, as it meets the selection criteria employed by the study: ·· A working debt capital market; strong institutional investor interest; availability of pipeline opportunities Bonds are typically differentiated either by use of proceeds, guarantor or issuer Social Impact Bonds (SIBS) are a classical form of blended finance - a contract between the public sector and investors, in which repayments are based on improved social outcomes from activities funded by the SIB. But improved outcomes are not guaranteed, and measurement is difficult, thus, returns are · uncertain Green Bonds are growing across the world with US$ 1.5 T of green investment potential in Africa, almost · half of which is attributable to green building South Africa accounts for over 70% (or US$ 1.5B) of Green Bonds issued in African countries between 2012 and 2020. Green Bonds have been targeted for deployment were there’s a strong commercial basis (cost saving or financial return on investment). South African issuers include municipalities and corporates STRICTLY PRIVATE AND CONFIDENTIAL 7

SA Gender Bond Landscape Findings Building better forward with gender and youth inclusion • SA has the opportunity to build economy back more inclusively and gender responsively through: Burgeoning green bond market which can be leveraged for gender responsive and inclusive growth; financial markets requiring more innovative socially conscious solutions; more economic representation & participation by women from the economic revival effort; ring fencing funding for social causes related to gender in an outcome-oriented manner; a latent care economy that if grown could create more economic opportunities in pursuit of COVID-19 economic recovery • Considerations for a gender bond include the fact that SA is over geared and under performing; SIB has the greatest coverage of SA Gender Priorities and preferential procurement so may be the greatest driver of change; convergence between Government priorities & investor expectations is vital; working within existing intersecting priorities, such as infrastructure growth (including green) & job creation offer the greatest scale potential • South Africa has a sound macroprudential regulations and a robust financial system. Financial institutions continue to be highly capitalized • Constraints include: high debt burden requiring fiscal neutral solutions; COVID-19 economic recovery amidst mounting debt & limited fiscal space and cross-cutting issues & economic strain disproportionately affecting women & previously disadvantaged people • Stakeholder expectations of a gender bond include women’s empowerment; sustainability; private sector participation; PPPs; inclusion of the care economy; transparency. Perceived risks and issues: accessibility; incentives and trust. STRICTLY PRIVATE AND CONFIDENTIAL 8

Recommendations for Gender Bonds in South Africa Align Diversify Impact at Scale • Leverage the • Pursue Sustainability • The Sustainability Plus Economic Revival Plan Bonds & Other Capital Facility would seek to to power SA COVID-19 Market Instruments in maximize: Economic ERRP with women’s ways that include Impact, based on the participation gender bonds versus commercial feasibility exclusive focus on & impact of the project gender bonds as a & their ability to service single SDG and capital debt obligations. Align market instrument with the ICMA Social Bond Principles, 2X and SDG Impact Investment measures 9

SPF Investment Opportunities I. Gender mainstreaming the Youth Employment SIB (concessional finance) • For a more gender responsive II. Investing in Financial institutions, intermediaries and fintech to help them participate in infrastructure (commercial investments) • The Government has committed to R791.2 billion infrastructure investment drive, with partners in the private sector, to rollout infrastructure through initiatives such as the blended finance Infrastructure Fund • It is recommended that this money is used to lend to women-led/owned businesses participating in the infrastructure, including renewable energy. Funds for the facility could be generated through: o Proportion of proceeds from revenue the government gains from bonds o Money made by the hybrid facility would be channeled towards social impact STRICTLY PRIVATE AND CONFIDENTIAL 10

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