The European Investment Bank (EIB) and the Central Bank of Kenya have jointly inaugurated a groundbreaking climate finance initiative, designed to enhance the involvement of Kenyan financial institutions in funding climate-related ventures.

This two-year technical assistance scheme, a pioneering initiative in East Africa under the EIB’s Greening Financial Systems Programme, is backed by the German government through the IKI Fund.

Functioning as a blueprint for climate finance mobilisation, the initiative addresses hurdles hindering commercial banks’ engagement and aims to facilitate the integration of climate risk into Kenya’s regulatory framework by the Central Bank.

One key aspect is the development of a green taxonomy for the financial sector, supporting the scaling up of environmentally sustainable investments in line with the objectives of the 2015 Paris Climate Agreement.

Under the Greening Financial Systems Programme, Kenyan banks and financial institutions will receive support to adopt climate finance best practices across their operations.

The initiative aims to spark fresh funding for green projects, enhance the ability to evaluate, monitor, and report climate-related risks.

CBK Deputy Governor Susan Koech planting a tree at KSMS. Image: courtesy.
CBK Deputy Governor Susan Koech planting a tree at KSMS. Image: courtesy.

This programme responds to the pressing need to mobilize climate finance, as highlighted during COP 28 in Dubai, contributing to global undertakings to curb temperature increases and adapt to the effects of climate change.

EIB Vice President, Thomas Östros, stressed the necessity of scaling up climate finance to drive the green transition, acknowledging existing barriers such as the lack of long-term funding matching the economic life of green investments and the perceived risk of climate investment.

Governor of the Central Bank of Kenya, Kamau Thugge, affirmed the commitment to greening the Kenyan financial sector.

The Central Bank issued guidance in October 2021 to facilitate the incorporation of climate-related considerations into the governance, strategy, risk management, and disclosure frameworks of commercial banks.

The initiative aligns with findings from the EIB’s Finance in Africa Report 2023, revealing that climate risks are increasingly factored into risk appraisal processes for loans in African banks.

The report indicates that 59 percent of African banks have a climate change strategy, with an additional 22 percent planning to introduce one.

Over the past decade, the EIB, as the world’s largest international public bank and a prominent climate financier, has played a pivotal role in enhancing the climate finance skills of over 40,000 African financial professionals.

Additionally, it has invested over EUR 534 million (Ksh 88 billion) in the last five years in private sector projects in Kenya, collaborating with local businesses, banks, financial partners, and microfinance institutions.