Central Bank of Kenya moves on climate risk

May 18, 2021|Written by Hilal Atici|Central Bank of Kenya

The Central Bank of Kenya (CBK) will work with banks to develop guidelines on climate-related financial reporting and disclosures. Bank Governor Patrick Njoroge made the announcement at an EU-Kenya green diplomacy conference last week.

Warning of “obsolete stranded assets that were used to secure loans,” Njoroge said more needed to be done to green Kenya’s financial system. “As a regulator we need to incorporate climate risk in our prudential surveillance framework as we pursue our core mandate of financial stability,” he told the conference.

Pointing to a green bond listing and a 2015 sustainable banking initiative as achievements towards green finance, Njoroge acknowledged there was more the CBK could do.  “As regulators, we must always be alive to climate risks,” he said, promising to embed integration of climate-related risks and opportunities in banks. The new guidelines will be aligned with the recommendations of the Task Force on Climate-related Financial Disclosures.

Njoroge concluded by emphasising the importance of collaboration, saying the bank “will strive to walk with others on the same path, but who are further ahead”.

However the CBK is not a member of the Network for Greening the Financial System (NGFS) or the Bank for International Settlements, the two major international collaborations by central bankers working on climate change and sustainability. Out of 41 African central banks, only five are members of the NGFS.

Kenya is extremely vulnerable to climate change. Projections show a rise in temperature of up to 2.5C by 2050 along with more intense and less predictable rainfall. A recent report suggests that “even the slightest increase in frequency of droughts will present major challenges for food security and water availability,” especially in the north and east.

This page was last updated May 18, 2021

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