How Absa is accelerating Kenya’s green building shift
Kenya, like most countries in Africa, is a young, buzzing, and vibrant economy with its citizens lurching from one opportunity to the next.
According to forecasts, Kenya, which is East Africa’s biggest economy, will be experiencing housing pressure in urban centres, as more and more people migrate to cities in search of education, jobs, and investments.
For policymakers and key players in the economy, one of the biggest challenges remains ensuring that the country’s increase in population drives change in a manner that sustainably empowers its citizens.
One of the emerging opportunities that can help meaningfully drive change is harnessing the myriad of chances presented by a green economy.
Green buildings in particular offer a huge opportunity that can unlock benefits for investors keen on harnessing sustainable agriculture and sustainable infrastructure development. These two industries normally benefit from shared resources such as water, wood, and waste management systems to name but a few.
At the moment, Kenya is grappling with a housing challenge, with official statistics showing that the country is facing a deficit of at least 250,000 units per year.
One of the smart ways to plug this supply gap would be by embracing low-carbon, locally sourced materials to develop green buildings at scale, thereby saving on huge import costs.
Collaboration among policy makers
To succeed, however, this approach demands collaboration among policymakers, financiers, and players in the construction industry to unlock Kenya’s potential in green housing.
“Banks are not merely financial intermediaries; they are the lifeblood of our economy. Absa’s dedication to integrating sustainability into its core operations sets a precedent for other financial institutions and indeed, for all sectors of the economy,” noted Dr. Eng. Festus Ng’eno, the Principal Secretary, of the State Department of Environment and Climate Change, at the launch of Absa Bank Kenya 2023 Sustainability Report.
Last year, Absa Bank Kenya disbursed a total of KES6.7 billion to Acorn Holdings Limited (AHL) in a financing deal for the development of 10 Purpose-Built Student Accommodation (PBSA) to address current student housing deficit in Nairobi.
According to Acorn, these green buildings have been certified under the International Finance Corporation (IFC) EDGE green building certification system. This means that the developer is setting up internationally recognized green buildings aiming at alleviating student housing needs for Kenyatta University, JKUAT, and the University of Nairobi.
Acorn, a pioneer in Kenya’s Real Estate Investment Trusts (REITs) industry has been building student houses as part of plugging the country’s housing deficit.
With Absa’s KES6.7 billion financing in 2023, this investment will add 12,000 beds to the Acorn Student Accommodation REITs, and increase the total bed portfolio to 21,000–the largest in Africa.
“Our objective is to continue to align and contribute to the Affordable Housing Program with 70,000 student beds over the next 10 years,” Acorn Holdings Ltd CEO Edward Kirathe said at the signing of the financing plan last year.
According to IFC’s Building Green, Sustainable Construction in Emerging Markets 2023 report, the production of construction materials such as steel and cement, accounts for roughly 40 percent of energy and industrial-related carbon dioxide (CO2) emissions globally.
However, IFC adds that emissions growth in construction value chains can be cut with the “application of existing technologies, new financing instruments, and the implementation of appropriate policies.”
“To avoid perpetuating the status quo, decisive action is needed by policymakers, developers, construction material producers, financiers, and international development institutions,” the World Bank’s private lending arm explains.
Read also: Absa case study: Partnerships bank quick wins for the sustainability fight
Sustainable future
With Absa Bank and other financial institutions supporting the green buildings sector, Kenya can accelerate to a sustainable future where the construction sector cuts emissions significantly.
Targeted financing can lead to among others electrification of brown buildings with cleaner energy, as well as coming up with energy-efficient new buildings. Green financing also offers an opportunity for developers to use low-emission materials, and increasingly adopt frameworks that lower value chain emissions.
By adopting these measures, the IFC projects that construction value chain emissions can be reduced to about 23 percent by 2035 globally.
Kenya is already making its mark globally in green building breakthroughs. At the COP28 summit, the Kenya Green Building Society in liaison with FSD Africa helped the city county of Nairobi in having the office of the Governor named the first IFC EDGEgreen government office in the continent.
