Attracting green financing in Rwanda

Rwanda's ambitious climate action agenda is propelling the country towards building resilience and fostering green growth, but to achieve these goals, substantial investments totaling 11 billion US dollars are crucial. The Sustainable Finance Roadmap outlines three strategic objectives aimed at addressing existing gaps in green investing and attracting the necessary capital to propel Rwanda towards a sustainable future. One of the critical pillars highlighted in the roadmap is the need for robust infrastructure, skilled workforce, and attractive financing options. Rwanda acknowledges the limited expertise in ESG investing across various financial sectors such as banking, insurance, and capital markets. To bridge this gap, the country is focusing on green banking lending and environmentally-friendly investment structures. By nurturing the right environment, Rwanda aims to tap into innovative financing models that blend different types of capital to achieve sustainable objectives. The country is witnessing a surge in creative financial structures revolving around carbon pricing and externalities, showcasing a promising landscape for green financing in Rwanda and across Africa. With a pressing demand for 11 billion dollars in investments to realize green growth targets, Rwanda is leaving no stone unturned in seizing available opportunities. At the recent UN Climate Change Conference, COP27 in Charm El Sheikh, Egypt, Rwanda unveiled a $100 million facility, Iremma Invest, to enhance private sector access to green finance. The facility aims to attract and unlock private investments while providing financial instruments to support local businesses. Recognizing the need for a blend of public and private investments to combat climate change effectively, Rwanda is tailoring financial products to cater to the varying needs of businesses across different stages of development. From ideation to acceleration, the facility offers grants, reinvestable grants, subsidized loans, and guarantees to bolster private sector initiatives towards a sustainable future. Private banks are poised to play a vital role in financing the transition to a low-carbon economy, but there are challenges to address. Many local banks are yet to adequately measure and mitigate climate risks embedded in their portfolios. The lack of expertise in assessing EHGV risks and pricing products accordingly poses a hurdle in aligning banking operations with sustainable practices. Rwanda highlights the importance of integrating climate risk considerations into decision-making processes to navigate the journey towards a carbon-neutral economy successfully. By embracing a climate action-oriented approach, Rwanda is paving the way for a transition to a green economy, enabling the country to leapfrog into a sustainable future that aligns with its development and climate objectives.