The Kenyan banking industry still has homework to do in improving transparency, addressing greenwashing, facilitating capital mobilisation and empowering market participants to identify and invest in sustainable assets.
- This is despite a study by Kenya Bankers Association (KBA) commending the industry for strides in aligning business with the global trends in sustainability.
- In terms of local guidelines, 73 per cent of the respondent banks indicated they have implemented the Central Bank of Kenya (CBK) climate risk management disclosure guidelines and submitted a report to CBK on climate risk as expected by the 30th of June 2023.
- Apart from the CBK Guidelines that are mandatory for banks, adoption of other sustainable finance frameworks is largely voluntary. Since issuing the guidance on ESG disclosures in 2021, NSE reports indicate a 15 per cent increase in the number of listed companies that published sustainability reports in 2022 including the eight listed banks.
“As highlighted in the report, financial institutions operate in a rapidly evolving environment, heightened by complex regulatory requirements. Ensuring maintenance of confidence, the institutions are increasingly embracing sustainable finance practices,” says Raimond Molenje acting Chief Executive Officer Kenya Bankers Association.
“As primary providers of finance, banks have a key role in driving the transition towards a sustainable future in a low-carbon regime,” KBA notes in the study.
“The banking industry in Kenya has made strides in aligning the banking business with the global trends in sustainability but more needs to be done to improve transparency, address greenwashing, facilitate capital mobilisation and empower market participants to identify and invest in sustainable assets,” the industry association added.
The Central Bank of Kenya reported that by end of June 2022, it had received board-approved climate risk implementation plans from 38 commercial banks and 1 mortgage finance institution for review.
“Despite the progress, there is need to map duplicate metrics across the various standards to minimise regulatory burden on reporting entities. For instance, Kenyan Banks are required by CBK to use the TCFD framework in their reporting while those that are listed in the NSE also apply GRI reporting standards recommended by NSE ESG Disclosures Guidance Manual.”
“This is a case of double reporting on similar metrics for banks listed in the NSE and which could be eliminated through standardisation.”
“A conducive environment for sustainable finance is only possible with a multi-sectoral approach that makes it possible for the public, private and civil society, in both finance and sustainability agenda, to partner. Education and awareness creation also remain critical in empowering individuals and organizations to make informed decisions that align with sustainability principles,” Mohamed Awer Chief Executive Officer WWF-Kenya.
.
