Source: European Investment Bank
Climate change knows no borders – as Kenya can tell you. The country is routinely hit by weather disasters.
“Every five to ten years, the country experiences either very heavy rains that cause floods or persistent drought,” says Reuben Chepng’ar, the senior manager in the Banking Supervision Department at the Central Bank of Kenya.
By the year 2030, Kenya aspires to reduce greenhouse gas emissions by 32%. This work is expected to cost $62 billion, but the government says it can raise only $8 billion. The investment shortfall of $54 billion is expected to come from the private sector and global development institutions, such as the European Investment Bank and the Internal Monetary Fund.
The Central Bank of Kenya is trying to help commercial banks support more green projects, enhance their climate-related risk reporting and attract foreign investors. The Central Bank used technical assistance from the European Investment Bank to create new climate investing and reporting guidelines in the country.
The European Investment Bank collaborated with Kenya’s Central Bank to develop two guidelines under a programme known as Greening Financial Systems technical assistance. EIB consultants worked with the Central Bank and local banks from 2023 to 2025 to develop regulations that commercial banks must follow for climate reporting and green investments.
The EIB support to the Central Bank was financed through the IKI Fund, an EIB trust fund backed by Germany to help climate action initiatives in emerging countries. The IKI Fund highlights the importance of international cooperation and knowledge sharing. Since climate risks transcend borders, coordinated action among global institutions is essential to ensure that local financial systems are aligned with global sustainability objectives. The European Investment Bank oversees a group of trust funds that are financed by EU countries and the European Commission. These funds provide grants, technical assistance and loan guarantees around the world.
Marjan Stojiljkovic was a team lead for the EIB technical assistance programme in Kenya. He is a climate finance consultant who offers training around the world to banks on sustainability reporting requirements and managing risks related to green lending.
“One objective of this project was how to internalise and measure the impacts of climate risk on banking operations in Kenya, because climate risks are real and they have impacts on the financial sector,” Stojiljkovic says.
After a series of meetings and workshops, the central bank created two sets of policy guidelines to help commercial banks improve climate risk reporting. One is the Kenya Green Finance Taxonomy and the other is the Climate Risk Management Framework. The green taxonomy is the fourth to be adopted in Africa, after South Africa, Rwanda and Ghana. The taxonomy is based on the EU green taxonomy that provides a clear classification system for sustainable economic activities and guidance on assessment and reporting. One aim is to prevent greenwashing, or the exaggeration of the benefits projects bring. Another aim is to increase sustainable investments, particularly by attracting foreign investment. The climate risk framework was designed to increase transparency in Kenya’s financial sector and encourage businesses to adopt more sustainable practices.