Ted Otieno, vice chairman of the Kenya Green Building Society (KGBS), said greater incentives for green finance can help Kenya find its way to economic recovery.
Kenya has one Housing deficit of more than two million unitsMore than 60% of urban households live in slums. According to the World Bank, the country is has to build around 200,000 new residential units every year just to keep up with population growth.
KGBS is a not for profit group that advises companies on reducing the environmental impact of their buildings.
Two obstacles to promoting green living in Kenya are the idea that green building is expensive and there is a lack of funding mechanisms, says Otieno from Nairobi. Government incentives for developers and small investors are needed, and banks need access to green finance. “That would allow us to get to scale.”
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According to UN Habitat, commercial and residential buildings account for 40% of all electricity generated in East Africa, more than the transportation and industrial sectors. Green buildings come with modest cost premiums for design and implementation, and the business model for them is strong, according to KGBS.
According to UN Habitat, green properties should achieve higher market values, improve cash flow for owners and users, and reduce the risk of borrower default.
Otieno recognizes that there is a discrepancy between the need for cheap mass housing and the green agenda.
However, it is necessary to focus on both quality and quantity. Progress has been made in the past two years, and Kenya is currently developing new building codes to include environmentally friendly requirements, Otieno says.
However, much remains to be done.
- “The government has to encourage people to build green,” says Otieno.
- A carrot and stick approach is needed: there should be incentives for green developers and penalties for builders of non-green housing, he adds.
Gain an advantage
In 2019 Acorn Holdings was the first Kenyan issuer to sell a green bond and raise $ 43 million to house university students in Nairobi. Green bonds are part, but not all, of the solution, says Otieno.
Lenders can do more to promote green buildings, he adds. Some banks like Standard Chartered have started offering discounted personal loans for renewable energy solutions. However, according to Otieno, green mortgages remain “an area of opportunity” for banks.
The Excellence in design for more efficiency The (EDGE) tool from the World Bank’s International Finance Corporation (IFC) is suitable for broader application, including by banks, argues Otieno.
- Buildings must have a 20% reduction in energy and water consumption from a base case to receive EDGE certification.
- The tool is sensitive enough to be able to predict building performance in different regions of Kenya.
- The government has stated that affordable housing projects must meet the EDGE standard for green buildings. The free to use tool is dynamic rather than static and requires continuous progress once the initial goal has been achieved.
- Greater digitization has made it possible to collect and disseminate information about environmentally friendly building worldwide. When combined with tools like EDGE, green building is a breeze for Kenya, concludes Otieno.
Greater incentives for green building could turn Kenya’s housing shortage into an opportunity.