Marisa Drew: StanChart Chief Sustainability Officer on opportunities in nature financing 

Multilateral lenders, including the International Monetary Fund, have provided more than Sh200 billion in financing to cater to climate mitigation and adaptation. Private sector flows to the same course are, however, yet to prove sticky despite the potential pockets of capital for the course.

The Business Daily spoke to Standard Chartered Group chief sustainability officer Marisa Drew on the challenges and opportunities for climate and sustainable finance.

Besides launching the tree mapping application, what brings you to Nairobi?

I’m on a tour to engage stakeholders and most importantly our clients and interested partners who are helping us on our sustainability mission. My role is to try to accelerate the mobilization of capital towards sustainable outcomes and to ensure we are creating a world that is truly sustainable for the future.

Your 2023 Sustainable Banking Report suggests potential flows of $3.4 trillion (Sh520.8 trillion) to climate investments with about $7 billion (Sh1 trillion) of these flows coming to Kenya, what do you feel has been the challenge in realising these flows?

Certainly, there is enormous potential in Kenya to deploy sustainable capital and I think there are several areas in terms of the potential with the first one being the overall sustainability transition. We hope that capital can continue to flow towards the energy transition where we can move into more renewables.

Many business models need to move from carbon emissions while there is a need for adaptation finance to adapt to the realities in front of us. This would require quite a rethink of the financial systems where a lot of private sector participants today believe adaptation finance is the job of government.

The government doesn’t have enough money to fill that gap and as such the private sector needs to participate. We however need to think of nudges or incentives to facilitate those flows.

Last year, StanChart arranged a $102.95 million ($15.7 billion) sustainably linked loan to Safaricom, what’s more in the pipeline in terms of financing from the bank?

We are trying to engage in areas with the greatest potential for scaling. These areas such as nature financing are a big piece of it, another area is use of carbon markets, the ability to create carbon credits from activities such as tree planting and some of the energy transition works such as migrating some parts of the continent away from coal.

The carbon credits can pay for some of the work we are looking to accomplish.

The government has taken the lead in anchoring climate finance by setting its own targets including the goal to transition to 100 percent clean energy by 2030 and a net zero target for 2050. At the same time, the government has accessed green financing from multilateral lenders, what we are yet to see is private sector funding flowing at the same rate, what will it take to bridge the gap?

The government has set a framework, which is an important step for the private sector to identify with as the sector is very much looking at standards to get into issues. Sustainability-linked instruments will also be important where the government or a corporation would issue security and link it to a set of KPIs that are sustainable.

We find this to be an attractive mechanism for the transition and investors like it since it leads to behavior change creating more sustainable outcomes.

Blended finance, merging concessional funding to financing from for-profit institutions such as Standard Chartered, this combination ends up reducing the cost or taking parts of the risks that may not be viable for taking by the private sector. This has been applied effectively in other markets and has created a multiplier effect resulting in the crowding in of capital.

We’ve seen opportunities for sustainable finance but there are challenges such as barriers to investing including the concern for low returns, how should the industry go about breaking those barriers?

Part of our job is looking at areas where there is a prevention of capital flows and attacking those areas one by one. There is no one answer, or a one size fits all, but I do think in general, there are some themes emerging where the private sector sometimes faces challenges, for instance, funding in local currency and international investors may not have the ability to do so. Sometimes we need to have incentives or policy changes.

In some cases, the affordability for the issuer is too high but the investor wants a return, this is where blended finance can be breakthrough.

Green washing has been a great concern in sustainable finance, how can issuers be honest to investors in green products and protect against the practice?

Green washing is not always understood by non-practitioners in the market and it seems much complicated that is actually the case.

At its heart, green washing is miss selling or overselling one’s green potential. This is nothing new in market terms and the way to protect against that is by transparency. It’s not for us to judge whether an investor likes an issuer’s products but what we do is create a transparent framework that tells the investor why we are labelling certain products as green.

KPIs on sustainably linked instruments must also be ambitious enough, if this is not the case, an investor could tell an issuer is setting ambitions that they are going to achieve anyway and hence they are not delivering any value add from a sustainability perspective.

Finally, what are your expected outcomes from your trip to Kenya?

I’m quite excited by the potential and ability to attract sustainable financing to the country and I genuinely think anything from monetising Kenya’s natural capital resources to advancing the energy transition and carbon emissions and more green issues is on the agenda. Kenya has shown huge leadership on the world stage in anchoring sustainable finance.

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