BY:
Lessons from the county green investment facility
August 14th, 2025
Counties in Kenya serve as critical hubs for investments, offering potential for continued economic growth and development. Yet, many investable projects remain at the conceptual stage, struggling to transition into viable, bankable projects due to inadequate project preparation funding, limited technical expertise, weak institutional frameworks, regulatory and policy bottlenecks, and limited private sector engagement. To bridge this gap, the County Green Investment Facility, funded by Financial Sector Deepening (FSD) Trust Kenya and managed by PricewaterhouseCoopers (PwC) Kenya, supports 10 counties (Embu, Kirinyaga, Kisumu, Laikipia, Nairobi, Makueni, Nandi, Taita-Taveta, Vihiga, and Wajir) in identifying and preparing investment-ready projects.
The facility is designed to enhance the capacity of counties to develop, structure, and mobilise external finance for sustainable investment projects that support green growth and economic resilience. Its implementation has enabled the formation of County Green Investment Working Groups, which collaborate closely with PwC to prioritise and structure investment ready projects effectively.
Devolution represents a major milestone in Kenya’s economic development, offering counties the opportunity to attract region-specific investments. However, despite these promising opportunities, investing in counties remains complex. Structural and fiscal challenges continue to hinder both public and private investment at the county level.
Constraints to investment readiness in counties
Continuous engagement with counties has revealed constraints that hinder investment readiness and project implementation. Key among these challenges include:
- Inadequate project preparation
Many promising projects lack essential preparatory work, such as market assessments, feasibility studies, and Environmental and Social Impact Assessments (ESIAs), which hinder their ability to be effectively packaged to attract investor interest. In some cases, projects are based on partial or outdated studies, leading to critical data gaps in areas such as capital expenditure (CAPEX), operational expenditure (OPEX), and return on investment (ROI). Without this information, counties face significant challenges in demonstrating project viability and making a compelling case for funding. While several counties have previously undertaken feasibility assessments and prepared project proposals, most of these are now outdated and require additional resources to update with current and credible data to meet investor expectations.
- Balancing impact with financial viability
While impact-driven projects are essential for sustainable development, they must also incorporate clear and viable revenue models to attract investors. Many project proposals tend to focus on social and environmental outcomes without adequately demonstrating how investors will recover their capital. This underscores the need for county governments to design projects that are not only socially and environmentally beneficial but also commercially viable.
Following Kenya’s reclassification as a lower-middle-income country and the resulting shift in development financing, it is increasingly important for counties to prioritize the development of bankable, self-sustaining projects. For instance, a renewable energy project may offer significant environmental benefits, but investors will also seek assurance of stable demand for the electricity produced and reliable payment mechanisms. This highlights the importance of embedding revenue-generating components into project design from the outset to ensure long-term viability and investor confidence.
- Large capital outlays requirements
Many county-level projects, particularly in sectors such as water supply, solid and liquid waste management, and agro-processing, require significant infrastructure investment and advanced technical expertise, which is often inadequate and/or lacking at the county level. These projects are vital for economic development, environmental sustainability, and the delivery of essential public services. However, their high upfront preparation cost and capital requirements present major financing challenges.
While Public-Private Partnerships (PPPs) offer a viable model for mobilising private capital, counties often face difficulties in attracting investors due to weak financial positions, limited and unpredictable revenue streams, and their inability to provide guarantees that reduce investor risk. In the absence of proper financial structuring and robust risk mitigation strategies, many of these critical infrastructure projects remain stuck at the planning stage, unable to move forward to implementation.
- Investor risk perception
The FSD Kenya Green Finance Assessment (2024) highlights that investors often view county projects as medium- to high-risk due to structural issues such as low own-source revenue, limited fiscal autonomy, high levels of pending bills, and recurrent expenditures — especially personnel costs — that exceed recommended thresholds. These challenges significantly limit counties’ financial flexibility and their ability to attract private capital. In many cases, counties struggle to ensure that project revenues are properly managed, ring-fenced, and reinvested, leading to concerns about financial sustainability. Additionally, delayed payments to contractors and inadequate project oversight further erode investor confidence.
Structuring projects through Special Purpose Vehicles (SPVs) with clear mandates, financial discipline, and professional management can significantly mitigate these risks. SPVs provide an independent governance structure that ensures transparency, accountability, and efficiency in project execution. Coupled with sound fiscal discipline, they create a more predictable investment environment, reduce risks associated with political interference, and enhance the creditworthiness of county projects, making them more attractive to investors. SPVs have been successfully used in several national infrastructure projects implemented under PPP structures, such as the 35MW Sosian Menengai Geothermal Power Plant, Road Annuity Lot 18, and the Nairobi Expressway. At the county level, SPVs are increasingly being explored for projects in sectors like water, waste management, and housing. For example, the Water Sector Trust Fund (WaterFund) supports counties in structuring water and sanitation projects through SPVs under its Commercial Financing Programme, where projects are co-financed through commercial loans and performance-based subsidies, ensuring financial sustainability and improved service delivery
- Weak value chain integration
Sustainability is a key concern for county-led projects, especially those without robust value chain integration. Successful projects must secure a sustainable supply of raw materials (backward integration) and establish strong market linkages (forward integration). Many counties overlook these critical components, affecting the long-term viability of their initiatives.
For example, an agricultural processing plant may be established without adequate plans to ensure a steady supply of raw materials from local farmers. Similarly, a county investing in a cold storage facility must ensure that transport and market access are well-coordinated to prevent post-harvest losses.
Additionally, counties in the same bloc often establish duplicate industries rather than adopting a regional bloc perspective. A more coordinated approach would ensure diversification of industries to support different value chains.
How the county green investment facility is addressing these challenges
The County Green Investment Facility has a structured approach to providing technical assistance, and resource mobilisation to counties, helping them develop bankable projects. Specifically, the County Green Investment Facility is supporting counties by:
- Mobilising funding for project preparation activities – Supporting projects to develop proposals for comprehensive market assessments, financial models, risk evaluations, and overall project preparation support.
- Conducting due diligence – Documenting key project details, including location, technical requirements, infrastructure dependencies, and potential risks
- Enhancing counties’ capacity to structure projects – Providing advisory services to help counties navigate regulatory, financial, and technical complexities in structuring different investment arrangements, including but not limited to PPPs.
- Improving investor confidence – Supporting projects to have sound governance frameworks, clear revenue models, robust risk mitigation strategies, legislative approvals, and stakeholder buy-in.
- Promoting value chain integration – Working with counties to design projects with strong backward and forward linkages to ensure sustainability and market alignment.
Unlocking county investments requires a multi-faceted approach that addresses project preparation, financial structuring, and risk management. Even the most promising opportunities will struggle to secure financing without adequate groundwork and investor confidence.
The County Green Investment Facility is playing a pivotal role in bridging these gaps by supporting counties in mobilising project preparation funds, structuring viable investment models, and enhancing investor confidence. Beyond financial support, the facility fosters knowledge sharing, enabling counties to learn from best practices and successful models across different regions.
To transform conceptual ideas into investable projects, governments, funders, and development partners must work collaboratively to strengthen project readiness. By implementing strategic interventions, Kenya’s counties can unlock their full investment potential, drive sustainable economic growth, and contribute to national development goals.
