Kenyan bourse brings carbon exchange to East Africa

By Seth Onyango, bird story agency

Climate change mitigation efforts in Kenya have received new impetus after the Nairobi Securities Exchange (NSE), inked a deal with the AirCarbon Exchange (ACX) and the Nairobi International Finance Centre (NIFC) to set up Kenya’s first carbon offset exchange.

ACX will develop the carbon exchange platform as part of innovative financing to shore up environmental projects, including reforestation and land restoration, according to the NSE.

The Singaporean firm securitises carbon credits into tradable carbon asset classes, thereafter carbon credits held by the exchange are held in a trust.

For every credit deposited into the trust, a corresponding one-tonne token resides on the exchange.

A green portfolio at the NSE will create an investment value chain across Kenya’s overall financial ecosystem to support climate change mitigating projects.

“The NSE is today signing a collaboration agreement with the Nairobi International Finance Centre and AirCarbon Exchange Limited. This will lead up to the exploration and formation of the emissions trading platform in the overall financial ecosystem in Kenya,” the NSE said on the sidelines of the launch of NIFC.

Emissions trading is a market instrument for reducing emissions of CO2 and other greenhouse gases.

Businesses that cut their emissions can sell their excess carbon credits to other firms whose emissions have increased, thus commoditising carbon and creating a market.

Kenya is looking to attract more than $2 billion worth of investments through the NIFC over the next eight years, with Nairobi now joining Casablanca (Morocco), Cape Town (South Africa), and Port Louis (Mauritius), and Johannesburg as IFCs on the continent.

NIFC CEO Oscar Njuguna has said he is upbeat about the potential for the carbon exchange to spur climate finance in Kenya by establishing a locally accessible marketplace for carbon offsets.

In Kenya, the companies lining up to utilise the carbon exchange include power generator KenGen, Koko Networks, Mumias, and other smaller companies and farmers.

“Investments in clean green infrastructure are fundamental to Kenya’s continued prosperity and growth,” said Jane Marriott OBE, British High Commissioner to Kenya.

ACX securitises carbon credits around market demand, allowing traders to gain exposure to an asset class as opposed to individual projects. Every token is backed by one tonne of CO2 equivalent (tCO2e) and the credit sits in the exchange’s trust.

Kenya’s Capital Market Authority chair Nick Nesbit told Business Hub the move was an opportunity to grow trust in the market and to build a culture of ESG (environmental and social governance) amongst regional companies.

“We are driving trust utilising technology and trying to ensure really robust mechanisms to ensure that businesses abide by ESG in Kenya,” he said.

Kenya is among the top providers of climate finance in Africa alongside South Africa and Nigeria. The country’s first-ever green bonds were issued by Acorn Holdings in 2019. That issue was oversubscribed.

/bird story agency