As this year’s COP27 in Egypt is coming to a close, climate finance was again at the centre of the negotiations. But to become climate-neutral by 2050, both the public and private sector need to invest in solutions that significantly reduce greenhouse gas emissions and ensure green and inclusive growth.
The Kenyan Government has been promoting green investments within the country, having launched its first green bond programme in 2017. Through our Sustainable Urban Economic Development Programme (SUED) – funded by the UK’s Foreign, Commonwealth and Development Office – we support the Kenyan Government in attracting investment for critical climate-smart value chain and infrastructure projects by working with ten fast-growing intermediary cities.
Over the past three years since SUED started, our Tetra Tech team has supported municipalities to identify equitable and inclusive climate actions in areas such as sustainable agriculture, waste management and green resilient infrastructure for transport and water. To increase investment that will help mitigate against and adapt to the impacts of climate change, SUED has developed climate-smart Urban Economic Plans (UEP) – plans that promote economic growth and support urban development in a sustainable and inclusive way – and is now attracting investment to help realise these plans.
In this blog, our SUED team highlight four ways in which they have successfully worked with municipalities to catalyse private finance.
De-risking private investments
So far, SUED has attracted nearly £5 million private sector funds using a climate “seed fund” to leverage and de-risk wider private sector investment, with £1.38 million of seed funding utilised to date. With SUED’s support, three municipalities – Kisii, Iten and Malindi – were able to bolster their economic activities in the agricultural sector and contribute to the country’s largest foreign exchange earner. By doing this, SUED is looking to increase the overall export of Kenya’s produce. We are working closely with the private sector to ensure they promote sustainable agriculture that adopts climate-smart practices – for example techniques that will preserve and improve soil fertility, prevent water pollution and protect the municipalities’ unique biodiversity.
Increasing understanding of, and access to, climate finance
We are delivering targeted capacity building to municipalities so that they are better suited to proactively seek green finance for the projects they have identified in their Urban Economic Plans (UEP). “The SUED team helped us develop our project pitch for various green funds available. By working together with the team, we have been able to strengthen our approach on how we attract climate finance”, said Lilian Bonareri, Head of Corporate Communication and Resource Mobilisation for Kisii Municipality.
Through SUED’s mentorship and coaching, the municipal managers and their resource mobilisation teams have started to incorporate a climate-conscious culture into their project development.
Taking a multi-faceted investment approach
We are promoting various ways to attract investors and mobilise climate finance. Through SUED’s blended finance approach, we were able to ensure that our private sector partners prioritise climate resilience in the projects that they fund.
In the Avocado Oil Processing Plant Project in Kisii Municipality for example, we have facilitated the private sector to help farmers prioritise climate-smart ways of avocado tree planting. Along with promoting agroforestry, they also encourage the project to grow these trees along with other marketable food crops such as bananas.
Not only does this enhance biodiversity and soil fertility – it also helps mitigate against the impacts of climate change. And through the private investor’s efforts to sensitise farmers for good agricultural practices, they will be able to better response to climate-induced risks such as crop failure that result from changes in weather patterns.
Without the programme’s support, incorporating future climate-proof considerations in their business modelling would not have had the high priority that it currently has.
Developing climate-friendly projects
All the investment support that SUED provides undergoes a rigorous in-depth review process. In that process, we identify the most promising climate-resilient value chain and infrastructure projects. In order to decide whether a project should go ahead, our team reviews it against agreed climate criterion that considers how climate change could impact the project.
We then carry out a thorough evaluation of the project’s viability and identify any climate risks and potential mitigation measures that need to be considered. This in-depth approach enables investors to quickly see how climate-friendly the investments are and inform their funding decision.
Our work with municipalities is crucial to strengthening Kenya’s national green finance ecosystem to attract – and retain – green finance at the local government level. In doing so, SUED is playing a key role in demonstrating to investors that there is a viable pipeline of green investment in Kenya. This highlights just how important collaboration between the private sector and local governments is – so that Kenya is able to prioritise green and inclusive economic growth that has the power to ensure sustainable economic development.