Banks, under the umbrella body of the Kenya Bankers Association (KBA), have signed a Memorandum of Understanding (MOU) with the International Finance Corporation (IFC), and Nairobi Securities Exchange (NSE) with the purpose of spurring the development of the banking industry’s green bonds program through individual bank issuances.
The collaboration between KBA, the IFC and the NSE will aim to provide KBA member banks with technical support in green finance in conjunction with other climate finance initiatives undertaken by IFC in other markets, including South Africa and Turkey. The partnership will also serve to support Kenya’s Vision 2030 ambition to become a leading financial centre in Eastern and Southern Africa and one of Africa’s fastest-growing economies.
KBA Chief Executive Officer, Habil Olaka, acknowledged IFC’s global experience in sustainable finance. The IFC fosters sustainable economic growth in developing countries by financing private sector investment, mobilizing capital in the international financial markets, and providing advisory services to businesses and governments.
In 2016, IFC’s climate-related investments were close to $2 billion and an additional $1.3 billion was raised through core mobilization, for a total of $3.3 billion invested in climate-smart projects. In addition, through its Advisory, IFC enabled more than $1.2 billion in climate-related investments in power, resource efficiency, green buildings, and public-private partnerships. Especially, in 2016 new green bond-financed commitments were close to $1 billion worth invested in 35 projects across 22 countries, including 16 new markets.
“There is a great opportunity for banks to attract funding aligned to climate change issues and we welcome the technical assistance and advisory support from IFC towards this end,” said Mr. Olaka. “The sectors in Kenya that require green finance include agriculture and agribusiness; manufacturing; building and construction; transportation and infrastructure; energy, among others. There is no shortage of investment opportunity. Therefore, we hope banks in this market will consider how they can tap this investment opportunity towards building their portfolios while also contributing to Kenya’s sustainable development,” he said.
The Nairobi Securities Exchange Chief Executive, Geoffrey Odundo said that the NSE was enthusiastic that Kenya had the opportunities for green finance and banks would be able to tap the capital markets to attract new investors with dedicated allocations aligned to climate change mitigation and adaptation, as well as the Sustainable Development Goals.
“The Exchange fully supports green financing and we see huge growth potential for the sector,” said Mr. Odundo. “The world continues to aspire for green and inclusive growth and we urge our listed and non – listed entities to embrace the green bond market as an innovative and alternative way of raising finance from both domestic and external sources for sustainability-driven investments. The introduction of the issuance of green bonds will increase the priority for sustainable development within the region,” he said.
With IFC’s support, banks in Kenya will review their portfolios to identify climate-aligned (green) assets that can be refinanced as well as new assets that would form the pipeline to be financed from the green bond proceeds. IFC has also committed to catalyse Kenya’s green bond market by serving as an anchor investor for the pioneer issuance.