For the better part of most mornings in March, movement across Nairobi came at a cost. Flooded roads turned highways into parking lots. Deliveries got stuck. Shopkeepers couldn’t open on time. For a farmer in the Rift Valley, similar rains meant a destroyed harvest and further added to concerns on food security.
For all of us, it meant a sharper reminder – Kenya’s economy is already paying the price of climate risk, every day, in lost productivity, destroyed harvests, and emergency response costs. The question is no longer whether Kenya can afford climate action. It’s whether we can afford to delay it.
However, the debate around Kenya’s climate response still leans heavily on policy targets, donor commitments, and long-term ambitions. What is slowing capital is who carries the risk of financing the transition.
For commercial banks, lending to renewable energy, clean transport, or sustainable agriculture is not constrained by awareness but by structure.
These projects take longer to break even and their returns are unpredictable, having uncertain cash flows, often lack the collateral on which traditional credit models are built and treated the same as traditional business loans, even though they’re different.
From a balance sheet perspective, they are difficult assets. Consequently, banks often hesitate not because they oppose green investment, but because the risk does not get priced appropriately. This is where the enablement through risk-sharing guarantees becomes important.
By absorbing part of the perceived risk, guarantees change how banks can assess climate-aligned lending. These do not make projects less risky. They make them lendable within existing financial frameworks, hence the difference between announcing climate commitments and actually moving money.
Encouragingly, Kenya’s financial system is already moving in this direction. The introduction of the Kenya Green Finance Taxonomy has created a baseline for what qualifies as green, reducing ambiguity and limiting the scope for misallocation.
At the same time, frameworks linked to the Central Bank of Kenya are pushing lenders to account for climate exposure in their portfolios.
Flood damage to collateral, disrupted supply chains, and declining agricultural yields are no longer externalities. They are already showing up in loan performance and asset quality, ensuring that climate risk is internalised into credit decisions.
That explains why guarantees are becoming central. They represent a move away from a grant-driven model, where climate finance sits outside the market, to a structure where public or development capital is used to unlock private lending. In practical terms, this allows banks to extend credit into sectors they would otherwise shy from, while still protecting their capital base.
The problem, however, is not funding, but execution, with few projects being structured to be financed. Despite stronger frameworks, many businesses, particularly SMEs, cannot meet the technical, reporting, and structuring requirements that green financing demands.
This has created a persistent gap between available capital and actual disbursement, risking stalling the transition.
Without investment in project preparation, technical support, reporting capability and standardisation, guarantees risk becoming underutilised instruments, available, but not fully deployed.
Climate finance, in this sense, is as much an execution problem as it is a funding problem.
In addition, most green investments in Kenya today do not yet stand on purely market terms. They still rely on some level of de-risking through guarantees, concessional funding or policy incentives.
That does not invalidate the model. It defines its current phase. Guarantees are not a permanent solution, but a bridge to a market where climate-aligned investments can compete without support.
Kenya has made progress. Regulatory clarity is improving. Financial institutions are adapting. New instruments are entering the market. But the pace of climate shocks is outstripping the pace of capital deployment.
Each flood event, each disrupted supply chain, each lost harvest reinforces the same pressure point: the economy is already paying for climate risk.
If guarantees are the mechanism that allows banks to price and absorb that risk, then their role is not peripheral but foundational at this stage of the journey. They are what convert climate exposure into investable opportunities.
For policymakers, the priority is scale and standardisation. For financial institutions, it is integration into core lending strategy, not side portfolios. For businesses, it is readiness by structuring projects that can meet the threshold for financing.
The transition will not be funded by policy intent or donor goodwill alone. It will be funded by financial structures that make risk acceptable, and capital deployable.