We must understand Climate Finance if we are to increase investments in the subsector

Agneta Auma Akelo points at her once-thriving home. The house was destroyed by floods. [Lynet Otieno, Standard]

The climate change agenda has assumed a relatively prominent role in the manifestos of the leading presidential candidates.

This is not surprising because the sector is a big agenda globally due to the shared responsibilities, obligations and consequences. It is thus something to celebrate because it implies that climate change will attract the necessary political attention that it deserves.

While there are well-established global structures that govern climate change finance (CCF) and its flows, it is often easily mistaken in poor countries to mean this is largely an externally financed agenda. The truth is that the most reliable and sustainable sources of finance for climate action are internal: public, private or community resources. I am alive to the complex geo-economic and political intricacies of CCF. This article, however, deliberately veers off this discussion to address the important role of households and individuals in the climate finance space. Ultimately, the outcomes that we desire will come from each one of us individually and collectively.

At the technical level, there is no consensus yet on a single definition of what constitutes CCF. However, the United Nations Framework Convention on Climate Change (UNFCCC) describes it to include local, national and transnational finances drawn from public, private or alternative sources of financing that seek to support adaptation and mitigation actions. Contrary to popular believes out there, the largest source of CCF is from International Private Sector Investments and Capital (Climate Change Finance Handbook, the National Treasury, Kenya, 2019). This mainly comes as concessional loans, debt, equity or guarantees.

As mentioned here, I wish to highlight things that constitute CCF for the smaller economic units to understand their role and how they can actively contribute to the global agenda. If these economic units are active participants in the human activities that harm the ecosystem, they can equally play an important role in providing the solution. For society in general and households to actively contribute to this initiative, they must see CCF as an investment rather than extra expenses.

This is because most of the time the measures that will save our nation and the world require that we move an extra mile within our ordinary spending. Ideally, the element of project costs that represent CCF is not the total cost to complete the project, but only the additional cost necessary to ensure the project complies with climate change standards. Thus, unless one is able to appreciate this does not constitute an extra cost but an investment into a better coexistence in the future, they may be unwilling to go that extra mile. While in the broader picture most of these micro-economic units may not easily be tracked for reporting within the formal climate change administrative structures, they nonetheless make a huge contribution where it matters most.

The five important (sub)sectors that can easily play a critical role in enhancing grassroots contribution to CCF within their activities include construction, agriculture, transport/infrastructure, energy and jua kali. Contributions into CCF in the construction sector would include things like extra cost for bigger windows to rely more on natural lighting, harvesting rain water, biotechnologies to recycle domestic waste and enhancing tree cover on construction sites among others. If we side stepped an individual household to imagine how many buildings are under construction in the country or in a county at any point, then the significance of this becomes clear.

These households, property developers and firms are making these decisions/choices on a daily basis. The sum total of these investments into the sector is enormously unimaginable were it to be tracked. In the agriculture sector, small-scale and livestock farmers make choices on what to grow, farming practices and agricultural waste management.

They decide on the tree cover on their farms, use of raw materials and agro-processing. Again, while the individual farm holder may appear insignificant alone, collectively they form a huge force to reckon with for the positive as well as the negative actions towards climate change.

If they could go the extra mile to invest in farm practices and technologies that enhance the target outcomes for climate change, then this would be a huge benefit to the CCF. In the transport/infrastructure sector, roads are not only done at government level. Many private sector actors and households develop access roads, utilities and other domestic works. Collectively, they equally contribute to the destruction of beneficial initiatives or otherwise. In any case, Small and Medium Enterprises are important players in the sector under affirmative action programmes or in provision of supplies.

Within the energy sector, households and firms are perpetually making decisions on their source of energy supplies. They have to decide on whether to invest in greener sources or to revert to the same old sources they are accustomed to.

Unfortunately, once they have settled on a particular source, it is never an easy choice to revert to alternative sources. For instance, solar and wind power technologies have improved significantly and increasingly growing cheaper per unit cost, even in the short term. But it works like a default setting for ordinary folks to revert to the national grid supplies. Generations after often retain this order for several decades.

This makes it more strategic to intervene at the decision point if the choice would have such long-term consequences. Individual interventions at this point would translate to more people moving to greener sources in the long term. Finally, an unusual entrant into this discussion is the jua kali sector. This can be extended to include the broader Micro, Small and Medium Enterprises (MSMEs). Official statistics in Kenya, for instance, indicate that at least 82 per cent of the economy is informal. This places the actors into the thick of the wheels of the economy whether you look at the supply or demand sides.

I have often relied on information shared by actors in this sector to make important decisions that I now realise are attributable to climate change. Properly informed and capacitated, they can help midwife impactful choices and/or investments.