In many ways, Kenya is leading the way on green finance in Africa. In the past decade, the country has managed to decouple its fastly growing GDP and population from its GHG emissions. Now, Kenya is one of the only six countries worldwide with a greenhouse gas emission trajectory aligned with 2ºC or below, together with Ethiopia and Morocco.
In the past 5 years, the country has enacted a green bond programme and seen the issuance of its first green bond. It has seen one of its banks become a GCF accredited institution, the creation of a local sustainable finance initiative and the participation by one of its banks to a leading financed emissions standard, showing a strong commitment towards green finance.
But further private capital needs to be channeled towards climate mitigation and adaptation for Kenya to reach its ambitious climate targets. The private sector still needs to increase its level of ambition and civil society needs to stay mobilized. This would require building the local expertise on climate finance, adopting and tailoring ambitious mandatory frameworks and policies to Kenya's context, and mobilising additional capital, especially for adaptation with Kenya ranking as one of the most vulnerable countries to climate change. What can be done to ensure a shift towards a low carbon, climate resilient and sustainable economy?
Early 2021, South Pole and FSD Kenya's sustainable finance experts set out to analyse the current state of green finance in the country and provide insights on what could be done to accelerate the transition of Kenya's financial sector in line with national ambitions. The intended work focused on financing green projects (investing in inclusive green initiatives) and greening finance (making mainstreaming climate and environment factors a financial and strategic imperative in the financial sector).
What are some of the actions that could support this transition?
Building capacity and training people to better understand green finance, by continuously informing financial leaders of the business rationale, risks and opportunities of green finance.
Ensuring strong interaction among local green finance initiatives, hoping this will allow ecosystem stakeholders to maximise synergies and minimise overlap.
Driving innovation in local sustainable and climate finance, similarly to what the Kenyan Ministry of Environment is doing with its Green Procurement Policy.
Enforcing mandatory financial disclosure, such as factoring TCFD and investment emissions disclosure into the country's regulations.
Implementing incentives for green finance through carbon pricing, the abolition of fossil fuel subsidies and tax rebates.
We are calling all Kenyan financial institutions and regulators to advocate for these ambitious measures, implementing them throughout their value chains and organizations and walking the talk.
Want to know more? Click here to get access to our Kenya green finance ecosystem mapping.