1. BACKGROUND
The Financial Sector Deepening Kenya (FSD Kenya) is an independent trust dedicated to the achievement of a financial system that delivers value for a green and inclusive digital economy, while improving financial health and capabilities of women and micro and small enterprises (MSEs). FSD Kenya has a green finance program dedicated to supporting the development of a green finance ecosystem and a greener real economy resilient to climatic and other environmental shocks, resource efficient and generates green investment, employment, and income generation opportunities for low-income Kenyans.
The 2010 Kenyan Constitution devolved important natural resource and environment related sectors such as agriculture, water provision, transport, and planning to counties. Thus, counties have a pertinent role to play in Kenya’s sustainable development agenda, an agenda that can only be realised if counties have the requisite capacities and capabilities including financial resources. Yet at present, counties face a funding gap, with most, if not all, of them reliant on transfers from The National Treasury.
Green finance presents an opportunity for counties to generate resources for their development priorities including county infrastructure such as water piping, county roads and the development of agriculture etc. in a green and climate resilient manner. Noting that climate change and natural disasters have disrupted the socio-economic development of counties, FSD Kenya in its bid to support counties to mobilise additional finance from nontraditional sources, assessed the potential for 10 counties to access and apply to green finance market, with a focus on green bonds. The 10 counties are: Embu, Kirinyaga, Kisumu, Laikipia, Nairobi, Makueni, Nandi, Taita-Taveta, Vihiga, and Wajir. FSD Kenya’s assessment focused on the following factors:
▪ Economic and Fiscal Assessment: County fiscal performance, strengths, challenges, and ability to take on (additional) debt including the consideration of potential revenue generation sources.
▪ Credit Risk Assessment: Estimate the county government’s relative likelihood of defaulting on its obligations.
▪ Green Asset and Activity Assessment: Availability of green investment opportunities and assets in the selected counties.
▪ Green Finance Capability Assessment: County government skills and ability to manage green financial instruments (with a focus on green bonds) and related projects. From this assessment several counties have been selected for further technical support through the County Green Project Preparation Facility. Through this facility, investment specialists will work with select county governments to prepare priority green projects. It is understood that there are other potentially viable counties with whom FSD Kenya may not have worked.
2. OBJECTIVES
The consultant will manage and implement the County Green Project Preparation Facility. This includes working with the selected county governments to prepare green projects eligible for a range of green finance instruments. County governments selected have been advised to develop Green Investment Working Groups which will the main point of contact for the consultant. The ambition is to have a cluster of projects, prepared by investment professionals and matched with green financing options through appropriate financial vehicles
3. SCOPE OF WORK
The consultant will manage the facility and be responsible for the following:
▪ County Government Engagement in the County Green Investment Working Group:
Responsible for working with the individual County Governments and their respective County Green Investment Working Groups including County Leadership and technical staff assigned to the Working Groups. Examples of specific responsibilities include:
o Agree on a workplan for green project selection and preparation and related schedule of activities and deliverables.
o Ensure the activities and deliverables agreed to with the County Green Investment Working Group are met.
o Organise workshops, working sessions, presentations with the County Green Investment Working Groups as required.
o Secure a list of viable Green Priority Projects approved by the County Green Investment Working Group and County Government.
o Be actively cognisant of the varied development priorities, legislation, County Integrated Development Plan commitments, and fiscal dynamics in each selected county
▪ Selection of Viable Green Priority Projects: Generate a group of viable green priority projects. Examples of specific responsibilities include:
o Using the FSD Kenya County Green Project Assessment as background, determine the number and scale of green projects that should be put through more rigorous due diligence processes which may include credit rating and verification.
o Develop an approach/toolkit to assess specific green project viability that addresses asset base, capability, risk etc., in terms of project financing, political economy, sectoral and macroeconomic risk, and apply this to each project and county.
o Shortlist all possible green priority projects to a small group of the most viable.
o Work with the County Green Investment Working Group to generate consensus on the top green priority projects that should be taken to the project preparation stage.
▪ County Green Project Preparation: Prepare shortlisted county green priority projects financing. Examples of specific responsibilities include:
o Develop investment proposals for each shortlisted county green project cognisant of the range of appropriate green financial instruments available for both core projects financing and risk mitigation financing.
o Match investment proposals of the selected county projects to the most appropriate source of finance cognisant of financier mandates, risk appetite, expectation of return, appetite for social return beyond green considerations etc.
o Match investment proposals to the most appropriate green financial instruments that meet the objectives of green finance such as Government grants; development grants; guarantee funds; subsidies; concessionary loans; commercial loans; results-based finance; blended finance; ESSG Bonds etc.
o Propose financial architecture and arrangements in investment proposals that increase project viability and securing investment.
o Work with the County Green Investment Working Group to determine the roles and responsibilities of the County Government and/or assignment of parties within investment proposals developed.
o Recommend additional assessments for shortlisted county green priority projects.
o Support nominated professional parties to conduct further appraisals on the county green priority projects such as credit rating and green certification.
▪ Investor Awareness and Engagement: Responsible for generating communication that enhances investor understanding of and engagement with the investment proposals. Examples of specific responsibilities include:
o Leverage the consultant’s network to create a presence and awareness of the county green investment opportunities with key investor groups and stakeholders such as development financiers, multilateral agencies, bilateral donors, banking institutions, capital market actors etc.
o Capture and integrate formal and informal feedback on investor concerns and suggestions into investment proposals as required/appropriate.
o Integrate County Governments, particularly County Green Investment Working Group members into the investor engagement process and schedule of activities.
▪ Coordination with National Government Bodies with a focus on The National Treasury and Economic Planning: Coordinate and engage with National Government bodies for project preparation including National Treasury Economic Planning, and National Ministries, Departments and Agencies/Authorities as required. With the guidance and support of FSD Kenya, engage The National Treasury Economic Planning (TNT) on the progress of the facility. Examples of specific responsibilities include:
o Provide updates on the projects selected through the facility.
o Detail implications related to National Treasury Guarantee requirements in all investment proposals including expected sources of financing, implication for national debt exposure and probable repayment expectations.
o Integrate regulatory requirements that pertain to investment proposals and ensure compliance, particularly fiscal and monetary policy.
Consultant to propose workplan and timelines for the above including the expected deliverables detailed in section 5.
4. CONDUCT OF WORK
The contract will run for a term of one year (renewable). The consultant/firm will report directly to the FSD Kenya Green Finance Project Team.
5. OUTCOMES AND DELIVERABLES
▪ Inception Report
▪ A list of viable Green Priority Projects approved by the County Green Investment Working Group and County Government for each county
▪ Due Diligence and Project Viability toolkit/ methodology applied to each county and county green priority projects
▪ Minimum of 5 investment proposals generated per county, approved by the County Green Investment Working Group and County Government.
▪ Project performance monitoring tracking tool
▪ Investment briefs and presentations for each investment proposal
▪ Completion of Investor Engagement activities
▪ Briefs to The National Treasury Economic Planning on progress
▪ Progress and Final reports
How to apply
Click here for the full call for proposals and submission details. Interested bidders submit their proposal on or before February 29, 2024, at 1700H EAT.