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Green bonds tax policy bill will save earth, unlock dollars

Wednesday September 25 2019

 Clean Energy Technologies

Kenya needs to invest upwards of $100 billion in climate change mitigation and adaptation over the next four years. PHOTO | FILE | NATION MEDIA GROUP 

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It was my view that MPs engage more on matters within the span of their four-year term and that debates on policies with 10- or 20-year horizons were an exercise in futility.

However, something remarkable happened two years ago, when the then-Kibra MP, the late Kenneth Okoth, together with the Finance and Planning Committee chairman Joseph Limo (Kipkelion East) convened peers to confer on how, through the legislative process, Kenya can fast-track the Sustainable Development Goals (SDGs).


Fast-forward to last week, when MPs demonstrated prescient leadership with the endorsement of a proposal to catalyse green investments. The proposed withholding tax exemption for green bonds sailed through the Second Reading in the National Assembly.

Should it be passed, the law will crowd in more than Sh500 billion worth of private sector investment and create more than 500,000 jobs. In addition, projections by Green Bonds Program-Kenya say it will help to lower carbon emissions by as much as 50 million tonnes – roughly 192,000 acres of forest preserved from deforestation.

According to an analysis by John Weyant, Ernestine Fu and Justine Bowersock in the book, Renewed Energy, government policy is vital to crowd in capital for critical sustainable investment areas such as clean energy.


Governments help to set the pace and create an enabling environment for innovation, unlocking billions of dollars of private investment. Therefore, public policy and private sector investment and growth are inextricably intertwined.

Considering the effects of global warming are now fully apparent and manifest in failed rains and other extreme weather events, Kenya needs more policies supported by the Legislature to ensure that our economy and society mitigate and adapt to climate change.


The International Finance Corporation (IFC) estimates that the country has trillions of dollars worth of green investments with two promising areas in green buildings and infrastructure. For Nairobi alone, the IFC puts climate investment opportunities by 2030 at Sh850 billion, with public transportation and electric vehicles and green buildings accounting for 92 per cent.

A separate study by the Green Bonds Program-Kenya found manufacturing, transport and agriculture sectors have combined green investment and financing opportunities of Sh87 billion over the next five to 10 years. This may be mind-boggling but not hyperbole. We have seen the country’s first Climate Bonds Initiative certified issue come to market in Acorn Group’s Sh5 billion green student housing bond that is structured by Stanbic and partially guaranteed by GuarantCo.


Approved by the Capital Markets Authority (CMA) and backed by Helios, the bond carries a rating by Moody’s that is higher than the Kenyan government’s sovereign rating. The offer, therefore, promises investors good returns with the additional benefit of positively contributing to our country’s sustainability.

Inasmuch as we are seeing green shoots of sustainable finance activity, much more is needed to realise our green economy plans. Kenya needs to invest upwards of $100 billion in climate change mitigation and adaptation over the next four years. A considerable amount of that capital will come from the proposed Sovereign Green Bond.

But the more sustainable way to raise capital is via the private sector. We, therefore, need more of such policy review to unlock bottlenecks (including the rate caps) that hinder green bond issuance. Nevertheless, we are on the right track with this Bill.

And there couldn’t be a better time for MPs to ratify the green bond tax policy than now, when the UN Climate Action Summit 2019 is under way in New York.


The meeting will cover, among others, how states can ratchet up their Paris Agreement commitments and increase financial flows to narrow the SDG financing gap. Besides, it’s the World Green Building Week. Also, the Acorn transaction closes this week, putting Kenya on the global green bond map and reinforcing our position as a financial services innovation hub.

As one of the drafters of the Green Economy Strategy and Implementation Plan (Gesip), and with this critical Bill, I am optimistic that our green economy plans will be realised.

The green economy presents a tremendous innovation and shared value opportunity for not only Kenya but also all of Africa. As we seek to address the effects of climate change, a collaborative approach is necessary and enabling policies imperative.

Ms Mugambi is a director at Kenya Bankers Association and lead on the Sustainable Finance Initiative. [email protected]