President William Ruto says Kenya is considering issuance of sovereign green bonds to fund crucial climate projects as he seeks to take advantage of COP28 conference in Dubai, UAE.

Ruto’s disclosure comes as Kenya continues to grapple with the challenges posed by climate change including El-nino and droughts, seeking innovative financial instruments to support its environmental initiatives.

Since the initiation of Kenya’s green bond program in 2019, the possibility of a sovereign issuance has been a topic of discussion. President Ruto, addressing the press, emphasized that green sovereign bonds are an opportunity that is on the horizon for Kenya.

“Green sovereign bond is an opportunity in fact it is the next thing on the horizon,” said Ruto when he was being interviewed by the media at COP28 in Dubai.

The government aims to leverage this financial instrument to attract investment for projects focused on renewable energy, conservation, and sustainable development.

One significant development in Kenya’s green finance landscape occurred in October 2022 when Acorn Holdings executed an early redemption of Sh800 million from its Sh5.7 billion green bond—Kenya’s inaugural green bond. This move demonstrated the viability and attractiveness of green bonds as an investment vehicle. It also served as a testament to the growing interest in environmentally conscious financing within the country.

The proposed sovereign green bonds align with Kenya’s broader economic strategy outlined in the 2023 Medium-term Debt Management Strategy.

The government envisions pursuing opportunities for debt-for-nature swaps, demonstrating a commitment to balancing economic growth with environmental conservation. Such swaps involve the restructuring of debt in exchange for commitments to environmental protection and sustainable development.

In this context, the Draft Wildlife Conservation Trust Fund Regulations of 2023 have identified the proceeds from debt-for-nature transactions as a crucial component of the funding mechanism. These funds are earmarked to support wildlife conservation efforts, a vital aspect of Kenya’s commitment to preserving its rich biodiversity.