ESG in M&A Transactions – A Report from Kenya

​​​​​​​​​​​​​​​​​​On May 2nd, Rödl & Partner Kenya hosted a joint event with colleagues from Rödl & Partner Munich and Rödl & Partner South Africa on the topic “M&A on the Fast Lane”.

Key themes included:

• Opportunities in a dynamic market
• Solutions for closing deals in the current financing environment
• Tax due diligence in light of recent developments in Kenya
• Global perspectives
  
  

During the panel discussion, it became evident that sustainable investments are particularly in focus for investors and market participants.​ This sets the perfect stage to delve into the question of ESG in Kenya - one of the most dynamic markets in Africa.

ESG (Environmental, Social, and Governance) investments are gaining importance in Kenya, driven by both local and international initiatives promoting sustainability and responsible business practices.

Environmental Initiatives

Kenya has a robust legal and policy framework supporting ecological sustainability. The Kenyan Constitution guarantees the right to a clean and healthy environment. Notable policy measures include the Climate Change Act of 2016 and the ban on plastic bags in 2017. The Kenya Green Bond Programme, launched in 2017, has encouraged green investments and led to the issuance of the first green bond on the London Stock Exchange for eco-friendly student housing.

Social and Governance Initiatives

There is increasing emphasis on gender equality and employee welfare in the social sphere. The Capital Markets Authority (CMA) and the Nairobi Securities Exchange (NSE) have introduced guidelines to ensure diversity in corporate boards and promote ESG reporting. Additionally, the Central Bank of Kenya (CBK) has issued guidelines on managing climate-related risks, requiring banks to integrate these risks into their business decisions.​

Private sector involvement

Private sector involvement is crucial. For example, Microsoft and G42 announced a $1 billion investment in green data center infrastructure in Kenya, powered entirely by renewable geothermal energy. This project aims to support digital transformation in East Africa by providing secure and scalable cloud services. Additionally, SBM Bank's commitment to financing renewable energy projects, such as off-grid solar installations, under­scores the role of the private sector in supporting ESG goals.

Challenges and Opportunities

Despite these advancements, there are challenges in implementing ESG strategies, particularly in ensuring compliance and fostering broad acceptance. However, there is growing support from development institutions and local regulatory bodies, offering a positive outlook for ESG investments in Kenya.

Kenya's proactive approach and increasing participation from both public and private sectors demonstrate a strong commitment to ESG principles, positioning the country as a leader in sustainable development in the region.

Conclusion from the M&A Conference

The momentum and awareness for sustainable investments are particularly strong among investors and market participants in Kenya/Africa.

The country is evolving into a leading destination for impact investing in Africa, bolstered by a dynamic population, a strong economy, and a well-developed financial sector.

Kenya offers numerous investment opportunities across sectors such as financial inclusion, sustainable agriculture, renewable energy, education, and healthcare. These areas have significant potential to achieve social and environmental impact while generating financial returns. Particularly, renewable energy is a growth area, with Kenya playing a leading role in solar, wind, and geothermal energy production in Africa.​​