Climate-smart solutions-focused venture capital firm Kenya Climate Ventures Limited (KCV) has set its sights on mobilising capital from local pension funds following its receipt of a fund manager licence from the Capital Markets Authority (CMA).
KCV, which is fully owned by the social impact organisation Kenya Climate Innovation Centre, primarily makes debt and equity investments in companies involved in solutions to climate change.
The firm, which has been investing in early-stage enterprises focusing on climate solutions, has formed the Climate Ventures Impact Fund, a Sh3.2 billion ($25 million) facility, which is expected to pool funds mostly from local pensions.
Pension funds are allowed to invest up to 10 percent in alternative asset classes according to statutory requirements by the Retirement Benefits Authority (RBA), but they only had a share of 0.01 percent in the portfolio at the end of last year.
“We are now licensed as a fund manager to be able to manage our own fund but also be able to bid for other climate-focused funds to manage,” KCV chief executive Victor Ndiege told the Business Daily.
“Our licence gives us the opportunity to attract this kind of money (pension money). Funding will also partly come from development finance institutions (DFIs), but we have specifically carved out a niche to bring in local pension funds.”
KCV has been providing enterprises with a mix of debt and equity instruments since its founding in 2016 alongside capacity building/technical assistance, a feature the firm says differentiates it from other venture capital and private equity firms.
The firm currently has 23 portfolio companies, has previously successfully exited four enterprises, and values its investing fund at Sh517.1 million ($4 million).
Kenya Climate Ventures was initially funded by DFIs –the Danish International Development Agency (Danida), UK Aid and the World Bank. The firm says it is eyeing new capital through the Sh3.2 billion fund to support enterprises seeking commercial financing to gain market traction.
KCV is set to confront stereotypes around climate investing alongside the risk-averse stance by local pension funds, which had invested a majority of 52.4 percent of assets as of December 2024 in government securities.
“Climate investing has in the past been viewed as corporate social responsibility or through initiatives such as planting trees. That mindset must change. These are assets that must be managed with a given level of productivity to get returns,” added Mr Ndiege.
“We must demystify the risks involved in climate finance as other asset classes. Pension funds should view climate investments as opportunities to complement other investments.”
The total pension industry assets under management closed at Sh2.25 trillion at the end of last year.
This implies that the funds can set aside up to Sh225 billion in alternative assets such as specialised climate funds. KCV is also set to accelerate investments in projects promoting gender inclusivity.
