After several failed attempts to merge a bag to a seat in 2016, Arnold Mugaga, the creator of SeatPack emerged victorious in 2018.
Birthed on the ideals of resolving the inadequacy of desks in schools, pressures from population growth and increasingly endangered forest cover, the 600 gram school bag unfolds into a seat and contains a writing pad.
It was made to be environmentally and economically sustainable.
In the same spirit of human and animal life sustainability, Gorilla Conservation Coffee was formed.
Dr Gladys Kalema Zikusooka founded the company after the harsh realisation that the farmers living adjacent to Bwindi Impenetrable Forest were poorly remunerated for their coffee. Consequently, they resorted to using the national park for fuel and food.
Bwindi National park is home to many gorillas in Uganda. To protect the gorillas’ home, Gorilla conservation coffee then offered farmers a premium of $0.5 per kilo above the market price for their coffee to enable them attain their livelihood.
The company prides itself in protecting the animal species by donating $1.5 (1,829) per kilo of coffee purchased to help save mountain gorillas by directly supporting the work of Conservation through a non-profit organisation.
In addition to the above lies a plethora of businesses built with a sustainability aspect under the model, in a spectrum of sectors including energy, waste management and manufacturing among others.
Most recently, students of International University of East Africa unveiled electric motorcycles with the ability to move for about 80 Kilometres after charge. The goal, the university students said, was to use technology to reduce pollution.
But it is not only the startups and new innovations, big corporations are also making the shift.
Uganda Breweries Limited and cement manufacturer Hima Cement have also highlighted the firms’ dedication towards greener products. For them, it stems from the production processes.
“Cement is one of the biggest carbon emitters, so we are innovating new methods of reducing the carbon emissions,” Mr Israel Tinkasimire, commercial director Hima says.
Whereas he pegs Hima Cement’s green agenda to values such as health and safety, environment, education and people, there is a silent aspect of financing that cannot be ignored.
Going green in addition to cutting production costs, is becoming a prerequisite for some lenders.
Lenders can no longer block out the global alarm raised by world leaders as a call for action to mitigate climate change.
Several treaties have been signed. Some of which lenders are signatories to; for example, the Equator principles underscoring financial institutions’ due diligence role in determining, assessing and managing environmental and social risk in projects.
Responding to the pressure and the fear of being in the world’s bad books, some lenders have become more conscious of who they give money.
This phenomenon is especially common with international lenders who are turning their eyeballs to climatically sustainable businesses. The pressure is cascading to developing countries.
“We have begun to elevate within our lending processes aspects that conserve the environment. Responsible lending to us is very central and we are now embedding it into our lending principles and we have been doing that,” Mr Sam Mwogeza chief financial officer Stanbic Bank Uganda, said during a recent engagement.
However, due to the low return hence not so financially attractive nature of businesses designed with environmental sustainability at their core, dedicated funds were necessary to encourage a greener economy.
Green financing or sustainable financing was born.
Green financing according to Mr Jim Mugunga, the spokesperson ministry of finance is a new terminology that has come up in form of financial services such as banking and insurance products that can be delivered with a bias towards a greener world.
“In undertaking green finance you find that green investments are at the core so funds are set aside and are dedicated to businesses that have a bias to greening and insurance given to de-risk climate sensitive investments,” he explains adding that green financing is in response to climate change.
Research gate defines a green business as a firm that is committed to the principles of environmental sustainability in its operations, strives to use renewable resources, and tries to minimise the negative environmental impact of its activities.
In Uganda however, green financing is still a budding concept.
“We haven’t created a specific package or lending pool to specifically support that but it is one that we are actively considering as part of our broader vision to support our Environmental, social, and governance (ESG) agenda,” Mr Mwogeza explains.
He also revealed that the bank is engaging with different partners to unlock lower cost funding to disburse into the Small and medium enterprises space.
Green financing and its instruments
KCB group in East Africa was the first financial intermediary to receive a green light from the UN Green climate fund to provide green financing in the region last year.
The Green Climate Fund was established by 194 countries party to the UN Framework Convention on Climate Change in 2010 as a dedicated financing vehicle for developing countries within the global climate sphere. The Fund in 2020 announced a total of $10.3b as pledges and contributions from different countries.
Following the go ahead from the UN, KCB group, which also operates in Uganda among other East African markets recently secured Kshs16.5b (Shs550b) loan from multiple lenders.
They include; International Financial Corporation, SANAD fund for Micro-, Small and Medium Enterprise (MSME), Belgium Investment Company for developing countries (ICDC) and Symbiotics dedicated towards funding climate friendly businesses.
