Ten Counties have been selected to pilot an assessment for viability of green bond as an alternative source of funding to various capital-intensive projects in the devolved units.
The Financial Sector Deepening Trust Kenya (FSD Kenya) is working together with the Nairobi Securities Exchange, Capital Markets Authority, Agusto &Co and ADA Consortium in the project targeting Nairobi, Kisumu, Vihiga, Nandi, Laikipia, Wajir, Kirinyaga, Embu, Taita-Taveta and Makueni counties.
The counties were chosen based on on-going green and climate-related initiatives as well as existing relationships with strategic partners.
“Some of the counties have begun implementing the County Climate Change Fund (CCCF) mechanism, providing a foundation for the green finance capability assessment while others have expressed intrest in the green bond,” Ikechukwu Iheagwam, Regional Director Agusto&Co, said at an event in Nairobi on Tuesday.
Some counties he noted are in discussion to raise funds from the capital markets through the issuance of bonds.
“County bonds, particularly green county bonds, present an opportunity for counties to generate resources for the much-needed development of county infrastructure such as water piping, county roads and the development of agriculture, just to name but a few sectors and activities, in a green and climate resilient manner,” Ikechukwu added.
Nairobi Leads The Way
Speaking during a validation workshop for Nairobi County, the Gov. Johnson Sakaja-led government said it is ready to move forward with the green bond project once the official report on the initiative is launched in the first quarter of next year.
Consulting firm Agusto and Co presented assessment report on Tuesday to the county management for input to pave way for the official launch before end of March, next year.
According to the rating firm, the county can approach the bond as an entity, through a special vehicle or through one its many agencies.
County Governor Johnson Sakaja noted that the county needed alternative sources of income to solve its transport system challenges, manage waste, and check the county’s carbon footprints through initiatives targeting green buildings.
“I want to be clear: given these and other policy commitments, we greatly value the partnerships we have been able to establish with development partners; finance institutions at home and abroad—consider the French financing we have arranged for the new bus route; the environmental sector here at home; and our research and academic partners,” said Nairobi Governor Sakaja.
“But it is also essential, in my view, to seriously explore the possibility of the green bond. The policy options we need to consider—everything from changing how the city moves to how we build, to how we manage our waste—will need to paid for. If we can relieve the people of Nairobi of some of the burden—if we can borrow to spread the cost over time—then we certainly should,” he added.
In October last year, Sakaja said the Nairobi City County Government will float a Green bond that will be used to build a mass transit system and expand the infrastructure for waste management and water distribution.
Speaking at the Nairobi Securities Exchange (NSE), Nairobi Governor Sakaja Johnson said the exact amount to be raised will be announced later.
“We intend to float a green bond, and what we raise will be used to create order and also open up opportunities for our people and also make Nairobi work for everyone,” he said.
According to the governor, Nairobi Water and Sewerage Company alone will need a capital investment of about Kshs 30 billion to offer services and develop a proper water and waste management system.
“While not yet tested locally, their widespread application in other markets as well as the recent approval by National Treasury for the Laikipia County Infrastructure Bond illustrate their potential,” noted Ikechukwu.