While industries like fintech and energy continue to provide key drive for Kenya’s ongoing growth in private equity and venture capital (VC) funding, investors have also become far more interested in environmental, social and governance (ESG) as well as healthcare investments, say Brian Muindi, Head – Corporate & Commercial at TripleOKLaw LLP, and Jinaro Kibet, SC, a senior partner at TripleOKLaw LLP.
“We see greater focus on ESG now, with more investors asking what’s being done on the ESG front and about climate change, whether it’s carbon trading or clean energy,” shared Muindi, “We’ve also seen an increase in healthcare investments across the entire value chain spanning from physical infrastructure such as putting up hospitals and cancer centres or expanding universities, to logistical aspects like setting up warehousing for pharmaceutical products and facilitating distribution of medicines to market.”
Kenya ranks among Africa’s top investment destinations and is an economic engine for the rapid-developing East African region. An analysis by the East Africa Venture Capital Association showed Kenya accounted for 69% of 478 private equity and development finance institution (DFI) investments, and 74% of deal value between 2013 and 2023.
Muindi and Kibet have worked on many private equity and DFI transactions across various industries. Both note the increased impact of ESG concerns on their deals, not just in environment-facing sectors like mining or energy, but across the board. The social and governance aspects of ESG reporting are also very important to investors, they say.
“We represent several clients who consistently engage in capital raising. Kibet plays a significant role in securing additional capital from these European funds for our clients,” Muindi explained. “The European funds enforce stringent criteria, and whenever we engage in transactions involving them, we notice a strong emphasis on ESG components. However, we have also witnessed a growing trend of American funds entering the scene focusing particularly on the social aspect.”
TripleOKLaw LLP stands at the forefront, with a specialised Climate Change and Sustainability practice that influences all other areas of the firm’s operations.
Kibet, who previously chaired Kenya’s Capital Markets Tribunal, and Muindi say they have observed a definite shift in Kenya’s corporate legislation.
“This concept of triple bottom line reporting, involving the reporting not only of financials but also ESG components, is now integrated into our company regulations. It’s no longer an action driven solely by shareholder activism; instead, it's firmly anchored in Kenya’s legal framework,” Kibet pointed out. “Whether conducting a legal audit or pursuing a physical investment, considering ESG components is now mandatory.”
The “G” of ESG is also a key concern to investors, say the pair, who collaborate with businesses to improve their governance through training, frameworks and audits.
“ESG and sustainability have now become almost a tipping point everyone takes very seriously. It’s not just a tick-a-box exercise, it’s cascading into operations all the way down, and investors are giving similar prominence to governance as they do to market fundamentals,” Muindi emphasised.
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