In a landmark move towards sustainable finance, the Central Bank of Kenya (CBK) has entered into a strategic partnership with the European Investment Bank (EIB). The joint initiative aims to cultivate best practices in climate finance within the local commercial banking sector, marking a significant step towards achieving a net-zero economy in Kenya.
One of the primary objectives of this collaboration is to empower Kenyan financial institutions to actively participate in funding climate-related projects. Recognizing the pivotal role played by commercial banks in financing initiatives aligned with climate goals, the partnership seeks to drive the adoption of sustainable practices and enhance the resilience of Kenya’s financial systems to climate-related challenges.
Outlined below are key highlights and future directions set by the CBK and EIB collaboration:
- Mobilizing Climate Finance:
Commercial banks are identified as key players in the journey towards a net-zero economy. By actively financing climate-related investments, these banks contribute significantly to advancing sustainable development goals and fortifying the climate resilience of financial systems. - Addressing Barriers:
The Kenyan technical assistance scheme, an integral component of the collaboration, is designed to eliminate obstacles that hinder commercial banks from actively engaging in climate finance. By identifying and removing barriers, the initiative aims to create an enabling environment for increased participation. - Incorporating Climate Risk:
The collaboration will assist the CBK in integrating climate risk considerations into the Kenyan regulatory framework. This step is crucial in aligning financial regulations with the imperatives of climate change, ensuring a proactive and informed approach to risk management. - Scaling Up Green Investments:
A key outcome of the program will be the development of a green taxonomy for the financial sector. This taxonomy will facilitate the scaling up of green investments, ensuring alignment with the goals of the Paris Agreement and promoting environmentally sustainable financial practices. - Embracing Best Practices:
Kenyan banks are expected to adopt and implement climate finance best practices across all their activities. This includes catalyzing new funding for green projects, enhancing climate risk assessment capabilities, and improving reporting mechanisms to ensure transparency and accountability.
The CBK and EIB collaboration signifies a commitment to fostering sustainable financial practices and addressing the urgent challenges posed by climate change. As Kenya strives to become a leader in climate-resilient finance, this initiative sets the stage for a more sustainable and environmentally conscious financial future.
By: Delino Gayweh
Serrari Financial Analyst
December 12, 2023
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