Implementation Partner for Project Pipeline Development & Prioritisation, Investor Engagement, Project Management Office and Capacity Building

1. Introduction

The Nairobi Climate Adaptation & Resilience Plan (NCARP) seeks to address the challenges of building investment flow – in one of Africa’s biggest and most systemically important cities – that address the increasingly substantial impacts of climate change on lives and livelihoods. As part of the first phase (Phase I) of NCARP, FSD Africa seeks to contract a firm or consortia (hereafter referred to as the “Implementing Partner” or “Consultant”) to establish and develop – using a spatially defined climate risk model – a project pipeline, prioritization process, replicable engagement structure for engaging with prospective funders/investors, and programme of capability building that  enables the Nairobi City County Government (NCCG) to mobilise finance for their climate resilience agenda. NCARP is a frontier initiative for future activity in FSD Africa’s mission to accelerate the development of adaptation financing in Sub-Saharan Africa. The Consultant will be the key implementing partner in driving our joint ambition with the NCCG to attract private capital to socially impactful solutions; there is therefore great importance in the Consultant developing on-the-ground relationships with NCCG, developing fit-for-purpose approaches and capacitating NCCG/partners such that NCARP is made sustainable. The Consultant’s outputs will be used beyond the scope of Phase I; insights and material will drive the roll out of NCARP and support it in achieving its objectives. These terms will complement a separate procurement for the first portion of Phase I; the initial climate risk and cost of inaction modelling that informs the development of the NCARP platform. This engagement is expected to run from March 2026 to March 2027 (the end of NCARP Phase I).

2. Project Background

1. • About FSD Africa

FSD Africa works to reduce poverty by strengthening Africa’s financial markets. Based in Nairobi, with anchor funding from the UK’s FCDO, FSD Africa is a specialist development agency set up to support breakthrough ideas to build and strengthen financial markets across sub-Saharan Africa. FSD Africa does this by tackling the most intractable financial market challenges in Africa – addressing issues associated with the lack of long-term finance, especially in local currency, and inadequate risk management capacity. FSD Africa’s team of financial sector experts work alongside governments, business leaders, regulators and policy makers to design and build ambitious programmes Established in 2012, FSD Africa is incorporated as a non-profit company limited by guarantee. More details  are available on FSD Africa website at www.fsdafrica.org.

FSD Africa focuses its work where the need is greatest, and believes the potential for impact is the most significant. FSD Africa has a specific mandate to invest in breakthrough, innovative ideas that  can have a transformative impact. This project is closely aligned to FSD Africa’s green financing strategy, the FSD Africa end-to-end structural reform approach, and FSD Africa’s history of engaging with investors, financial institutions, project developers and regulators. FSD Africa’s programming is run through its Adaptation & Resilience, Early-Stage Financing and Financial Markets Pillars, while investments are made through a separate arm – FSD Africa Investments (FSDAi). Supporting functions are provided by Development Impact and Strategic Communications teams.

• Project Context – The Intractable Challenge

Nairobi is a city increasingly under threat from climate change. Facing both chronic (long-term change) and acute (disasters) threats of flooding, storms, water scarcity and extreme heat, there is an urgent imperative to act to protect Nairobi’s infrastructure and five-million strong population from climate stressors. In Nairobi’s informal settlements, where 60-70% of the population lives, over 85 per cent of citizens reported experiencing heat stress in the past decade, along with disease and health-related maladies linked to climate change (Muchiri and Opiyo, 2022).[1] 50 per cent of Kibera residents had their homes flooded in the 2015 rainy season.[2]

Our existing work in Lagos suggests costs of inaction are substantial in all African cities, and especially in Nairobi. Under a scenario where the world follows a path in which social, economic, and technological trends do not shift markedly from historical patterns, by 2050, a combination of river level rise, water scarcity and extreme heat will result in billions in climate-inaction-related costs for Nairobi per annum. This cost will be presented in areas inundated by floodwaters, key ecosystems degraded and eroded, populations displaced and left economically vulnerable, damage to infrastructure, increased health-related public expenses, interruption to economic activity and increases in food dependency. This will likely be many times the Nairobi City County’s annual budget. Inaction is not an option.[3]

