ESG in PPPs: How Kenya is using its PPP framework to drive ESG outcomes

• Developing markets are leveraging PPP arrangements and models to help drive enhanced ESG outcomes
• Massive demand for new infrastructure gives these markets an opportunity to get it right from the start
• Markets must ensure they have an enabling regulatory framework that can last the test of time
• Kenya's PPP Directorate serves as a great example of how markets can use PPP to drive ESG outcomes.

As developing world markets strive to achieve multiple economic, development, environmental, social and governance goals, Dr. Lawrence Mbugua, Senior Infrastructure Manager with KPMG in Kenya, talks to Chris Kirigua, Director General of Kenya's PPP Directorate, to find out how one of Africa's leading infrastructure investment destinations is attracting global capital flows.

Lawrence Mbugua (LM): How is Kenya using its PPP framework to advance ESG and SDG goals?

Chris Kirigua (CK): Our regulatory framework essentially demands that everything we do - the way we work, the way we do business, the projects we prioritize - is aligned to the United Nation's Sustainable Development Goals (SDGs). Within the PPP Directorate, we have mapped all our opportunities to the SDGs. Now we are focused on ensuring that we have the right metrics and that we are measuring the right KPIs to get the outcomes we want to achieve.

LM: What are some of the challenges with measuring the outcomes?

CK: Historically, governments around the world have not been very good at measuring the environmental, social and governance outcomes of their investments. But if you are not measuring, how can you expect to achieve your outcomes? Measurement is a very key aspect for us. One of the challenges we face is that ESG outcomes do not happen overnight. They take time. And they take partnership between government and the private sector to ensure we are delivering - and measuring - the expected outcomes.

LM: How are you ensuring that Kenya procures infrastructure and solutions that last the test of time?

CK: We have developed a `climate smart' infrastructure program that helps us ensure that the projects we work on and the technologies we put in place are delivering a positive outcome for the environment, and that any negative outcomes are being properly mitigated in accordance with our national laws and internationally accepted principles. We also have a 10-year infrastructure plan that outlines our priorities and projects over the decade. This not only allows investors to have greater confidence in our pipeline, it also ensures that our strategy lasts the test of time.

LM: In your opinion, do development and pollution go hand-in-hand?

CK: Not at all. Around 90 percent of Kenya's power generation already comes from green generation such as hydro and solar power. In fact, with just a few exceptions, most of Africa is now powered by renewables or low-carbon technologies. The task we now face is to ensure that any new infrastructure we develop allows our economy to grow without sacrificing our environmental and social goals. Frankly, I think developed markets have a bigger challenge because they need to allocate resources to replace and retrofit their existing infrastructure. When you are focused on building new infrastructure, you have an opportunity to get it right from the start. Kenya is rich in biodiversity and it is important to us to ensure that any development is carried out in a sustainable manner for the benefit of current and future generations.

LM: What advice would you give to other developing markets seeking to drive better ESG outcomes through PPP models?

CK: The first thing is to have an enabling environment supported by regulatory frameworks that are institutionalized. This gives all the players a level playing field since the rules are provided under law and apply equally to all. I also think governments need to be more willing to draw on the knowledge and expertise of external advisors - consultants, engineers, financial institutions, environmental companies and developers, for example - to augment their capabilities and to ensure projects are fit for purpose and attractive to the private sector. I would argue that much of our success has come from our focus on being enablers, working within the existing regulatory framework to build partnerships with the private sector without compromising governance.

LM: Have you seen success from your efforts?

CK: We have indeed. We have noted increased interest from investors around the world - from America to Australia - looking to work with us to deliver our PPP pipeline. I think investors see Kenya as a great investment destination with a very investor-friendly platform, proper regulatory framework, no foreign exchange restrictions, and a history of strong institutions and abiding by the rule of law. Investors are also very keen to find green investments that align to their own ESG goals. That has made it much easier for markets like Kenya to attract a much wider investor group to come into the market