The Central Bank of Kenya (CBK) has urged financial sector players to implement the guidance on climate-related risk management.
The guidance issued to commercial banks in October 2021 seeks to facilitate banks in incorporating climate-risk-related considerations in their governance, strategy, risk management, and disclosure frameworks.
CBK Governor Dr Kamau Thugge said 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 Thursday in Nairobi at the close of the Africa Climate Business Forum (ACBF).
He said the regulator is 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 corporates, 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 green low carbon economy,” said Dr. Thugge.
He disclosed that CBK joined the Network of Greening Financial Systems (NGFS) in April 2022 bringing together at least 100 banks and financial supervisors.
The network is backed 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 mobilizing 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,” he added.
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.