However, many cities – including Nairobi – have not quantitatively assessed these costs of inaction. Our conversations with Nairobi City County have shown us there is a desire to measure the cost of inaction, but a perceived difficulty in understanding where to start, how to link costs to IPCC’s scenarios, where these costs will be spatially imposed, and which climate risks are relatively harsher. While some macroeconomic analysis has been undertaken at a national level through the World Bank’s Country Climate and Development Report (2023); ‘by 2050, inaction against climate change could result in a decline in real GDP of 3.61–7.25 percent relative to the BAU baseline scenario’ – this work is not applied to Nairobi, is fairly limited in its channels (only four of eleven ‘impact channels’ are relevant to urban contexts), is spatially non-specific, and does not incorporate points of interest or counterfactual analysis.[4] More analysis is required to define specific risks, impacts, and eventually, projects.

NCCG has not yet set an ‘ambition’ or project-level business cases to fund A&R linked projects. NCCG does not know how much it needs to fund, what projects would have the most impact, or what a programme of implementation may look like for the city. Most pipeline identification – particularly driven by the IFC and C40 – is aligned to mitigation or circular economy outcomes. The recent Nairobi City County Climate Change Act (2024, passed in November) and County Climate Change Fund (developed through the support of FSD Kenya) lays promising groundwork for further project preparation. However, to our understanding, no adaptation-linked projects have involved the private sector. All are reliant on concessional donor funding, given the tight fiscal constraints NCCG must navigate.

Our preliminary diagnosis suggests the lack of adaptation financing could be attributed to multiple reasons including inadequate project readiness, limited public technical and analytical capacity, investor perception/understanding of risk and adaptation business models, and policy barriers such as the lack of (sub)-sovereign risk mitigation.

• Summary of NCARP

The Nairobi Climate Adaptation and Resilience Plan (NCARP) has the overall aim of reducing economic, social and environmental risks that face Nairobi over the next thirty years. Climate adaptation in Nairobi will be an immensely difficult problem to solve. When gaps associated with cost of inaction are analysed and articulated, we perceive a strong imperative to call for a substantial raising of adaptation financing, in the projects where it is most needed. Nairobi would be the second city after Lagos, to progress with an adaptation & resilience financing plan supported by FSD Africa. We have the vision – similarly to Lagos – to position Nairobi on the path to climate resilience, enabling it to be seen a model climate-resilient city (especially in East Africa), and assisting the County in overcoming challenges associated with its most pressing climate impact drivers. Given the scarcity of financing for adaptation – and especially private financing – NCARP will provide decision makers a data-driven assessment for climate inaction costs. This allows for prioritization of solutions, a mobilization of action & funding, and the development of a responsive whole-of-government strategy for resilience; it is rare for cities to have such analysis and coherence for adaptation.

Broadly, NCARP would position Nairobi on a five-step journey; the first four of these steps would be completed through Phase I (completed by March 2027). This approach was defined and systematised in Lagos. In Nairobi, NCARP would include:

1. a baseline/risk assessment driven by a technical spatial model that maps climate risk and resilience across Nairobi City County,
2. the collection of potential adaptation solutions ranked by bankability,

• the prioritisation of the project portfolio,

1. engagement of potential funding and resourcing, and,
2. eventual implementation and tracking of these projects.

