The Kenyan government is looking to establish the Kenya Green Investment Bank (KeGIB) to spur investment in environmentally-friendly projects by taking on part of the risk involved. This initiative is outlined in the draft National Green Incentives Policy Framework from the Treasury.

The purpose of KeGIB is to provide incentives and funding for public and private sector investments in green initiatives, which will help move Kenya’s economy towards a low-carbon, climate-resilient development path. The bank’s operations will be similar to the Kenya Mortgage Refinance Company, which was created in 2019 to offer long-term funding for mortgage lenders.

KeGIB is expected to offer a variety of financial instruments, such as credit guarantees, debt and equity, and risk-reduction facilities, to support green investments. The bank may also provide support and incentives for innovative financial products like green bonds, blue bonds, and resilience bonds, as well as carbon credits.

The government will consult on the design and focus of the bank, including the sectors it will target and the type of capital it will offer. Currently, green financing is primarily focused on renewable energy projects and energy efficiency initiatives, such as solar installations and hospitality-related wastewater management projects.

However, many investors and lenders have been reluctant to finance green projects due to a perceived mismatch between risks and returns. The Treasury hopes that KeGIB will encourage domestic institutions and private sector participation in green investments by addressing these concerns.

In 2018, Kenya’s banking sector invested only KES 27 billion in climate finance, out of a total loan book of KES 2.49 trillion, indicating a low risk tolerance for green projects. The government will also set up the Green Investment Register, a database of national green investments, to direct investment towards projects with a positive environmental impact. This database will inform private sector investment opportunities in the country.

While domestic pension funds and institutional investors have been reluctant to invest in green products, the debut green bond has attracted interest from foreign institutional investors. The Treasury hopes that KeGIB will help mobilize investment and resources for green initiatives in Kenya.

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