The Central Financial institution of Kenya (CBK) has given all business banks 18 months to begin disclosing the environmental impression of the companies and tasks they finance. The transfer is a part of the regulator’s efforts to wash up sustainability claims in Kenya’s banking sector and a crackdown on greenwashing—a rising concern as extra banks and corporations rush to model themselves as environmentally accountable.
CBK has issued Kenya Inexperienced Finance Taxonomy (KGFT), a classification system that identifies what qualifies as “inexperienced” underneath native and worldwide local weather requirements. The brand new guidelines would require lenders to publicly disclose their publicity to climate-related dangers, together with investments in sectors with excessive greenhouse gasoline emissions. The concept is to maneuver capital away from companies that worsen the local weather disaster and towards people who assist low-carbon, climate-resilient investments.
The 18-month transition interval will likely be a grace window and a testing floor for all business banks to construct inner capability, prepare threat groups, and combine local weather screening into their credit score evaluation fashions.
“The KGFT, which will likely be a reside doc topic to periodic updates, initially focuses on local weather change mitigation and adaptation as its aims,” the regulator mentioned. “Different environmental aims, similar to biodiversity and associated aims, will likely be thought-about in future updates.”
The announcement indicators a major shift. Local weather threat will now be handled as a cloth monetary threat, not only a reputational concern. CBK mentioned the taxonomy is supposed to provide banks a transparent, normal language for figuring out climate-friendly investments and flagging those that aren’t.
In recent times, “inexperienced” has turn into one of the overused phrases in monetary reporting. Globally, buyers and regulators have grown cautious of the rise in ESG-labelled merchandise with out proof to again their daring environmental claims. The regulator mentioned the transition interval will open a window to interact with banks earlier than a compulsory rollout in late 2026.
“The transition interval may also facilitate additional engagement between Central Financial institution of Kenya and the banking trade on any adjustments deemed essential to facilitate easy implementation of KGFT,” CBK mentioned.
The brand new guidelines will seemingly lower the longer term financing of sectors like oil and gasoline, mining, and large-scale agribusiness. Nevertheless, it might assist banks win climate-conscious buyers and faucet into the rising marketplace for inexperienced bonds and climate-aligned lending.