The Central Bank of Kenya (CBK) has renewed its commitment to greening the Kenyan financial sector and called on players in the industry to implement the guidance on climate-related risk management.
The guidance issued to commercial banks in October 2021 was intended to facilitate banks in incorporating climate-risk-related considerations into their governance, strategy, risk management, and disclosure frameworks.
Central Bank of Kenya (CBK) Governor Dr. Kamau Thugge said that considerable progress has been made by banks in implementing the guidance, but more remains to be done to consolidate the guidance and enhance Kenya’s attractiveness as a green finance hub.
“We have embarked on the second phase of the reforms,” said Dr. Thugge when he spoke on Thursday in Nairobi during the close of the Africa Climate Business Forum (ACBF).
He explained that they are developing a green finance taxonomy that will identify activities, investments, and projects that are considered green.
This will be supported by a disclosure framework for banks that will be aligned to international standards, including the recently issued standards by the International Sustainability Standards Board (ISSB).
Dr. Thugge said that the transition to a green, low-carbon, and climate-resilient economy presents opportunities not just for corporations but also for Micro, Small, and Medium Enterprises (MSMEs) and households.
“We believe these reforms will spur transparency in green finance and attract domestic, regional, and international investors to support Kenya’s transition to a low-carbon economy,” said Dr. Thugge.
He disclosed that CBK joined the Network of Greening Financial Systems (NGFS) in April 2022. NGFS is a network of over 100 central banks and financial supervisors.
Dr. Thugge said that the network’s purpose is to strengthen the global response required to meet the goals of the Paris Agreement and to enhance the role of the financial system in managing risks and mobilising capital for green and low-carbon investments in the broader context of environmental sustainable development.
“Given the global nature of climate change, CBK will continue working with other stakeholders, nationally, regionally, and internationally. I am therefore particularly pleased that representatives of some of our sister central banks from the region have participated in this forum,” said Dr. Thugge.
He said that the timing of the ACBF is apt, coming after the groundbreaking Africa Climate Summit (ACS) held in Nairobi from the 4th to the 6th of September 2023.
“The African leaders Nairobi declaration on climate change and call to action (the Declaration) emanating from the ACS will indeed inform Africa’s position at the upcoming COP 28 in Dubai, United Arab Emirates,” said the CBK governor.
He said their collective efforts as central banks will support Africa’s vision of being a vital component of the global solution to climate change as articulated in the ACS.
“I trust that, building on the ACS and the Forum, Africa’s position at COP 28 will be stronger than ever before,” he said.
Dr. Thugge appreciated the forum co-hosts, the International Finance Corporation (IFC), for their efforts to make ACBF a reality.
By Joseph Ng’ang’a
