The Central Bank of Kenya (CBK) and European Investment Bank (EIB) have launched a new climate finance best practice initiative to strengthen engagement by Kenyan financial institutions.
“Considerable progress has been made by banks in implementing the Guidance [on Climate-Related Risk Management in October 2021] , but more remains to be done,’’ noted Governor of the Central Bank of Kenya, Kamau Thugge.
- The program is meant to finance climate related investment, enable commercial banks to mobilise climate finance essential to achieving a net zero economy and strengthening the climate resilience of the Kenyan financial systems.
- The Greening Financial Systems programme will help Kenyan banks and financial institutions to better embrace climate finance best practice across all activities, catalyse new funding for green projects, and better assess, monitor, and report on the climate related risks.
- The program reflects the urgent need to mobilise climate finance outlined this past week at the COP 28 in Dubai and contributes to global efforts to limit global temperature increase and adapt to the impact of climate change.
Commenting on the technical assistance agreement, EIB Vice President, Thomas Östros said that greater efforts are being made to understand the barriers holding back green financing in Kenya.
“Scaling up climate finance is essential to mobilise new investment to boost the green transition and help reduce the impact of climate change. Barriers remain that hold back the full engagement of banks in climate dedicated finance. It is hindered by the lack of long-term funding that matches the economic life of green investments, the higher perceived risk of climate investment and limited experience of how to originate and monitor climate finance,” said Ostros.
“This new technical best practice partnership with the Central Bank of Kenya builds on the European Investment Bank’s long-standing partnership with Kenyan financial institutions to increase the impact of climate finance and unlock investment that better protects infrastructure and business from climate change,” he added.
- As outlined in the EIB’s Finance in Africa Report 2023, the increasing prevalence of climate risks on balance sheets has made climate an important part of the risk appraisal process for both new loans and existing portfolios.
- The latest EIB survey found that 59 per cent of banks in Africa have a climate change strategy and a further 22% plan to introduce one. Banks across Africa are now stepping up their efforts to offer an expanded range of green finance products rather than just mitigating risk.
- Over the last decade, the European Investment Bank, which is the world’s largest international public bank and leading climate financier, has helped to strengthen climate finance technical skills of more than 40,000 African financial professionals.
It has provided more than EUR 534 million (Ksh 88 billion) over the last five years for private sector investment across Kenya in partnership with Kenyan businesses, banks, financial partners and microfinance institutions.
