In the wake of the COVID-19 pandemic, Kenya has embarked on a low carbon, resilient recovery plan. This plan has been facilitated by a policy and legal environment that supports an effective climate change response, through the Climate Change Act 2016, Nationally Determined Contributions (NDCs), and subsequent National Climate Change Action Plans. However, the financing gap to implement these plans is still large.
A study from GNIplus that tracked climate finance flows in Kenya revealed that only one third of needed annual climate finance flowed to climate-related investments in 2018. Of that, 80% of the climate finance tracked flowed mostly to mitigation sectors such as energy. Kenya’s NDC, however, demands more investments in adaptation sectors such as water and the blue economy, forestry, wildlife, tourism, and food security. Furthermore, there is an increased need of mobilizing not only public resources, but also private finance to achieve the transformational changes that the country requires.
Among other barriers, the main constraints that these sectors face in Kenya are: (1) limited knowledge and/or lack of information around adaptation activities at the sectorial level; (2) lack of both technical and financial capacity to implement; and (3) high setup costs and lead times that reduce the feasibility of investments.
GNIplus is a program implemented by Climate Policy Initiative, AECOM, and Pollination, funded by the German International Climate Initiative (IKI), which works in collaboration with the Kenyan Ministry of Environment and Forestry, the National Treasury of Kenya, and other public and private stakeholders to help the Government of Kenya achieve its NDC goals. Based on five years of GNIplus experience supporting economic benefit while improving nature conservation, this report highlights three innovative financial structures that have the potential to transform livelihoods and sustain projects at the local level. They focus on currently underfunded adaptation sectors by providing blueprints with replicable and scalable characteristics that are designed to mobilize private capital.
BLUEPRINT 1: AFRICAN CONSERVANCIES FUND (ACF)
Problem: Reduction of tourism revenue, lack of income diversification from resilient sources, and poor governance threaten the conservancy model, a key land protection model throughout Africa.
Solution: The ACF is a blended finance fund-of-funds that will invest in regional investment vehicles that provide revenue-based loans to conservancies to meet their lease payments to landowners, improve their governance, and diversify revenue.
Key Takeaways: Conservancies are over reliant on ecotourism to fund their conservation efforts. ACF will innovate the African conservancy model by supporting revenue diversification as well as improve conservancy governance structures.
BLUEPRINT 2: CHYULU HILLS PAYMENT FOR ECOSYSTEM SERVICES
(CHYULU HILLS PES)
Problem: Over-reliance on philanthropic and public funding, which is uncertain and variable, threatens efforts to conserve and maintain key watershed areas that provide value to surrounding communities.
Solution: The Chyulu Hills PES is a mechanism that helps to mobilize resources in exchange for the conservation of natural areas based on creating new markets in which the beneficiaries of ecosystem services pay the providers of those services for their ongoing provision. The Chyulu Hills PES scheme is building on top of an existing REDD+ scheme and aims to provide an alternative source of finance for conservation of the watershed.
Key Takeaways: The Chyulu Hills PES scheme is aiming to monetize the services provided by ecosystems and fund the protection and improvement of these ecosystems. In turn, this will ensure sustainable provision of ecosystem services to beneficiaries
BLUEPRINT 3: GREEN VILLAGE SAVINGS AND LOANS ASSOCIATION
Problem: Limited access to formal financial services in communities for adaptation and conservation activities.
Solution: The GVSLA is a model that mobilizes finance at the micro level. The GVSLA will incentivize local communities to implement ecological actions by attaching environmental conservation requirements to micro group loans. In addition, it proposes a self-sustaining funding model that encourages local businesses to provide or supplement the upfront capital to these groups.
Key Takeaways: GVSLA promotes financial inclusion with an added benefit of having
the local communities engaging in environmental implementations. It has the potential to mobilize both human and financial resources not yet tapped in combating climate change.
ADDITIONAL CONSIDERATIONS TO ACCESS CLIMATE FINANCE
Beyond specific financial structures, there are general considerations that proponents and implementing partners should address during the capital raising stage to maximize opportunities with potential climate-focused funders. To qualify for and attract climate finance, projects need to highlight and clearly articulate the project’s positive climate impact. Public and private funders will often assess the following questions:
- What are the climate risks or challenges in that region?
- How does the project address those risks and challenges through mitigation and/or adaptation action?
- What metrics are being used to measure climate action and how will these be monitored and tracked?
In addition to articulating a project’s climate relevance, there are other important program considerations that should be addressed by the organization and summarized for potential funders, as they are regularly scrutinized when evaluating potential investments. Some of these considerations include:
• Transparency: this includes the organization’s governance, as well as having clear and attributable accounting
• Theory of change: a clear expression of goals, and the primary levers to achieve those goals
• Defining relevant metrics: KPIs that monitor and verify climate impact
• Alignment with funder focus: aligning instrument objectives to funder focus
• SDG co-benefits: Articulating other SDGs that also benefit from the project beyond climate
These three innovative blueprints for climate projects in Kenya demonstrate the opportunity for mobilizing more financial resources to priority sectors. The experiences presented also show the potential to mobilize and leverage public and private capital and create more sustainable interventions which can be replicated and scaled in Africa as well as in other regions.