The value of retail sustainable investment holdings in Kenya is projected to climb to Sh2.3 trillion ($19 billion) by 2030 on higher capital flows into tackling food insecurity, climate change and green energy, a new report by Standard Chartered Plc says.
The global lender’s Sustainable Banking Report 2022 highlights the growing adherence to the environment, social and governance (ESG) practices by companies as investors demand to see corporates taking action to address climate concerns and more responsible business practices.
It notes that in Kenya, 30 percent of investors have more than 15 percent of sustainable investments assets as part of their investment portfolio, a figure expected to reach 50 percent in the next two to three years.
Sustainable investments allow an investor to achieve financial returns while promoting long-term environmental or social value through their investment.
Green finance—such as green bonds—is expected to lead the way for the country’s sustainable investment growth, as is the continued transition to green energy such as geothermal and wind power.
“Green bonds, growing wealth, and government efforts to increase transparency could catalyse further sustainable investments growth,” said the lender in the report.
“Beyond energy transition, Kenya’s $19 billion of retail capital potential could also be directed toward combating market-specific environment, social and governance (ESG) issues such as food scarcity, poverty and human rights.”
The Nairobi securities exchange (NSE) recently became the fourth exchange in Africa to issue an ESG manual in 2021 guiding listed companies on measuring and reporting ESG matters and gave companies a one-year grace period to begin making the disclosures.
Regulators are trying to future-proof companies within their jurisdictions from being locked out of financing options that may destabilise operations if they cannot access local and international funds.
The report highlights Kenya as having a high potential for growth in sustainable investing, largely due to its significant population and rising domestic wealth.
Climate change and carbon emissions was one of the top ESG priorities contributing 36 percent, poverty and income equality at 32 percent and human rights at 24 percent, as per respondents polled by Stanchart for the report.
The report also revealed lack of information (48 percent), difficulty of accessing investment opportunities without a professional financial advisor (48 percent) and difficulty in comparing sustainable investments within an asset class (47 percent) as some of the top barriers to increasing their sustainable investments.