Private sector funds critical to combating climate change

Kenya will next month host The Africa Climate Week (ACW 2023), one of four Regional Climate Weeks held this year to build momentum ahead of the United Nations (UN) Climate Change Conference COP 28 in Dubai.

The ACW 2023 to be co-hosted by the Kenya government and African Union Commission will be organised in parallel with the African Climate Action Summit, also hosted by Kenya.

The three-day summit to be held on September 4–6 will bring together leaders and investors from Africa and beyond to share experiences and solutions for a sustainable, resilient Africa.

Financial Standard sat down with sustainable development advocate Isaac Kalua, who also chairs the Green Africa Foundation, on private sector involvement in combating climate change. Excerpts of the interview:

Developed nations have in the past pledged $100 billion (Sh14.3 trillion) in annual funding to help developing countries such as Kenya reduce emissions and manage the impacts of climate change. Is the goal being met?

There was $79.6 billion in climate finance in 2018, but the actual allocation to developing nations and its impact on the ground vary. It is essential to assess whether the committed funding is being effectively utilised and whether additional financial support is needed to meet the intended goals.

Let us remember that small island states and low-lying coastal areas are already losing land to rising seas. Conceivably, this may happen to Mombasa or Lamu. Flooding from extreme storms continues to wipe out people’s livelihoods in Africa and Asia.

Furthermore, heat waves are killing crops, affecting marine lives that our coastal communities rely on. According to the United Nations, the cost for low-income countries to adapt to these and other climate impacts far exceeds the promised $100 billion a year. This is why urgent action must be taken to meet and exceed the $100 billion target.

In July this year, we saw a landmark agreement mooted on the need to massively increase private sector finance to developing and middle-income countries to allow them to transition to clean energy. Has the private sector taken up this challenge?

Private sector involvement in financing the transition to clean energy in developing and middle-income countries has been growing, and there is increased recognition of the need for their engagement. However, the challenge lies in scaling up investment to the levels required to make a substantial impact.

While there has been progress in attracting private capital toward renewable energy projects, more efforts are needed to address barriers such as perceived risks and limited access to financing. Close collaboration between governments, international financial institutions, and the private sector is crucial to mobilise the required resources.

In order to secure private sector financing, there is need of de-risking of investments in countries with lower financial ratings. That is easier said than done. So it falls on African governments to create a conducive governance environment for such de-risking.

The government has said it plans to plant 15 billion trees by 2032, stop and reverse deforestation, and restore 5.1 million hectares of deforested and degraded landscapes as part of efforts to fight climate change. What do you make of the implementation plan?

The government’s plan demonstrates a comprehensive approach to combating climate change. However, the implementation of such an ambitious plan requires detailed strategies, sufficient resources, and effective monitoring mechanisms. It is vital to ensure that the plan accounts for community involvement, sustainable land management practices, and considerations for biodiversity preservation. Regular evaluation and adaptive management will be essential to make the implementation plan successful.

In addition, we can only meet this target if we plant four million trees every single day.

Electric vehicles (EVs) have been billed as a powerful weapon in the world’s battle to beat global warming. What interventions are necessary to help Kenya promote their use?

To promote the adoption of EVs, addressing key bottlenecks such as charging infrastructure and high costs is imperative. The government can consider implementing incentives such as tax credits, subsidies, and reduced import tariffs for EV-related technologies.

Public-private partnerships can be established to develop a robust charging infrastructure network, particularly in urban areas and major highways.

Promoting local manufacturing of EV components and batteries can help lower costs over time. Additionally, awareness campaigns and education on the benefits of EVs can encourage their adoption among consumers and businesses.

Banks and other financial institutions particularly have a key role in funding projects which support transition to a low-carbon economy. Do you feel they are taking practical steps in facilitating this and what more can they do?

Many banks have started integrating environmental and social risk criteria into their lending decisions, and some have committed to align their portfolios with climate goals. However, more can be done.

Banks can enhance their green financing offerings, provide customised financial products for sustainable projects, and collaborate with industry stakeholders to develop innovative financing models. They should also increase transparency in reporting their climate-related exposures and investments to facilitate informed decision-making.

The Central Bank of Kenya review recently revealed that the lowest loan rate was at nine per cent and the highest at 17.6 per cent. Cheaper loans for green investments are critical to spur growth in this sector.

William Ruto has been questioned on his commitment to mitigating climate change risks after he lifted a ban on logging as well as softening on shamba system. What do you think of these policies?

The policy decisions could indeed raise concerns about Kenya’s commitment to climate change mitigation efforts. They have the potential to contribute to deforestation and increased greenhouse gas emissions.

It is important for the government to consider the long-term environmental impacts of such policy changes and ensure they are balanced with comprehensive measures to preserve ecosystems, promote sustainable land management, and engage local communities in conservation efforts.