This guide provides a comprehensive and practical guide for corporations seeking to access green financing in Kenya, in alignment with the Kenya Green Finance Taxonomy (KGFT) This guide is designed to assist corporations in Kenya in understanding and navigating the process of accessing green financing by aligning their projects with the Kenya Green Finance Taxonomy (KGFT). It outlines the necessary steps, key documentation, and considerations for a range of projects across various sectors.

Introduction to the KGFT and Green Financing in Kenya

The Kenya Green Finance Taxonomy (KGFT) is a classification system established by the Central Bank of Kenya (CBK) to identify which investments are environmentally sustainable. It defines a minimum set of assets, projects, activities, and sectors that are eligible to be defined as "green" in line with international best practice and national priorities. The KGFT aims to increase the consistency of green finance flows, enhance user confidence in green investments, and guide the financial sector in selecting green investments. Initially intended for the banking sector, it can be leveraged by various stakeholders, including corporations.

Aligning your projects with the KGFT is crucial for accessing green financing opportunities from financial institutions that are increasingly adopting the taxonomy to identify and report on their green portfolios. It provides clarity and certainty regarding the environmental credentials of your projects.

A Step-by-Step Guide to Qualifying for Green Financing Under the KGFT

The KGFT outlines a seven (7)-step process for determining taxonomy alignment. Corporations seeking green financing should follow these steps:

Step 1: Familiarisation with the Principles of the KGFT

• Understand the three overarching principles: To be taxonomy-aligned, an economic activity must:
  • Make a substantial contribution to one or more of the KGFT's environmental objectives. Currently, these focus on climate change mitigation and climate change adaptation. Future editions may include other objectives.
  • Do no significant harm (DNSH) to any of the other relevant environmental objectives. These currently include sustainable use of water and marine resources, ecosystem protection and restoration, and pollution prevention.
  • Comply with minimum social safeguards (MSS), including Kenyan labour law and international standards.
• Key Resources: Carefully review Part A of the KGFT, which provides the context and purpose of the taxonomy. Pay close attention to the definitions of "green," "green finance taxonomy," and the environmental objectives.

Step 2: Identification of Environmental Objective(s) for Your Project

• Determine the primary environmental objective(s) that your project intends to contribute towards. Is the main goal to reduce greenhouse gas emissions (mitigation) or to enhance resilience to the impacts of climate change (adaptation), or both?
• Consider both direct and enabling activities: Your project might directly contribute to an objective or enable other activities to do so through your products or services.
• Key Documentation: Prepare a clear articulation of your project's environmental goals and how it aims to address climate change or other environmental concerns.

Step 3: Locating the Relevant Economic Activity in the KGFT Catalogue

• Consult Part C – Catalogue of Sectors and Activities of the KGFT. This section uses the Kenya Standard Industrial Classification (KeSIC) framework to classify sector-specific activities
• Identify the macro-sector that your project aligns with (e.g., Manufacturing, Agriculture, Energy, Water and Waste Management, Transportation, Buildings).
• Navigate to the specific economic activity within that sector that best matches your project. The KGFT provides appendices for each priority sector, detailing eligible activities. For example, in agriculture, this could be "Certified agriculture projects" or "Implementation of smart agriculture systems."
• If your activity isn't explicitly listed: Note the KeSIC code for your activity. This information can be valuable for future KGFT developments and discussions with financial institutions.
• Key Data: Have a clear understanding of your project's activities and the corresponding KeSIC code.