On a global scale, there is increasing interest by lenders to finance green investments.
Green financing is issued through multiple methods including debt and equity, sukuk, bonds and insurance among others. Green Sukuk are described as Shari’ah compliant investments in renewable energy and other environmental assets. They address Shari’ah concerns for protecting the environment.
According to a green bonds market summary for the third quarter of 2020 by climate bonds initiative, Green bonds, loans and sukuk added to the Climate Bonds Database during the period reached $69.4b with majority issued towards energy, buildings and transport.
United States of America and Germany issued the biggest green bonds during the period.
In a world dependent on manufacturing through industries, motor vehicles and the like, pollution has been rising.
According to Uganda’s first biennial update report to the United Nations framework convention on climate change authored by Ministry of Water and Environment in 2019, Uganda’s emissions have had a steady rise increasing from 53 thousand gigagram (Gg) tonnes in 2005 to close to 90 thousand Gg tonnes in 2015.
The agriculture, forestry and other land use (AFOLU) sector has remained the most significant source accounting for over 86 per cent of the emissions followed by the energy sector accounting for 10.8 per cent.
Though lower than the AFOLU sector, the report notes that the emissions from the energy sector have almost doubled, rising from 4.7 thousand Gg tonnes in 2005 to 9.5 thousand Gg tonnes in 2015. The transport sub-sector accounts for close to 66 per cent of the emissions of Uganda’s energy sector.
Now that the world is become aware of the effects of climate change, it is responding.
Countries such as Uganda are signatory to the United Nations Framework Convention on Climate Change (UNFCCC), Kyoto Protocol and the Paris Agreement whose main focus is on climate change and mitigating global warming.
Through the different treaties and organisations, funds have been consolidated from different developed and some developing countries such as the Green Climate Fund.
Currently, a lot of green financing is being done by the international community through development partners. This in part is attributed to the limited understanding of the concept in Uganda from both the lenders and public.
Launched in 2019, Uganda Green Enterprise Finance Accelerator, UGEFA is a four year program funded by the European Union and is implemented by Adelphi research, a think tank focused on climate.
The organisation is supported by a local consultancy firm called Finding XY.
Mr Eddie Sembatya, the programme lead, UGEFA provides aid to green enterprises in two ways including advisory services such as tax knowledge and corporate governance among others as well as enabling access to credit of up to $100,000(Shs366m).
“We are yet to see a lot of activity from financial institutions designing green financing products or having such relations in their own strategy,” he says adding that the accelerator programme is in final stages of partnering with Equity bank to offer credit to the enterprises.
Mr Sembatya, however, notes that financiers are willing to learn and collaborate.
The Organisation for Economic Co-operation and Development (OECD) also highlights the need for high level political support for green growth, ideally complemented by broad stakeholders’ consultations.
For green financing in Uganda
UGEFA partners with local banks to provide financing to green enterprises. The programme thereafter caters for a third of the loan repayment, meaning the loan is subsidised for the green enterprise.
The programme which is currently calling for applications for the second time, targets businesses that have been operating for at least two years.
There are also funds under the Green Climate Fund for environmentally sustainable projects. Currently, the Fund has supported nine projects in Uganda.
In addition, government through Ministry of Gender, Labour and Social Development started a programme dubbed “Green” Jobs & Fair Labour Market in Uganda” in 2016.
The programme aims at reducing negative environmental impact and promoting safety and health at work, leading to environmentally, economically and socially sustainable enterprises and economies.
The ministry also has a mandate over the Uganda Green Incubation Programme (UGIP) - Songhai model which emphasizes more production more with less, zero waste, and creation of green jobs, inclusive economy and self-reliance.
Government plans to re-skill 500,000 unemployed persons, support 500,000 from the informal sector with green technology, business start-up tool kits, exposure tours, training and certification.
Final Investment Decision
Uganda’s oil and financing
There are expectations that the announcement of the Final Investment Decision is drawing closer than ever. All will be set in motion to see Uganda realise her first oil.
While the financial excitement has been stirred, civil society organisations continue to emphasize the need to safeguard the country from the environmental destruction.
Financiers of these projects have a big role to play. Environmentally sensitive financing is now more accentuated than ever.
Stanbic Bank, a key financial player in Uganda’s oil story, acknowledges that it is a fine line but the institution says it will endeavour to protect the environment while extracting economic value of the oil resource.
“We are signatory to the equator principles and every action will be governed by those principles. We shall not compromise on transactions on which we advise or where we actively participate,” Ms Ann Juuko Stanbic Bank’s chief executive promised.