KCB Group is betting on the growing demand for sustainable investments to raise as much as Sh300 billion, but the size of the planned bond programme could expose a major weakness in Kenya’s green finance market — a shortage of projects that are ready for funding.
The lender has unveiled a five-year sustainability bond programme that will finance investments with environmental and social benefits. The first phase is expected to mobilise up to Sh100 billion, although the amount will depend on regulatory approval and conditions in the market.
Funds raised under the programme will be divided among green, blue and social investments. KCB plans to support renewable energy, sustainable farming, clean and low-emission transport, water and waste management and affordable housing.
The programme will also extend financing to small and medium-sized businesses, including enterprises owned or led by women and young people. Job creation is also among the areas targeted under the social part of the framework.
The move comes as demand for sustainable investments continues to grow, with investors looking for opportunities that can deliver both financial returns and environmental or social benefits.
But the availability of money is not seen as the biggest problem facing such investments. Market officials and climate finance experts say Kenya still has a limited supply of projects that are properly prepared and capable of taking in large amounts of funding.
NSE chief executive Frank Mwiti said the market has adequate capital for sustainable investments, but more work is needed to develop projects that can attract and use the funds.
“It’s a big challenge originating projects that can actually absorb capital. The projects also need to be properly structured to meet financing and post-issuance requirements,” said Mwiti.
This means KCB’s ability to raise the full Sh300 billion will depend on more than investor appetite. The bank will need to build a steady pipeline of projects that qualify under its sustainability framework and can show clear environmental or social benefits.
The investments will also need to make financial sense, with projects expected to provide enough returns while delivering the wider development benefits required under the bond programme.
KCB Group chief executive Paul Russo said the new framework builds on the lender’s long-term work in developing financing solutions for projects with economic and social value.
“The launch of the Sustainability Bond Framework is a natural progression of the work the Group has been doing over the last two decades to structure innovative financing solutions and support investments that have a meaningful economic and social impact,” said Russo.
Under the green category, KCB will finance renewable energy, energy-efficient buildings, clean and low-emission transport, sustainable agriculture, and water and waste management projects.
The blue category will be used for investments linked to marine and coastal ecosystems, while the social category will cover affordable housing, MSMEs, women and youth-led businesses and job creation.
The scale of the planned bond programme comes as Kenya faces a large financing need to meet its climate goals, increasing pressure to turn investor interest in sustainable finance into projects that can actually be funded.