KEPSA in collaboration with the National Treasury and Economic Planning, and Financial Sector Deepening (FSD)-Kenya organized a Virtual Climate Finance for Green Growth towards the Nairobi Summit Declaration Forum on 17^th August 2023 ahead of the inaugural Africa Climate Summit (ACS) in Nairobi. The climate finance session aimed to support the private sector to further refine climate change recommendations and priorities of the private sector at the ACS under the stewardship of KEPSA, approaches on how the private sector can build capabilities and skills to leverage climate investment opportunities; and key policy levers required to foster private sector climate change investments.

KEPSA Climate Business Information Network-Kenya (CBIN-K) Coordinator, Ms Faith Ngige, while presenting the focus and structure of the Africa Climate Summit highlighted that Climate Finance is one of the key crosscutting thematic areas of the summit. The focus is on creating a new financial architecture for climate finance and expanding the private sector financing towards climate change interventions. Some of the challenges in getting accurate status of the climate finance flows in Kenya are data-related especially access to climate finance from the private sector.  To improve information availability, it is important that the technical capacity of private sector is enhanced in climate-related investment and reporting.

National Treasury and Economic Planning, Green Economy and Climate Finance unit, Mr Hillary Korir highlighted that, climate finance is central to the Africa climate summit.  The Summit provides a unique opportunity for the voice of the Kenyan and African private sectors to position their priorities and capabilities in the global conversation on climate change, green growth and climate finance. There were opportunities at the summit for the private sector to present perspectives on climate finance, access modalities, institutional reforms capacity building among other considerations.  Among other areas of focus during the summit are carbon markets both voluntary and compliance markets.  The Green Climate Fund (GCF) will also hold the Private Sector Investment Conference during the same period 4^th – 5^th September 2023. Private Sector members were invited to register for the GCF Investors Conference. Among key areas of inputs are private sector perspectives on investments approach towards climate interventions, ensuring financial instruments prioritize financing adaptation needs for Kenya and Africa at large.

Dr Samwel Tiriongo, Director Research and Policy at the Kenya Bankers of Association (KBA) presented the proposed climate finance architecture reforms as expounded on the private sector communique towards the summit. Kenya has a well-developed financial sector that and there is good progress in the finance and banking sector in deliberately directing financial flows towards climate change adaptation and mitigation measures. There is increased scrutiny of environmental and social risks that follow investments. It is therefore that financial institutions adopt bold and deliberate measures on nature-based disclosures in order to drive stronger commitment of private sector commitments in climate change.  Climate risks lead to reduced revenues, increased cost of doing business such as the proposed cross boarder adjustment mechanism. In addition, climate change is a long-term phenomenon requiring long term programmatic solutions, however the current climate funds favour projects and short-termism negating the long-term interventions required to address the impacts of climate change.

Ms Anzetse Were, Senior Economist at FSD Kenya, while presenting on the Partnerships and collaboration on climate finance during and beyond the ACS, shared on the status of climate finance in Kenya, where the government still shoulders a larger proportion of climate financing in Kenya at 28.3% while private sector contributed 14% according to climate finance landscape report 2018. In the international space.  A lot of it is directed towards mitigation measures at 79.8% in relation to adaptation at 11.7%. Financing instruments for climate finance include: Green Climate Fund (GCF), Financing locally-led climate action (FLLOCA), guarantee funds for Kenyan projects, concessional climate funds linked to climate targets, grand funding for technical assistance, international carbon credit sales and carbon markets among others. The mitigation measures in order to catalase private sector climate and green investments there is need to:

• Increase a range of green project pipeline through measures such as technical assistance funds, aggregation structures, project management support and guarantees. There are consideration measures taken in greening Kenya’s financial sector with policy measures in the capital markets and the Central Bank Guidance on Climate-Related Risk Management. This can still be enhanced through increased software and climate finance skills of the sector and also include sectorial focus for portfolio management.
• Data that enhances information availability transparency and general investment conditions for better alignment of risk perceptions and realities will go a long  way in catalyzing green investments and reducing “greenwashing claims”.   There is need to regularly generate green and climate data information on Kenya’s green finance.
• The climate finance and sectorial requirements present opportunities for green jobs such as accreditation experts for carbon markets, carbon registry specialists, legal support in green contracts, and transaction administrators among others.

The meeting further highlighted the following climate finance and key considerations towards the Africa Climate Summit Declaration and beyond:

• The private sector, therefore, calls for wholesale financing of climate change not short-termism, review of the financing mechanisms of multilateral development banks risk rating of developing countries which eventually impacts financial arrangements, taxes, interest rates.
• While there is a drive to remove subsidies even for fossil fuel, which Kenya has already done, this should not be at the expense of the poor and livelihoods, subsidies should be directed to renewable energy investments. There is a need to re-engineer carbon taxes mechanisms and subsidies to ensure inclusive investments.
• While the adoption by regional economic blocs towards enhancing green growth measures such as cross broader adjustment mechanism has adverse effects on African Exports and also introduces credit risk to the financial sector. Observance of such commitments should not go against the Paris Agreement nor should they undermine the principle of just transition and Common but Differentiated Responsibilities.
• There is need for policy stability towards climate and green investments and reforms, especially around issuance and provision of incentives schemes.
• Small and Micro Enterprises (SMES) have a critical role to play in the green transition as innovators and market developers, it is therefore important that the financial architecture and reporting mechanisms are adjusted to reflect the realities of SMES and also to enhance access modalities for the private sector generally to climate fiancé and reduce bureaucracy of climate funds.
• KEPSA and FSD Kenya to partner on provision of technical assistance to private sector in climate finance matters.