Key policies and governance approach

Through Vision 2050, Rwanda plans to make long-term investments in future endowments:  enhanced human capabilities, strong innovation and technological capacity capabilities, socioeconomically integrated forms of urbanization, and effective and accountable institutions of governance [4]. The essence of sustainable finance is captured in the GoR's efforts to ensure that environmental sustainability initiatives are reflected in the strategies and plans of each relevant sector.

Rwanda has invested in policy, institutions, and legal instruments to ensure that its economic development is conditioned by its environmental and natural resources endowment. Rwanda’s Green Fund (FONERWA) supports environmental protection and minimizes the impact of climate change. The fund is a cross-sectoral financing mechanism between the GoR and its development partners to achieve development goals of environmentally sustainable, climate resilient and green economic growth. The Rwanda Green Fund facilitates direct access to international climate finance and streamlines external aid and domestic finance [3].

Successes and Remaining Challenges

A review of the information on the allocation of environmental finance from the GoR to support the country's mission for sustainable finance shows the country's commitment to the environment, although gaps exist [5]. Although Rwandan investments in green growth have increased in recent years, this has mainly been done with international capital and foreign currency [6]. Rwanda continues to depend heavily on foreign aid, with external grants and loans representing between 40% and 60% of development budgets per year [6]. This creates great uncertainty in the protection and management of Rwanda’s natural resources.

By 2030, green growth is estimated to increase by 20.9%, according to the 2017 Rwanda Green Investment Baseline Study. Much of this investment is expected to be channeled into energy, transport, agriculture, and forest plantations [7].

For the energy sector in particular, financing in local currency is one of the missing links to increase investment flows in renewable energies [6]. Rwanda collaborates with European programs to increase investment in the renewable energy sector. The recently launched collaboration between banks and programs aims to support financial institutions in Rwanda in the development and supply of financial products to increase the share of renewable energy financing [6].

While Rwanda's capital market has developed a basic enabling regulatory framework since its inception in 2007, it requires further development to enable more issuance of securities and strengthen the capacity of market players, intermediaries, investors and issuers [8].

Initiatives and Development Plans

GoR continues to develop its activities on climate change and funding. Over the past decade, it has shown keen recognition and achieved several exceptional successes, integrating climate-related aspects into its interventions for sustainable socio-economic development. The country benefits from several external and internal funding sources, such as the National Green Fund (FONERWA), the World Bank, the Global Environment Facility (GEF), the Green Climate Fund (GCF). For the latter, the total GCF financing in Rwanda represents 50.8 million expenditures on six national projects, including the last approved project (July 2021) on the transformation of the Eastern Province through climate change adaptation [9].

The EU has been supporting Rwanda's development in various fields, including through the recently launched collaboration to strengthen Rwanda's mining sector through investment, technology and skills development, added value and traceability (Francis Gatare, CEO of RMB Hon) [10].

To support the development of Rwanda's capital markets, IFC, the National Bank of Rwanda and Rwanda's Capital Markets Authority (CMA) announced a four-year partnership that will help expand access to long-term local currency finance in Rwanda for key sectors such as housing, agribusiness, and smaller businesses. IFC will also provide advice on adopting appropriate investment guidelines and help assess the potential for alternative investment vehicles and instruments to mobilize long-term financing for key sectors [8].