Nairobi primed to attract billions in climate investment

Nairobi has the potential to attract Sh871.59 billion ($8.5 billion) fresh investments in climate change-aligned projects in just a decade, a new report suggests, putting the Kenya’s capital among top cities likely to reap from multitrillion-dollar green financing.

International Finance Corporation (IFC) — the World Bank Group's private sector lending arm — says investment opportunities for Nairobi are largely in electric vehicles, public transport, and green buildings.

The latest IFC’s Climate Investment Opportunities in the Cities report, projects investment opportunities in green bonds across cities in emerging markets at $29.4 trillion by 2030.

The report, part of a series of publications the global private sector financier has been releasing since 2016, is based on analysis of climate-related targets and action plans for cities across the world.

Priority investment sectors the IFC has identified include green buildings, public transportation, electric vehicles, waste, water, and renewable energy.

The report, part of Climate Investment Opportunities series the firm has been publishing since 2016, highlights innovative approaches being adopted by cities such as green bonds and public-private partnerships to attract private capital and build urban resilience.

“There’s a great urgency to address climate change — we must take meaningful action now. Cities are the next frontier for climate investments, with trillions of dollars in untapped opportunities,” IFC chief executive Philippe Le Houérou said in a statement.

“To deliver on the promise of climate-smart cities, the public sector needs to enact reforms that are aimed at attracting more private sector financing.”

The IFC has since early 2017 been technical support for commercial banks planning to float the country’s debut green bonds under their lobby, Kenya Bankers Association, in partnership with the Nairobi Securities Exchange.

Water demand in Nairobi, the IFC says in the report, is likely to more than double by 2035, creating an investment opportunity in the order of $360 million (Sh36.91 billion) in water and wastewater sector.

“The Kenyan city expects a sharp rise in housing construction, leading to an investment opportunity of over $1 billion (Sh102.54 billion) in greening those buildings,” the World Bank’s private sector lending arm says.

“Meeting the city’s non-motorised and sustainable transport goals will create an investment opportunity of $1.6 billion (Sh164.06 billion) in infrastructure including bike lanes, a bus rapid transit system, and commuter rail, with a further $5 billion (Sh512.70 billion) to catalyse citywide electric vehicle adoption.”

Nairobi has been mulling over tapping into green bonds to fund projects that promote sustainable environmental conservation since the city hosted United Nation's Sustainable Stock Exchanges executive dialogue on green finance.

That was part of the week-long 14th United Nations Conference for Trade and Development meeting in July 2016.

Kenya needs an estimated Sh2.4 trillion to support projects in afforestation, renewable energy, public transport, building and urban planning, water and waste management to mitigate debilitating effects of climate change and global warming, according to Kenya Green Bond Programme.

The three-year programme, launched March 2017, is aimed at accelerating mobilisation of funds from domestic and foreign investors through the Nairobi bourse to finance green projects.

The capacity building initiative brings together the IFC, UK government-backed Financial Sector Deepening Africa, Kenya Bankers Association, Nairobi Securities Exchange and Dutch Development Bank.

“The pipeline that we are looking at is quite large. We are prepared to meet some of the initial cost such as certification for some of the first issuers in the market to provide a demonstration effect,” Evans Osano, director of capital markets development at the Nairobi-based FSD Africa, said in a recent interview.

“We are also discussing with a number of banks which have already expressed interest to issue one (green bond).

“Some of those banks have in their portfolios loans that they have lent to firms that qualify as green projects.”

Climate Bond Initiatives data show the size of global green bond market nearly doubled last year to $155 billion (Sh15.58 trillion) from about $87.2 billion (Sh8.76 trillion) in 2016, as countries race to mitigate global warming in line with the Paris Agreement of December 2015.

Under the Paris deal, world leaders pledged to limit global warming to below two degrees Celsius

Nigeria last December became the first country in the continent to tap into globally popular instruments, by raising $30 million (Sh3.02 billion) through a sovereign issue to fund renewable energy and afforestation projects.

In South Africa, Growthpoint Properties — a property investment firm — became the first company to list on Johannesburg Stock Exchange’s Green Bonds segment after listing 1.1 billion rand (Sh8.38 billion) bond on April 25 for refinancing of commercial green office blocks.