By Davis Buyondo And Agencies
As Africa’s climate financing needs continue to rise, green bonds are being seen as one of the most promising avenues for funding the continent’s energy transition and sustainable development.
Already, success stories are emerging from countries like Nigeria and Kenya. But experts warn that Uganda must act cautiously to avoid the risks of green-washing and unsustainable debt.
In simple terms, a green bond, also called a climate bond, is a type of loan that an organisation uses to raise money for projects that help protect the environment or fight climate change. These initiatives have gained popularity in Africa in just a few years.
In June 2025, Nigeria, currently the major player on the continent, raised USD 59 million through green bonds in just two days, following earlier successful issuances in 2017 and 2019.
The funds were directed towards renewable energy, eco-friendly housing, and various conservation initiatives. But to attract investors, Nigeria had to pay interest rates as high as 19 percent, reflecting the perceived risks of lending in African markets.
Kenya entered the green bond market in 2019 when a private developer, Acorn Holdings, raised more than USD 40 million to fund an environmentally friendly student housing project. Ivory Coast, Tanzania, and South Africa have also issued green bonds, with Ivory Coast securing USD 1.5 billion in 2024.
Despite this momentum, Africa’s share of the global green bond market remains small. In 2023, the continent accounted for about USD 5 billion of the USD 2.2 trillion in global green bond issuances, according to the Africa Policy Research Institute.
Analysts point to currency depreciation, high inflation, political risks, and a lack of well-prepared projects as key challenges.
Uganda’s cautious first steps
Uganda is yet to issue a sovereign green bond. But discussions are under way, with policymakers and regulators working to lay the foundation for the country’s entry into the market.
In April 2025, the Government of Uganda, through the Ministry of Finance, Planning and Economic Development (MoFPED)’s Climate Finance Unit, in partnership with the Climate Change Department at the Ministry of Water and Environment and with support from the Global Green Growth Institute (GGGI), successfully organised a four-day capacity-building session on Climate Change Budget Tagging (CCBT).
The training, conducted under the Creation of the Climate Finance Unit Project and the Support Program to Enhance Access and Retention of Climate Finance in Uganda (SPEAR-CF), aimed to enhance stakeholders’ capacity to develop climate-responsive Programme Implementation Action Plans (PIAPs), identify climate-related activities in the Programme Budgeting System (PBS), and integrate them into the national planning and budgeting cycle for FY 2025/26.
Officials at the Ministry of Finance and the Capital Markets Authority say Uganda is developing a national green bond framework.
“We are working towards a framework that will guide the issuance of green bonds in Uganda. The goal is to ensure credibility and investor confidence,” said a senior official at the Ministry of Finance, who requested anonymity.
Uganda hopes to attract private sector participation as well. Green bonds could be issued not only by the government, but also by corporations, banks, or project developers seeking to finance renewable energy, climate-resilient infrastructure, sustainable agriculture, or improved waste management.
Promise and risk
Green bonds offer the potential to help Uganda finance key climate goals, including its energy transition. Possible projects include solar and wind power, small hydropower, clean transport systems, climate-smart agriculture, and flood control measures.
“Using green bonds can help Uganda raise large amounts of money to support climate-friendly projects. But we must be extremely careful not to replicate mistakes seen elsewhere,” said Yisito Kayinga Muddu, a climate finance expert at Community Transformation Foundation Network (COTFONE) in Uganda.
According to Kayinga, Uganda must ensure projects are well-designed, directly involve communities, and deliver real environmental benefits.
Nigeria’s experience with a green bond-funded reforestation project in Oyo state illustrates the risks. Poor planning and lack of community involvement led to failure, with most trees dying within a few years, yet the country must still service the debt incurred.
“Here we see the danger of green-washing, calling something green when it is not. That is a risk Uganda must actively guard against,” said Antonio Kalyango, Executive Director of Biodiversity Conservation Foundation (BCF).
Experts further warn that Uganda will have to overcome several barriers to successfully tap green bond markets. These include building a pipeline of credible, bankable green projects; strengthening policy and regulatory frameworks; and ensuring macroeconomic stability to attract investors.
“The green bond market demands transparency and accountability. Uganda will need to show that funds are well used, impacts are real, and risks like corruption and mismanagement are kept at bay,” said a senior official at the National Environment Management Authority (NEMA).
Analysts also note that high borrowing costs could deter Uganda, as the country may be required to pay higher interest rates than wealthier nations due to investor concerns over political and economic risks.
The road ahead
Uganda’s efforts are being boosted by international partnerships aimed at preparing the country for entry into green debt markets. In 2023, Uganda, alongside Angola and Cameroon, received funding support from the Nordic Development Fund (NDF) to address climate financing gaps across Africa.
The NDF contributed €500,000 (about UGX 2 billion) under the Green and Resilience Debt Platform, an initiative designed to support climate-friendly projects and unlock up to USD 2 billion in green debt capital for the continent.
International development finance institutions, such as the European Investment Bank and the Green Climate Fund, are playing a crucial role in helping countries like Uganda access green bond markets and attract investment to finance their energy transitions.
Uganda’s success in using green bonds without falling into the trap of green-washing will depend on strong project design, community involvement, investor trust, and strict monitoring to ensure that every shilling raised delivers real environmental impact.
Uganda Vision 2040
The Uganda Vision 2040 provides for development paths and strategies to operationalize Uganda’s Vision statement which is ‘A Transformed Ugandan Society from a Peasant to a Modern and Prosperous Country within 30 years.’
Accordingly, the concept of the green economy is provided for in the vision 2040. It further provides that the green economy will contribute to the eradication of poverty as well as sustaining economic growth, enhancing social inclusion, improving human welfare and creating opportunities for employment and decent work for all, while maintaining the healthy functioning of the ecosystems.
The Uganda Green Growth Development Strategy (UGGDS) 2017/18 – 2030/31 was developed in order to operationalise the green growth broader principles and accelerate the implementation of global development goals, Agenda 2030, Uganda Vision 2040 and the second National Development Plan (NDP II).
The UGGDS and its implementation road-map identified finance as an enabling factor that drives transition to a green economy. The strategy highlights some of the major existing financing mechanisms and instruments currently employed for implementing the green economy in Uganda.
These include: environmental taxes and levies; compliance charges, local government fees; resource rents; biodiversity offsets, payment for ecosystems services (PES), water resources and climate finance instruments; international funds; non-tax revenue; revenue and benefit sharing and resource access; conservation funds; energy standards and voluntary compliance for trade; subsidies; central government transfers; overseas development assistance (ODA); and private sector contributions.
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