Study: Kenya’s Green Investment and Financing Opportunities Worth KSh87 Billion
Study commissioned by Green Bond Programme Kenya, Kenya Bankers Association and WWF-Kenya
Green financing opportunities identified in Transport, Manufacturing and Agriculture sectors
Kenya is preparing to issue first green financing bond next year with about KSh2.4 trillion required to support green economy activities.
Nairobi: Tuesday, December 18, 2018: Kenya’s manufacturing, transport and agriculture sectors have combined green investment and financing opportunities valued at KSh87 billion over the next five to 10 years of which there is near-term demand for Ksh16 billion, a new study has revealed.
According to the study commissioned by Green Bond Programme Kenya with support from Kenya Bankers Association and WWF Kenya, the three sectors through various segments present the most viable business opportunities for climate-smart financing – as Kenya readies for its first sovereign green bond issue next year to assure the country’s sustainable economic development and resilience to climate change in line with the country’s green economy strategy and climate change policies.
The transport sector, the study indicates, offers the bulk of climate-smart opportunities and finance demand worth KSh8billion per year in the short term, which is defined as one to two years, growing to KSh58 billion in the medium term, which is five to 10 years. Agriculture follows with KSh3.5billion in the near term and KSh18 billion over 10 years; and manufacturing with KSh4.4billion and KSh10.7billion in the same periods. The planned Light Rail and Rapid Bus Transit model in Nairobi and Mombasa, with a finance demand worth KSh14billion and KSh35 billion, respectively takes the bulk of the sustainability investments available under transport sector.
Under the manufacturing sector, the study lists energy efficiency, renewable energy, agro-processing and waste management as potential areas for green investment. Livestock and agricultural inputs cap the opportunities in the agriculture sector.
The report: Demand Study on Green Finance Opportunities, released today in Nairobi seeks to quantify the investment opportunity for green investments in Kenya, identify barriers to the issuance of green bonds and solutions for creating bankable projects.
Speaking during the Study’s launch, Mohammed Awer, WWF Kenya Chief Executive Officer said the study, a first in the market, bridges the informational vacuum experienced by potential bond issuers and investors in the green financing market.
“The Study brings a clearer understanding of sector performance and investment trends for climate smart projects which in turn will help bond issuers and investors understand the market size, and estimate future financing potential,” said Mr. Awer .
Overall, the need for an enabling policy environment at local and international level, limited data on green investment opportunities and technical know-how have been cited as among key barriers hampering spread and scaling up of the green financing market in Kenya.
To address these challenges, Kenya needs to ensure that green bonds have their proceeds invested in projects with environmental benefits, and mostly facilitate climate change mitigation and adaptation, as is best practice globally. The research that was conducted by SBA Consulting on behalf of the partners found that issuance of green bonds in the manufacturing sector is likely to be affected by potential issuers’ risk perception of greenfield projects, disenabling regulations, and limited technical skills.
The transport sector is affected by lack of an enabling environment at the national and county level. Access to capital and risk perception, fragmented smallholder farmer base and long payback periods impacts green investment in agriculture sector.
“The Study recommends a raft of solutions that will help build a robust and viable pipeline of projects, create confidence for bond issuance, and call for improved enforcement and policy coherence,” said Mr. Jared Osoro, KBA Director of Research and Policy. KBA has partnered with Nairobi Securities Exchange, Climate Bonds Initiative, Financial Sector Deepening – Africa and FMO- Netherlands Development Finance Company to support the development of guidelines and build capacity of potential issuers of green bonds in Kenya.
In December 2017, Climate Bonds Initiative and FSD-Africa, were among the organizations that assisted Nigeria’s Ministry of Environment to issue the Continent’s first Sovereign Green Bond. Green bonds have become popular globally as nations race to mitigate the effects of global warming in line with the Paris Agreement of December 2015.The global size of the green bond market doubled last year to $155 billion (Sh15.66 trillion) from about $82 billion (Sh8.28 trillion). According to the national Green Economy strategy, Kenya is in need of approximately Sh2.4 trillion for green economy activities in areas such as afforestation, renewable energy and public transport. The Green Economy Strategy and Implementation Plan (GESIP) identifies green bonds as one of the mechanisms through which capital can be raised for the economy’s transition.
To read the reports, kindly click this link.
Kenya Bankers Association
Director – Public Affairs