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FSD Kenya at the African Investment Conference London (AFSIC)

October 29th, 2024

I represented FSD Kenya at the AFSIC – Investing in Africa 2024 in discussions focused on the investment landscape and opportunities in Kenya specifically under green finance.

The AFSIC conference, known for bringing together key players from the global investment community, development finance institutions, private sector investors, and policy enablers, provided an excellent platform to discuss emerging opportunities across various sectors in Africa. With a particular interest in green finance, I highlighted the growing investment landscape in Kenya, which is becoming increasingly attractive as both the policy environment and capital inflows for green projects continue to expand.

One of the developments discussed was the introduction of carbon market regulations in Kenya, which offer a much-needed framework for the country’s carbon markets. These regulations create a structured approach for businesses and projects to participate in the carbon trading ecosystem, providing additional income streams for green investments. For instance, by enabling carbon credit transactions, projects like the Kasigau Corridor REDD+ Project have made significant strides in forest conservation, while generating sustainable livelihoods for local communities. Such initiatives demonstrate the dual benefits of environmental conservation and economic empowerment, which are crucial as Kenya moves toward a greener, more resilient economy.

In recent years, Kenya’s green finance landscape has evolved rapidly. Government support, through policies such as the Climate Change Act 2016 plus the subsequent amendment this year and the National Climate Change Action Plans (the country is currently in the 3rd plan), has created a solid foundation for green investments.

At the same time, international development organisations and institutions like FSD Kenya are playing a vital role by providing technical expertise, financial support, and capacity building to foster green investment across different sectors. These organisations help de-risk investments, making it easier for private investors to channel funds into green projects, which is crucial for scaling sustainable development efforts.

FSD Kenya through the green finance project, last year provided financing for a carbon markets simulation project to SunCulture. The main objective of the project being to assess the possibility of increasing the access to the solar products sold by SunCulture through reducing the interest rates charged using proceeds from carbon trading.

In addition, FSD Kenya is supporting a green finance preparation facility in 10 counties where through a transaction advisor the counties will work to raise financing for green projects for the counties. The aim of the project is to crowd in financing for green investments in the counties with the aim of increasing the own revenue base for the counties.

Green finance presents a unique opportunity to address some of Kenya’s most pressing challenges, including climate change, food insecurity, and unemployment. By mobilising capital for environmentally sustainable projects, green finance directly contributes to achieving Kenya’s Sustainable Development Goals (SDGs) and Vision 2030 objectives. One area where this is already making a difference is in the agricultural sector, where climate finance is being used to promote climate-resilient farming practices, such as water-efficient irrigation systems, renewable energy-powered operations, and agroforestry. These investments not only help smallholder farmers mitigate the effects of climate change but also improve productivity and livelihoods.

However, there are still barriers to fully unlocking the potential of green finance in Kenya, particularly around access to finance for smaller enterprises and farmers. Many small and medium-sized enterprises (SMEs) and smallholder farmers find it challenging to tap into available climate finance due to the complexity of application processes, lack of awareness, and high collateral requirements. In this context, there is a need for more tailored financial products that can bridge this gap and allow these smaller actors to participate in the green economy.

During the Kenya Investment Summit, panel discussion, panellists also touched on the role of private sector engagement in green finance. The private sector is a critical player in scaling climate finance solutions, especially in high-impact sectors like energy, infrastructure, and agriculture. There is a growing recognition that incentivising private sector investment in sustainable projects is key to achieving large-scale impact. Mechanisms such as public-private partnerships (PPPs), blended finance, and risk-sharing tools were discussed as potential pathways for encouraging greater private sector involvement. With the right incentives, such as tax breaks and access to carbon markets, the private sector can significantly contribute to driving green investments in Kenya.

Looking ahead, the prospects for green finance in Kenya are promising. The carbon market regulations and green finance taxonomy are already laying the groundwork for structured, long-term investments in sustainable sectors. But to fully realise the potential of green finance, collaboration among all stakeholders is crucial. This includes the private sector, government, financial institutions, and international development partners. By working together, we can create an enabling environment that not only supports green investments but also ensures that these investments deliver real, tangible benefits to communities across Kenya.

In conclusion, the discussions at the AFSIC reinforced that Kenya is well-positioned to continue attracting significant green investments. The country’s progressive policies, combined with strong interest from international investors, present a unique opportunity to accelerate its transition to a more sustainable and inclusive economy.

FSD Kenya, along with other development finance institutions, remains committed to supporting this transformation by ensuring that the necessary financial tools and frameworks are in place to enable both small and large players to participate in the green economy. The momentum for green finance in Kenya is building, and with continued collaboration, the future looks bright for sustainable development in the country.

 

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