Climate Finance

What is Climate Finance?

Climate finance refers to local, national or transnational financing, which may be drawn from public, private or alternative sources, and is targeted to implement climate change adaptation or mitigation actions. It is an integral part of the Means of Implementation (MoI) for climate action, since it facilitates technology access, capacity building as well as enabling actions. Climate finance is critical to addressing climate change and its impacts since large-scale investments are required to build resilience as well as to significantly reduce emissions, notably in sectors that emit large quantities of greenhouse gases.

Why does Kenya need Climate Finance?

Kenya is a developing nation whose economy depends on climate sensitive natural resources, and due to her geographic positioning, all her sectors are vulnerable to climate change and its impacts. Although Kenya aspires to be a middle income country in 2030 (Kenya Vision 2030), climate change challenges increases the cost of development. Growth in all sectors have to take a low carbon, climate resilient development pathway. To achieve this, Kenyan actors need to access appropriate cutting edge technology, build capacity of its institutions and actors, as well as facilitate access to financing to enable various actors play their respective roles. These require additional funding over and above the normal (business as usual) development agenda.

What are the UNFCCC Climate Finance Arrangements?

In accordance with the principle of common but differentiated responsibility and respective capabilities set out in the Convention, developed country Parties (Annex II Parties) are to provide financial resources to assist developing country Parties in implementing the objectives of the UNFCCC. To facilitate the provision of climate finance, the Convention established a financial mechanism to provide financial resources to developing country Parties. The financial mechanism also serves the Kyoto Protocol and the Paris Agreement. The Convention states that the operation of the financial mechanism can be entrusted to one or more existing international entities. The Global Environment Facility (GEF) has served as an operating entity of the financial mechanism since the Convention’s entry into force in 1994. At COP 16, in 2010, Parties established the Green Climate Fund (GCF) and in 2011 also designated it as an operating entity of the financial mechanism. The financial mechanism is accountable to the COP, which decides on its policies, programme priorities and eligibility criteria for funding.

In addition to providing guidance to the GEF and the GCF, Parties have established four special funds: the Special Climate Change Fund (SCCF), the Least Developed Countries Fund (LDCF), both managed by the GEF, and the GCF under the Convention; and the Adaptation Fund (AF) established under the Kyoto Protocol in 2001. At the COP21 in 2015, the Parties agreed that the operating entities of the financial mechanism – GCF and GEF – as well as the SCCF and the LDCF shall serve the Paris Agreement. Parties are currently working on modalities for the Adaptation Fund (AF) to serve the Paris Agreement. Under the Kyoto Protocol, other Climate Finance mechanisms include the Clean Development Mechanism (CDM), the Joint Credit Mechanism (JCM) and the Emissions Trading schemes (ET).

To access funding, developing countries nominate their National Designated Authorities (NDAs) or focal points (FPs) to the GCF, which enables governments to liaise with the Fund and ensure a country-driven approach. The GCF, through the NDAs then accredits Implementing Entities, who are the key partners through which the resources of the GCF in a variety of financial instruments, including grants, concessional loans and private sector instruments, is channelled to undertake climate change mitigation and adaptation projects and programmes in developing countries. The accredited Implementing Entities can be subnational, national (NIEs), regional (RIEs), private, non-governmental or international organizations. In order to undertake actual adaptation or mitigation actions on the ground, the Implementing Entities engage Executing Entities (EEs) who have the technical capacity to implement (execute) climate action in line with the proposals to the GCF.

Funding for climate change actvities is also available through bilateral, regional and multilateral channels.

How is climate action financed in Kenya?

The constitution of Kenya provides the framework upon which financing climate action is anchored. The Climate Change Act, 2016 requires that deliberate Climate Change considerations is made to ensure mainstreaming in all government plans, policies and programmes, resulting into inbuilt public climate financing of all sectors of the economy. The Climate Change Act, 2016 further created a Climate Change Fund to facilitate climate action. The National Treasury is the National Designated Authority (NDA) for climate finance in Kenya, and oversees the implementing entities for various climate finance streams, as well as tracking of the financed on-budget and off-budget activities. Some county governments have already instituted county climate change funds to facilitate and accelerate climate action at the subnational level.

Kenya has several Accredited Entities, which include the public institutions such as National Environment Management Authority (NEMA) which is the NIE for both the Green Climate Fund (GCF) small category projects, as well as the Adaptation Fund (AF). Multinational Organisations in Kenya like Acumen Fund, KfW for large category GCF projects; UN bodies like the UNEP, UNDP, UNFAO, International Union for Conservation of Nature (IUCN) for multinational projects. Private entities such as the Kenya Commercial Bank (KCB) are also seeking accreditation to enable the private sector leverage on climate funding opportunities.

Kenyan actors interested in accessing climate finances are encouraged to make use of the various implementing entities and take advantage of the opportunities from both local and international sources by submitting competitive innovative proposals. Application templates and procedures are available online.