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New rules, law reforms position Kenya as a green investment hub
Kenya is ramping up green finance with new policies and incentives to attract climate-smart investments and build resilience against costly climate impacts.
The government recently introduced the Kenya Green Finance Taxonomy (KGFT), a guideline for environmentally sustainable investments that defines the minimum criteria a project must meet to be labelled “green”.
For instance, eligible activities must make a significant contribution to climate-change mitigation or adaptation, observe a strict “do not do significant harm” standard and comply with minimum social safeguards.
Essentially, by providing a common language for investors, issuers of green bonds, and other financial-sector participants, the KGFT enhances transparency in the identification, disclosure, and monitoring of investments.
The International Monetary Fund’s (IMF) Climate Module of the Public Investment Management Assessment 2023 report paints a clear picture of the significance of green finance, noting that floods, and droughts, among other climate-linked disasters cost Kenya between two and 2.8 percent of its Gross Domestic Product (GDP) each year. This, despite Kenya contributing less than 0.1 percent of global greenhouse gas emissions.
Kenya has a great potential to leverage green finance for climate and adaptation initiatives. The United Kingdom provides a compelling precedent. Between 2021 and 2024, its Green Financing Programme raised GBP 43.4 billion, enabling investments in zero-emission buses, food, and coastal-erosion risk management.
Kenya is already leveraging green financing to address climate risks and secure funding for various projects. Acorn Holdings, which issued a $42.5 million green bond (the first of its kind in Kenya) in 2020 to support wastewater treatment and renewable energy initiatives is a good example.
Although obstacles to scaling green finance remain, Kenya’s deliberate integration of climate priorities into its regulatory and policy frameworks is noteworthy.
By enacting dedicated climate-change legislation, the government is creating a structured, investor-friendly environment needed to attract green capital and accelerate both mitigation and adaptation efforts.
A notable example is the Income Tax Act (ITA), which stipulates that companies operating an emission trading system certified by the Nairobi International Financial Centre Authority (NIFCA) benefit from a reduced corporate tax rate of 15 percent for the first 10 years of their operations.
NIFCA is tasked with attracting firms to the Nairobi International Financial Centre (NIFC) by creating a streamlined framework, developing incentives in collaboration with relevant agencies, and recommending legal and regulatory reforms to enhance Kenya’s position as a competitive international financial hub.
To obtain NIFC certification, companies need to fulfill certain conditions and pay a Sh100,000 fee for startups and Sh1 million for other firms, along with a non-refundable processing fee of Sh25,000.
Additionally, the government ammended the Climate Change Act in 2023 to allow for participation in the carbon markets (subject to policy direction from the Climate Change Council) which is now done through bilateral or multilateral trading agreements, trade between the government and a private entity, or in a voluntary carbon market. Such legislative changes are positive steps in advancing Kenya’s green financing initiatives.
The ITA's reduced tax rate for certified emission trading systems and Climate Change Act provisions align fiscal incentives with regulatory certainty.
If implemented and refined, this framework positions Kenya as a preferred destination for investors seeking resilient, high-impact opportunities.
The authors serve as a Partner and Associate, respectively, in the Tax and Legal Services at PwC Kenya.
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