Nairobi, March 26, 2021 — Kenya is highly vulnerable to climate change and is already experiencing the effects with a notable increase in climate-related disasters, such as droughts and floods. These events are estimated to create an economic liability of 2-2.8% of its gross domestic product every year.
A new report launched by The National Treasury and Planning of Kenya and Climate Policy Initiative (CPI) indicates that climate-related investment in Kenya is disproportionately targeting certain sectors and activities that will only partially address climate issues.
Hon. (Amb.) Ukur Yatani, Cabinet Secretary for The National Treasury and Planning said: “We have high ambitions for a more prosperous, green, and resilient future in Kenya. However, our economy is dependent on its natural resource base and climate change is threatening our Vision 2030 goals. For us to achieve these ambitions we urgently need more finance to be channeled towards climate action.”
The analysis shows that significant efforts will be required to align all sectors relevant to achieving Kenya’s Nationally Determined Contribution (NDC) to make the country climate-resilient and reduce its greenhouse gas (GHG) emissions by 32% by 2030 relative to the business-as-usual scenario.
Dr. Barbara Buchner, Global Managing Director of CPI said: “Kenya has ambitious policy goals to transform to an industrialized, middle-income country by 2030. However, given the vulnerability of its key sectors, it is vital that Kenya embraces ‘green growth’ to build a resilient economy. To achieve this, it is imperative that both the public and private sectors scale-up and mainstream climate-related investments.
The Landscape of Climate Finance in Kenya is the first attempt to track the climate finance flows in the country since the Paris Agreement. The study finds that KES 243.3 billion (USD 2.41 billion) flowed to climate-related investments in 2018. Kenya requires at least triple this investment annually to meet its climate goals according to best estimates.
The Landscape applies CPI’s framework for mapping climate finance flows to the Kenyan context and was conducted within the context of the Global NDC Implementation partners (GNIplus) program, supported by the German International Climate Initiative (IKI).
Key findings include:
- Almost 80% of climate finance in Kenya was directed to the implementation of climate mitigation measures which is in stark contrast to the need given that Kenya has a focus on financing the adaptation to climate change.
- Only 11.7% of climate finance in Kenya was directed to adaptation, while a further 8.5% of investment had relevance for both adaptation and mitigation outcomes. The largest financing gap for meeting Kenya’s climate targets is in the water and blue economy sector. There is also an urgent need to increase finance for the forestry and disaster-risk management sectors, as both will build Kenya’s resilience against drought and flooding.
- The Kenyan government disbursed KES 76 billion (USD 752.4 million) in climate-related development expenditures in the fiscal year 2017/18, with 55% being external resources from international development partners channeled into the national budget.
- Less than 60% of the tracked finance came from international public and private sources. Implementing Kenya’s climate policy requires that international partners will sustain at least 87% of the costs by 2030, a level not met in 2018. Development partners in particular provided less than one third of all finance tracked.
- 79% of international public climate finance was delivered through debt and was mostly channeled towards mitigation activities (55%).
- Investment from the private sector totaled KES 98.9 billion (USD 979 million), 34.4% originating domestically from Kenyan companies through their own resources and 65.6% from overseas private companies investing into projects located in the country.
- Foreign private sector actors invested KES 64.9 billion (USD 643 million) in climate-related capital in Kenya, predominantly in renewable energy projects (99.7% of the total).
The report highlights key recommendations for how climate-related investments can be scaled in Kenya:
- There is an urgent need to increase finance for adapting to climate change in Kenya, particularly in the water, disaster risk management, and forestry sectors.
- Incentivize private sector investments in key climate sectors. The private sector has a key role closing Kenya’s investment gap. Implementation of incentives and subsidies to create a more attractive enabling environment for private investment in the transport, forestry, water, land use, and waste sectors are therefore of critical importance.
- There is a need for international public finance to focus on more challenging climate sectors which are not receiving private finance at scale. For example, using innovative financing to mobilize investment into key underfunded sectors, such as forestry, transport, and water.
- Climate finance should be used more effectively to increase its impact. This will require improved coordination and reporting between Kenyan actors at all levels: Ministries, agencies, county-level government entities, international donor partners, and private sector stakeholders.
- There is a need for regular reporting from Ministries to the National Treasury on climate-related expenditure to better understand whether finance is meeting Kenya’s climate needs and how to scale-up investment.
For media inquiries, contact:
Julius Muia, PhD, CBS
Principal Secretary, The National Treasury
+254 020 2252299
Caroline Dreyer, Senior Communications Associate
+44 7397 311042