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6.3 Funding
The investment experts as part of the SUED programme will develop feasibility studies for the proposed projects which will include estimated capital expenditure and operating expenditure requirements. It will likely be necessary to blend and combine a range of different sources of financial and non-financial support to meet the projects’ expenditure requirements. Careful consideration will have to be given to the differing eligibility criteria of the various sources in order to successfully structure blended finance arrangements. Grant funding can help improve the financial viability of projects which have significant, upfront capital expenditures, improving the overall investment appeal of a project and attracting additional private investment as a result. The proportion of grant finance of the total project finance amount should be carefully justified, as simply seeking a maximised grant finance proportion can seed doubts in the private sector about the long-term financial sustainability of the project. Grant funding is also available to less commercially viable projects with significant socio-economic or environmental benefits, particularly relating to climate change and resilience. They may also be focused on certain activities such as technical assistance in project preparation or capacity development. Philanthropic and NGO grant funding could also be leveraged through initiatives such as businesses dedicating 1% of profits to corporate social responsibility (CSR) initiatives. Examples of projects could include tree planting, provision of or access to recreational facilities such as SuDS development. The World Bank’s Kenya Urban Support Programme (KUSP) has also been identified as potential funding support for some of the UEP projects, including the incorporation of street features on key urban roads. Private sector finance for a range of sectors is available in East Africa from both local and international sources. Existing investors in the region include impact investors, venture capitalists and private equity funds who are able to provide relevant instruments for the value chain projects such as equity, quasi-equity (mezzanine finance) or concessionary debt. Access to private finance will be contingent on the concrete demonstration of viable business models and strong governance structures. Projects will also benefit by blending in non-financial support in the form of social capital, such as volunteer efforts from the community. Actions to build social capital include mobilising community organisations and volunteers to be involved with the development and implementation of projects. The most successful mobilisation of human and social capital resources occurs for projects where there is a demonstrated, direct and visible relationship between the project and the future benefits for community and volunteer stakeholders. Examples of projects could include raising awareness campaigns for more efficient use of water and solid waste collection and management. Climate change resilience funding Mobilising the scale of resources to address the identified climate change adaptation measures to be implemented and ensure that the selected VC and infrastructure projects are climate resilient, the counties need to consider the full spectrum of potential funding sources available. Presented below is a snapshot of the available climate change funds that cover climate adaptation and mitigation. It is important to note the following: › The VC and infrastructure projects have had climate change resilience actions embedded in their proposals, and further recommendations have been made, as
Section 5 Focus Area project details. This will aid the projects in accessing funding by demonstrating their significant contribution to climate change actions. › Successfully accessing resources from these funds depends on a good understanding of the funder’s perspective and procedures.
A comprehensive grasp of funding criteria as well as the different financial mechanisms and the extent to which they can be combined is important.
Existing guidance58 presents the following principles that need to be generally adhered to. The project activity must: › Include a statement of purpose or intent to address or improve climate
resilience in order to differentiate between adaptation to current and future climate change and good development; › Set out a context of climate vulnerability (climate data, exposure and sensitivity), considering both the impacts from climate change as well as climate variability related risks, where the UEP Climate Vulnerability
Assessment (Appendix D) provides important considerations here; › Link project activities to the context of climate vulnerability (e.g., socio-economic conditions and geographical location), reflecting only direct contributions to climate resilience.
Global Funds
Green Climate Fund (GCF): The GCF seeks to promote a paradigm shift to low emission and climate-resilient development, taking into account the needs of nations that are particularly vulnerable to climate change impacts including Africa and Small Island Developing States (SIDs). The GCF aims to deliver equal amounts of funding to mitigation and adaptation and its activities are aligned with the priorities of developing countries through the principle of country ownership. The financial instrument / delivery mechanism for the GCF is grants, loans, equity or guarantees. The National Treasury is the Kenyan National Designated Authority (NDA) for the GCF and developed the Kenya National
Green Climate Fund (GCF) Strategy59 which has a vision to increase financial flow from the GCF for a climate-resilient society and low-carbon economy. The Strategy identifies County governments as critical co-financiers who can take the role of Executing Entities and/or Implementing Entities of climate resilient and low-carbon initiatives. The Strategy provides a roadmap for stakeholders in harnessing resources from the GCF.
