BY MARK NAPIER
When it comes to the big debates about climate change, Africa is the forgotten continent. It receives less than three percent of global climate finance and yet 30 of the 40 most climate-threatened countries in the world are in Africa. It is the least contributor to global warming, yet extreme weather events are increasing in both frequency and severity, with shocking effects on biodiversity loss.
But while we see Africa more as a victim of climate change, it ignores the fact that it could also be a big part of the solution.
From the forests of Gabon to the Congo Basin in Central Africa, the continent is rich in natural capital and countries are taking advantage of this potential. Take Kenya, which has already become a leading provider of green energy with 90 percent of its energy production from renewable sources.
The recent visit of Kenyan President Uhuru Kenyatta to London brought further progress with the announcement of UK investments in off-grid solar energy and a new fund to develop green affordable housing. But especially in the area of green finance, the partnership between Kenya and Great Britain could prove to be even more important. Although progress has been too slow and fragmented, African countries are preparing to receive a much larger share of global climate finance.
Once this is invested in green projects, it benefits the whole planet. Kenya is already one step ahead. It abolished taxes on interest on green bonds. It has designed a framework for green fiscal stimulus that covers the whole economy and is now considering a carbon tax as well. Kenya’s first green government bond has been tracked for years and is expected to make further announcements over the next few months.
All of this is significant in several ways, not least because it involves a novel relationship between the third largest economy in Sub-Saharan Africa and the UK – one that relies on investment rather than aid – while also showing how smart and purposeful the UK is Help that was critical to the development of green bonds and other aspects of Kenya’s green finance push can help unleash those investments.
There can be no better symbol of this new relationship than the agreement announced during the visit between the City of London and Nairobi’s International Financial Center (NIFC), backed by Prudential, one of the UK’s most established financial institutions. Established to make it easier and more attractive for companies to provide financial services and related activities in Kenya and the region, NIFC strengthens Nairobi’s position as a hub for investment in the region.
For UK investors who may have stayed away from risky investments, green bonds offer an attractive way to invest in emerging markets because of the increased transparency they need to prove they are truly green.
For Kenya and other developing countries, green finance is attractive because of the tremendous growth of funds looking for investment opportunities. This is especially important at a time when these countries are grappling with the financial repercussions of the Covid pandemic.
Mark Napier is the Chief Executive Officer of FSD Africa