A development finance institution may have funds available for investment but still face difficult decisions about which projects qualify as green, how environmental risks should be assessed and whether proposed financing products respond to market demand.

These questions matter for Kenya’s transition towards a more climate resilient economy. Enterprises require financing for sustainable investments, while lenders must establish appropriate eligibility criteria, evaluate commercial viability and monitor the results of their portfolios. When these requirements are not adequately connected, promising investment opportunities can remain difficult to finance.

For Kenya Development Corporation (KDC), addressing these considerations formed part of an assignment on green financing strategy and sustainability accreditation undertaken by Impact Africa Consulting Limited (IACL).

Defining the financing challenge

From September 2025 to June 2026, IACL worked with KDC to examine how financial products, investment decisions and risk management processes could respond to climate, sustainability, resilience and inclusion objectives.

The assignment considered both external financing opportunities and the institution’s internal capacity to pursue them. Its scope included market demand, customer requirements, product suitability, governance arrangements, funding opportunities and performance measurement.

This distinction was important. Developing a green financing strategy requires identifying commercially relevant investments, but the institution must also determine how those investments will be evaluated, approved, managed and monitored.

Sustainability accreditation formed part of the assignment’s scope, placing further attention on institutional requirements, relevant standards and the processes necessary to demonstrate alignment with sustainability expectations.

Examining the financing environment

IACL reviewed financial strategies, existing products, market information, portfolio evidence, risk policies and operational procedures. The assessment considered relevant financing guidance and stakeholder requirements to understand the institution’s starting position.

Consultations involved management teams, financial institutions, technical specialists, market participants, programme partners and intended financing beneficiaries. These engagements helped clarify expectations, identify market constraints and examine the practical requirements of possible financing interventions.

The analysis considered customer demand, financing gaps, institutional capabilities and commercial viability. It also examined whether existing products and procedures were appropriate for the types of sustainable investment opportunities under consideration.

The objective was to establish which changes might be required within the institution before financing opportunities could be pursued effectively.

Connecting product design with risk assessment

A central part of the work involved examining potential financing products and programme options against identified market needs.

Green investments may have different capital requirements, repayment characteristics and implementation risks. Financing structures therefore need to reflect the commercial circumstances of borrowers alongside the environmental objectives of the investment.

IACL assessed product suitability, institutional readiness, relevant risk considerations and potential implementation approaches. Existing practices were compared with applicable standards, institutional commitments and realistic sector benchmarks.

The resulting diagnostic findings informed financing recommendations, product and programme options, risk measures and implementation priorities.

The work was intended to help KDC consider how its financing approach could accommodate sustainability objectives without overlooking commercial requirements or institutional responsibilities.

Preparing for practical implementation

The assignment also addressed the institutional arrangements necessary to translate strategic recommendations into operational decisions.

IACL developed guidance covering responsibilities, implementation sequencing, resource requirements, performance indicators and follow up actions. These considerations helped connect proposed financing directions with existing management processes.

Attention was given to the relationship between institutional capacity and the implementation of financing recommendations. A proposed product or financing mechanism must be supported by appropriate procedures, technical capabilities and monitoring arrangements if it is to operate consistently.

The project documentation records strategic and technical recommendations, rather than verified figures for green financing subsequently disbursed or accreditation achieved.

What development financiers can learn

The KDC assignment illustrates why green financing strategies require simultaneous attention to market demand and institutional capability.

Identifying sustainable investment opportunities is insufficient if financial products, assessment procedures and governance arrangements are not equipped to support them. Equally, sophisticated internal systems have limited value when financing products do not reflect customer requirements.

For development finance institutions, the practical implication is that product development, risk management, funding strategies and institutional capacity should be considered together.

IACL’s contribution provided KDC with diagnostic findings and implementation guidance intended to inform these decisions.

Green financing becomes operational when institutions can identify suitable investments, evaluate their risks and manage financing through systems designed for that purpose.