The Adaptation Fund: The AF finances projects and programmes that help vulnerable communities in developing countries adapt to climate change. Initiatives are based on country needs, views and priorities. The financial instrument / delivery mechanism used by the Adaptation Fund is grants. NEMA is the National Implementing Entity (NIE) for Adaptation Fund in Kenya. The Least Developed Countries Fund (LDCF): The LDCF was established to meet the adaptation needs of least developed countries (LDCs). Specifically, the LDCF has financed the preparation and implementation of National Adaptation Programs of Action (NAPAs) to identify priority adaptation actions for a country, based on existing information. The financial instrument / delivery mechanism used by the LDCF is grants. The Global Environment Facility (GEF) administers the LDCF and Operational Focal Points (OFPs) are responsible for coordination in country. The Ministry of Environment and Forestry is Kenya’s GEF Operational Focal Point. The Special Climate Change Fund (SCCF): The SCCF was established to address the specific needs of developing countries under the UNFCCC with respect to covering incremental costs of interventions to address climate change relative to a development baseline. Adaptation to climate change is the top priority of the SCCF and in addition to this, it finances projects relating to technology transfer and capacity building in the energy, transport, industry, agriculture, forestry and waste management sectors. The SCCF is administered by the GEF and its financial instrument/delivery mechanism is grants. The Ministry of Environment and Forestry is Kenya’s GEF Operational Focal Point. The Pilot Program for Climate Resilience (PPCR): The PPCR provides funding for climate change adaptation and resilience building. It aims to pilot and demonstrate ways in which climate risk and resilience may be integrated into core development planning and implementation by providing incentives for scaled-up action and initiating transformational change. It is a targeted program of the Strategic Climate Fund (SCF), which is one of two funds within the Climate Investment Funds (CIF) framework. The financial instrument/ delivery mechanism for the PPCR is grants and loans. The CIF Secretariat is housed at the World Bank.
The Adaptation for Smallholder Agriculture Programme (ASAP): ASAP channels climate finance to smallholder farmers so they can access the information, tools and technologies that help build their resilience to climate change. ASAP is contributing to the drive of scaling-up successful ‘multiple-benefit’ approaches to increase agricultural output while simultaneously reducing vulnerability to climate-related risks and diversifying livelihoods. ASAP is the world’s largest climate change adaptation programme for smallholder farmers, and it is run by the International Fund for Agricultural Development (IFAD). Regional Funds The Africa Climate Change Fund (ACCF): the ACCF aims to support African countries transition to climate resilient and low carbon mode of development, as well as scale-up their access to climate finance. The ACCF serves as a catalyst with a scope broad enough to cover a wide range of climate-resilient and low-carbon activities across all sectors. Priority for funding is given to the following themes; supporting small-scale or pilot adaptation initiatives to build resilience of vulnerable communities; and supporting direct access to climate finance. The ACCF gives grants and launches calls for proposals periodically. The Secretariat is housed at the African Development Bank. National Mechanism. The financing of climate action is anchored on the Kenyan constitution. The Climate Change Act, 2016 requires that deliberate Climate Change considerations are 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.
County Mechanisms The Kenya County Climate Change Fund (CCCF) Mechanism: These improve a counties readiness to access and disburse national and global climate finance to support community-prioritised investments to build climate resilience, five counties have so far established CCCFs. The CCCFs are aligned with national priorities set out in Kenya’s National Adaptation Plan (NAP) and enable these county governments to strengthen and reinforce national climate change policies while delivering on local adaptation priorities. The expansion of the CCCF across the country is one of the priorities in the Kenya National Climate Change Action Plan, 2018-2022. It is recommended that the climate resilient and inclusive infrastructure SUED projects are used to drive a capacity building exercise across Tharaka Nithi County in advance of implementation and that the CCCF can be a potential source of funding for these and other adaptation measures.
