Kenya continues to be adversely effected by climate change as the northern parts of the country continue to experience unprecedented levels of droughts and famine in recent history. The worsening situation points out Kenya’s vulnerability to climate change given it is highly dependent on climate-volatile sectors such as agriculture, tourism and wildlife.
In the past three years, we have experienced a significant increase in climate-related disasters such as floods and prolonged droughts. These disasters are estimated to be costing the country close to 3% of its gross domestic product (GDP) annually and is threatening to reverse progress in economic development.
H. E William Ruto, in his inaugural speech, noted that among the central concerns of his government is climate change. While addressing the United Nations General Assembly, he urged all parties to fulfil their financing pledges outlined in the Paris Agreement. The call to action comes ahead of COP 27 which is set to happen in Egypt. It serves to highlight the climate change vulnerability of the region.
Over the years, Kenya has demonstrated its commitment to building climate resilience cementing its position as the leading climate change voice in the global south. For instance, Kenya is among the first countries to ratify and domesticate the Paris Agreement which set out Nationally Determined Contributions aimed at reducing greenhouse gas (GHG) emissions by 32% by 2030. Despite the gains made, adaptations and mitigation efforts remain largely underfunded thus slowing down the transition to a sustainable economy. Climate financing is a huge opportunity that needs to be pursued in the country.
The National Climate Change Action Plan (NCCAP), 2018-2022 revised the projected estimates meant to build and enhance Kenya’s adaptation and mitigation actions by 2030 to 65B. Climate financing remains the untapped frontier in the fight against climate change in Kenya, it has a huge potential to push the country towards the attainment of the National Determined Contributions by 2030. Green financing brings onboard the financial sector in the country as key players in the implementation of climate change interventions. Traditional financing by financial institutions, for instance, has viewed climate-related sectors as risky and as such, it has limited its financial exposure in these sectors. However, with policies to compensate for the exposure, Kenya can tap on the strength of the financial sector to direct investments into the renewable energy, climate resilient infrastructure, sustainable agriculture and waste management among others.
On a promising note, Sustainable Finance Initiative Catalyst Awards convened by the Kenya Bankers Associations recognizes banks that have embedded Sustainable Finance Guiding Principle to create long-term value for the economy, environment and society. This is a testament to the progress made by the banking sector in Kenya and should serve as a launchpad for other financial institutions to innovatively direct the flow of financial investments toward building a sustainable economy.
Data on climate financing estimates that only 40% of the total climate related investments, could be tracked to the private sector while the remaining 60% is essentially undertaken by public entities. To scale up private financing, national government and county government development plans must integrate a proactive climate financing mechanism that will facilitate ease of investments. Incentives on taxations and product licensing to catalyze climate-friendly investments should be prioritized to bring onboard all tiers of financial institutions.