Rwanda on October 17 launched its Climate and Nature Finance Strategy (CNFS) intended to raise $6.5 billion (approx. Rwf8.7 trillion) in line with increasing green investment by both the public and private sector within six years.

The six-year strategy which runs from 2024 through 2030, is the blueprint for mobilising the financial resources needed to achieve Rwanda’s ambitious goals for carbon neutrality by 2050, and promoting biodiversity conservation and sustainable economic development, according to its developers.

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It was developed by the Ministry of Finance and Economic Planning in collaboration with other government agencies, the private sector, and development partners. It aims to green existing investments and make them more climate resilient.

As per the strategy, Rwanda’s Vision 2050 aims to transform the country into an upper middle-income country by 2035 and a high-income country by 2050, while simultaneously fostering a carbon-neutral and climate-resilient economy.

As part of this vision, Rwanda aims to reduce emissions by 38 per cent compared to business as usual by 2030. The CNFS will play a pivotal role in providing strategic solutions for mobilising and scaling finance to achieve this ambitious development trajectory, its developers observed.

Rwanda’s climate and nature finance needs and trends

Rwanda's updated nationally determined contributions (NDCs) – which are actions that embody efforts by each country to reduce national emissions and adapt to the impacts of climate change, under the Paris Agreement – a legally binding international treaty on climate change – delineate the financial demands for implementing both adaptation and mitigation measures until 2030, amounting to approximately $11 billion.

Of this, 40 per cent is earmarked for unconditional measures funded domestically, while the remaining 60 per cent relies on external financing support, information from the strategy shows.

According to the NDC implementation framework, financing has been secured to cover most implementation costs for the 2020–25 period, with the total secured finance amounting to $$4.5 billion.

Looking ahead, the overall financing gap is estimated at $6.5 billion for the entire 2020–30 period (IMF, 2023). The revised Rwanda Green Growth and Climate Resilience Strategy (GGCRS) underscores the need for an annual investment of $2 billion, with about $700 million sourced from government budgets.

As per the strategy, private sector investment in climate and nature initiatives has not been extensively reported.

However, given the sector contributed $2.1 billion in investment in 2022 (15.8 per cent of Rwanda’s GDP), including $399 million in Foreign direct investment (FDI), its potential role as a source of finance is promising, it observed.

Boosting private sector readiness to invest in climate and nature

Investment by Rwanda’s private sector is estimated at $1.15 billion per annum, of which it is estimated that $110 million relates to climate and nature (World Bank, 2024).

This represents a significant yet underutilised source of financing for Rwanda's climate and nature objectives.

The potential to leverage programmatic investment planning to target private sector financed interventions should be explored, the strategy stated, pointing to a need to provide technical and financial support aimed at enhancing the private sector's ability to develop bankable programmes and investments with attractive returns that are aligned with climate and nature objectives is crucial.

The strategy outlines five priorities, along with their key activities, which constitutes the essence of Rwanda’s intent to accomplish its stated purpose and goals.

The strategy’s five priorities

1. Increasing low-carbon, climate-resilient, and nature-positive investments

This strategic priority entails increasing public and private investments in climate-resilient, low-carbon technologies and practices, while also promoting initiatives that contribute to the conservation and restoration of nature.

By prioritising such investments, Rwanda aims to foster a greener and more sustainable economy, mitigating climate risks and preserving biodiversity for future generations.

This is expected to be achieved through activities including aligning relevant policies to enable climate and nature investment and operationalise Rwanda's Green Taxonomy – a framework that aims to define sustainability criteria, foster shared understanding and trust on what constitutes a green investment, as well as prevent greenwashing.

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The introduction of a Green Taxonomy provides an opportunity to augment the pool of viable private sector projects and align them more effectively with existing frameworks, thus facilitating improved access to financing, the strategy pointed out.

2. Leverage public sector finance for climate and nature investments

This priority emphasises the strategic utilisation of grant funding and concessional debt alongside public sector resources to bolster climate and nature-related investments.

Here, the issue of co-financing and allocation of public resources to access grants and concessional debt is a crucial consideration.

By maximising the efficient use of grant funding, especially while Rwanda is eligible for it, the country can amplify its impact and expedite progress towards its climate and nature objectives, according to the strategy.

Under this priority, activities expected to be carried out include scaling access to international climate and biodiversity grant funding.

Specifically, it pointed out, grant funding reserved for low-income countries should be the immediate focus, ensuring access before Rwanda achieves its development objectives of becoming a middle-income country.

Other activities to lead to the attainment of the strategy is to focus, negotiate, and deploy concessional finance to derisk investment in climate and nature; and promoting fiscal allocations to investments that are low carbon, climate resilient, and nature-positive.

3. Mobilise climate and nature financing through the progressive adoption of innovative instruments

This aims to harness Rwanda’s ambition to mobilise additional public and private finance to meet its targets by embracing innovative financial instruments and mechanisms.

By introducing new approaches such as blended finance, green and sustainability-linked bonds, and carbon markets, Rwanda seeks to attract diverse sources of finance to increase financial flows and maximise the effectiveness of its climate and nature investments, driving sustainable development and resilience.

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Targeted interventions include facilitating financing windows for private sector investment with significant climate and nature dimensions, the strategy pointed out, indicating that larger-scale private sector investment in climate and nature should be facilitated by building on, enhancing, and establishing structured programmes and dedicated funding windows.

There is also operationalising and expanding access to carbon and biodiversity markets.

4. Introduce incentives and mechanisms to promote the adoption of climate and nature investments by the private sector

This strategic priority involves creating favourable conditions and incentives to encourage increased private sector investment in climate and nature initiatives. By offering tax incentives, subsidies, and regulatory support, Rwanda aims to stimulate private sector participation in sustainable programmes, unlocking new opportunities for innovation, growth, and collaboration.

This will involve both increasing the number of climate and nature-related or focused investments as well as ensuring commercial and development initiatives include climate and nature dimensions.

Efforts to this end include refining policy or taxation instruments to promote private sector adoption of climate and nature investments.

Proposed actions include conducting a comprehensive review of existing tax policies to identify areas where adjustments can be made to incentivise investments aligned with green taxonomy principles.

5. Align and enhance monitoring, evaluation and learning of climate and nature across investments and assets

This strategy is focused on the importance of robust monitoring and evaluation mechanisms to track progress and ensure accountability, by enhancing data collection, reporting, and analysis specifically related to climate and nature finance.

It plans various activities including developing climate and nature monitoring mechanisms for all investments in Rwanda. The country is dedicated to enhancing transparency and accountability of the climate-related expenditures and revenue streams, as indicated in the strategy.