During his opening speech at the Africa Energy Forum (June 2023), President Ruto spoke about Kenya's journey towards achieving its ambitious development goals while maintaining its commitment to clean, green energy. He emphasised the need to use innovative financial mechanisms in order to bridge the energy access gap and ensure universal energy access and affordability. He highlighted the need to move in a direction that aligns the financial sector with principles of sustainable development.

Kenyan laws and regulations already incorporate many of these principles:

The Constitution of Kenya, 2010

  • It acknowledges that the people of Kenya are respectful of the environment and are determined to sustain it for future generations.

United Nations Sustainable Goals

  • Kenya, as a member of the United Nations, subscribes to its sustainable development goals.

Paris Agreement

  • Kenya signed up to the Paris Agreement in 2016 and it came into force in Kenya in 2017.
  • The objective of Kenya's Nationally Determined Contribution (NDC) is to lower greenhouse gas emissions (GHG) by 32% by 2030 relative to the Business as Usual Scenario.

Climate Change Act, 2016

  • In 2016, Kenya enacted the Climate Change Act, 2016 to provide for a regulatory framework that will assist in realising the objectives of the Paris Agreement.

Companies Act, 2015

  • This Act places a duty on directors, when considering the success of a company, to take into account the impact of the operations of a company on the community and the environment.

The Code of Corporate Governance Practices for Issuers of Securities to the Public, 2015

  • The Capital Markets Authority (CMA), in this Code, underpins the importance of having formal strategies within a business that promotes sustainability and guides companies to include Environmental, Social and Governance (ESG) aspects of the business in their annual reports.

ESG Disclosures Guidance Manual, 2021

  • The Nairobi Securities Exchange Limited ("NSE") issued this manual in 2021 where all NSE-listed companies are encouraged to voluntarily publicly report their ESG performance annually.

Nairobi Securities Exchange Listing Rules

  • It governs the issuance of green bonds and the conditions to their listing on the NSE.

Policy Guidance Note on Green Bonds, 2019

  • Issued by the CMA and highlights the guiding principles for the issuance of green bonds.

Guidance on Climate-Related Risk Management, 2021

  • Issued by the Central Bank of Kenya, this mandates boards of financial institutions to consider climate related risks when developing the financial institution's overall business strategy.
  • It also required banks to develop and submit to the Central Bank a plan on how they intended to implement the Guidance by 30 June 2022.

In the pipeline, are draft policies and laws that if enacted, will shift the landscape of sustainable finance in Kenya:

Climate Change (Amendment) Bill, 2023

  • Read more about the Climate Change (Amendment) Bill here.

Carbon Credit Trading and Benefit Sharing Bill, 2023

  • Read more about the Carbon Credit Trading and Benefit Sharing Bill here.

Draft National Green Fiscal Incentives Policy Framework

  • The National Treasury and Economic Planning Ministry released this draft policy in December 2022.
  • It is aimed at implementing different green fiscal actions that will enable Kenya to accelerate the transition to low emissions while still enabling the government to raise funds for its various projects.

The progress made in the regulation of sustainable finance in Kenya is promising and sustainable financing instruments are likely to increase in the upcoming years.

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