Based on our learnings in Lagos, we defined five key criteria that a city should meet to be eligible for our support; Nairobi meets these pre-requisites. Firstly, Nairobi is a climate vulnerable city, susceptible to a range of climate events both chronic and acute (i.e climate disasters such as flooding or storms). Secondly, the city is willing to make climate-related commitments and has expressed the desire to dedicate political capital to a prospective NCARP; the MOU is a sign of this commitment. Third, there is significant (private) financing potential in Nairobi – numerous regional banks and asset managers are based in Kenya, looking to engage with the County, and have capacity to invest and underwrite projects. Many multilateral lenders are highly willing to engage in Kenyan projects. Fourth, Nairobi directly and indirectly supports a large population that would benefit from adaptation-linked projects. The city’s economic centrality is unquestioned; a more resilient Nairobi is a more resilient East Africa. Finally, FSD Africa and the Network have strong relationships across both municipal and national governments; we are ‘pushing against an open door’. Nairobi is ready and willing reached to commence the development of a climate adaptation and resilience plan, comprised of bankable, high-impact projects.

• Project Concept – NCARP Phase I

NCARP Phase I has the ultimate aim of establishing a formal climate adaptation & resilience plan – backed by cost-of-inaction analysis and a pipeline of investible projects – that will allow for informed investor engagement and eventual financial close. NCARP Phase I has three defined objectives.

1. To develop an analytical fact base for Nairobi City County that defines and prioritises the key climate risks/impact drivers facing the County, and allows for project-based counterfactual analysis and business case development against an otherwise status-quo ‘cost of inaction’;
2. To establish an A&R financing strategy and implementation plan for Nairobi, that includes a prioritised project pipeline, assessment of key (project and portfolio level) financial instruments and recommended policy, regulatory and governance changes for NCCG;
3. To establish the foundations for systemic change through NCCG-wide capacity building that delivers continued acceleration of adaptation and resilience-linked policy reform and project development beyond the lifecycle of NCARP.

We intend to progress NCARP via four workstreams. The first workstream is envisioned to start prior to the final three workstreams (which will run concurrently). Each of these workstreams has a corresponding set of proposed deliverables.

• Workstream 1: Assess Nairobi’s baseline climate risk and exposure to climate impact drivers, in order to quantify the overall ‘cost of inaction’ to the County. This will allow us to deliver an advanced understanding of the climate related loss drivers and to identify the most affected locations, communities and social and economic sectors in Nairobi.
• Workstream 2: Establish a pipeline of adaptation-linked projects for NCARP, in order to prioritise, structure and support execution of financial transactions and investments that improve climate resilience in the County. This would include a feasibility assessment and key design aspects of prioritised ‘bankable projects’. Through cross-NCCG coordination, we would support project ideation, and benchmark Nairobi’s opportunities for policy, governance and regulatory reform in line with the ‘Playbook’ developed during LCARP. We would also define an overall adaptation financing ‘ambition’, to compare against the cost of inaction in WS1.
• Workstream 3: Commence a systemic process of engaging with funders and financiers in the NCARP analysis, strategy and projects, in order to ensure and build demand for the pipeline development in WS2. This would be used to prioritise the pipeline, test interest around the bankable initiatives, further the development of innovative financial mechanisms and close the ‘gap’ between NCCG and prospective investors.
• Workstream 4: Establish a series of capacity building activities for NCCG, in order to ensure continued acceleration of project development beyond the scope of our support. This training – delivered through the NCARP Working Team – would focus on building the capabilities to think through A&R issues in the County, develop and make ready high-impact projects, engage with funders and to continue management/monitoring of NCARP beyond the end of our support.

The Consultant will drive the majority of NCARP Phase I’s activity, through the full delivery of Workstreams 2-4. This would be delivered fully by March 2027, although we expect some activity on WS2 to commence as soon as possible (i.e. early pipeline development), building alongside Workstream 1 commencing in February. FSD Africa is ambitious in its aspirations for this work, and its future phases. The Consultant would be expected to define and prioritise a pipeline of impactful projects and build engagement with investors that will form the basis of an implementation plan to build Nairobi’s resilience to future climate shocks and accelerate investments. The Consultant’s efforts are therefore expected to lay the groundwork for a successful period of longer-term programming – deliverables and outputs will be drawn from regularly as NCARP proceeds. While NCARP is high-priority for Nairobi, the Consultant must be comfortable working with ambiguity, and the possibility of timelines having to flex given that relevant NCCG teams will be navigating a number of competing priorities.