The European Investment Bank (EIB) and the Central Bank of Kenya (CBK) have forged an alliance to kickstart a pioneering climate finance initiative. Unveiled as a two-year technical assistance scheme, this initiative, funded by the German government’s International Climate Initiative Fund, sets out to elevate the engagement of Kenyan financial institutions in climate-related investments.

The core objective of this collaboration is to empower commercial banks, facilitating their pivotal role in mobilizing crucial climate finance. The ambition doesn’t stop there—it aspires to steer Kenya toward a net-zero economy while concurrently bolstering the climate resilience of its financial systems.

This initiative, a first in East Africa under the European Investment Bank’s Greening Financial Systems Programme, is poised to serve as a blueprint for dismantling barriers that hinder commercial banks’ participation in climate finance. Moreover, it aims to empower the Central Bank of Kenya to seamlessly integrate climate risk considerations into the Kenyan regulatory framework.

At its heart, the program envisages the creation of a green taxonomy for the financial sector, a tool designed to amplify the impact of climate-related investments. Aligned with the goals of the 2015 Paris Climate Agreement, it seeks to propel green investments to the forefront by supporting their scaling up.

The Greening Financial Systems program is not just about rhetoric; it’s a hands-on guide for Kenyan banks and financial institutions to embrace climate finance best practices across the board. Its scope extends to catalyzing new funds for green projects and refining the assessment, monitoring, and reporting of climate-related risks.

This initiative couldn’t have come at a more critical juncture, echoing the urgency emphasized at COP28 in Dubai. EIB Vice President Thomas Östros acknowledges the barriers to green financing in Kenya, citing the dearth of long-term funding matching the economic lifespan of green investments, perceived higher risks, and limited experience in originating and monitoring climate finance.

CBK Governor Dr. Kamau Thugge underscores the commitment of the financial industry regulator to greening the Kenyan financial sector. Notably, progress has already been made, with guidance on climate-related risk management issued to commercial banks in October 2021.

The EIB’s Finance in Africa Report 2023 sheds light on the escalating prevalence of climate risks on balance sheets. A significant 59 percent of African banks already have a climate change strategy, with an additional 22 percent planning to introduce one. The financial landscape in Africa is evolving, with banks intensifying efforts to offer a broader array of green finance products rather than simply mitigating risk.

As the world’s largest international public bank and a prominent climate financier, the EIB has been a driving force in enhancing the climate finance skills of over 40,000 African financial professionals. Over the last five years alone, it has injected over EUR534 million (Kes88 billion) into private sector investment in Kenya, collaborating with local businesses, banks, financial partners, and microfinance institutions.

This collaborative venture between the EIB and CBK signifies a remarkable stride toward a sustainable and climate-resilient financial future for Kenya. It not only addresses immediate barriers but also lays the groundwork for a comprehensive, systemic shift toward green finance practices in the region.