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BII, Shell Foundation, and SunCulture pilot innovative carbon financing for solar irrigation in Kenya

Early December, British International Investment (BII), the UK’s development finance institution and impact investor, and Shell Foundation, the UK-registered charity supporting energy access market solutions in Africa and South Asia, announced investments of $2.1m and $0.5m respectively into SunCulture, a Kenya-based company that provides solar-powered irrigation systems to smallholder farmers. The investment will help 9,000 more smallholder farmers in Kenya to increase farmland productivity in a sustainable way and contribute to the region’s goal of enhancing food security.

Lowering upfront costs of climate smart irrigation products

According to the World Food Programme, food insecurity affects about 2.8 million people in Kenya. This is further exacerbated by the impacts of climate change which is reducing productivity in the agriculture sector.

BII and Shell Foundation have partnered to design and finance the facility to enable SunCulture to harness the future value of carbon credits and lower the upfront cost of climate smart irrigation products which can deliver:

  • Year-round and up to five times increased incomes for farmers due to longer and more frequent growing seasons.
  • 17 hours/week average time savings compared to collecting water for irrigation manually.
  • 92 per cent of SunCulture farmers reported improved resilience to, and recovery from, climate shocks such as droughts.

SunCulture expects that the 25-40 per cent reduction in the cost of solar irrigation pumps through carbon monetisation will enable them to materially increase their addressable market, putting clean irrigation solutions in the hands of thousands more farmers in East Africa.

The facility will be repaid with future sales of carbon credits, with BII bearing the risk on future carbon credit prices given the price volatility currently seen in voluntary carbon markets.

“Making a real difference to local communities”

Samir Ibrahim, SunCulture CEO said: “This innovative structure will allow climate-tech companies in emerging markets, in this case SunCulture, to maximise the value provided to low-income customers. Carbon finance must be used to accelerate the scaling of green technology in emerging markets, and I hope this structure inspires other financing organisations to offer similar solutions. This is just the start.”

Andrew Mitchell, UK’s Minister for Development and Africa,commented: “Our ambition, as set out in our recently published Development White Paper, is to ensure that BII is a leader on climate finance, working with partners like Shell Foundation to deliver innovative climate solutions.

“I am delighted to celebrate this new investment, which will make a huge difference to the lives of 9,000 smallholder farmers in Kenya and have a positive impact on food security in the country. This builds on previous support for SunCulture and highlights how such schemes are not only attractive to investors but can also make a real difference to local communities.”

Nick O’Donohoe, BII CEO said: “With farmers providing 78 per cent of Kenya’s food and already feeling the effects of climate change, it is vital that we support them to adopt sustainable farming

practices. This will not only help increase productivity but also improve farmers’ resilience to the impact of climate change and support food security in Kenya. Our intention is that this investment with SunCulture will catalyse private capital from the carbon markets to climate-smart solutions for smallholder farmers in Kenya and across Africa.”

Jonathan Berman, Shell Foundation CEOadded: “The facility will test whether carbon markets can be utilised to scale income-generating energy access and empower millions of smallholder farmers in emerging markets to earn a living income. By partnering with BII and SunCulture we have created an innovative, risk-adjusted financing mechanism to steer private capital into the hands of individual farmers and their families.”

Removing barriers associated with accessing financing

The investment is the first transaction under the strategic MOU between BII and Shell Foundation, with the two organisations working in partnership to endeavour to provide up to $245m blended finance and co-investment products to remove the barriers associated with accessing finance for early to mid-stage businesses within the agri-energy and other decentralised renewable energy and related sectors.

Shell Foundation’s investment also includes co-funding from the UK’s Foreign, Commonwealth & Development Office through its Catalysing Agriculture by Scaling Energy Ecosystems (CASEE) partnership supporting solutions for smallholder farmers across Africa and South Asia.

BII and Shell Foundation’s investment in SunCulture is aligned with the vision of the new Africa Green Industrialisation Initiative (AGII) launched at COP28, to support the development of sustainable and resilient industries that can create jobs, reduce emissions, and enhance biodiversity.

This investment will contribute to a number of the United Nations Sustainable Development Goals including SDG2 (Zero Hunger), SDG7 (Affordable and Clean Energy) and SDG13 (Climate Action).