Kenya’s Banks Face Green Finance Turning Point as CBK Sets 18-Month Deadline

Kenya is setting a new precedent for financial institutions across Africa with its bold move to integrate climate risk into banking. The Central Bank of Kenya (CBK) has issued a groundbreaking directive, giving all commercial banks 18 months to begin disclosing the environmental impact of their financed projects. 

This move is about positioning Kenya’s financial sector as a leader in sustainable finance within the African continent and on the global stage. The new directive is rooted in the Kenya Green Finance Taxonomy (KGFT), which serves as the blueprint for what qualifies as a “green” investment. With this new standard, banks will have to measure, track, and disclose their exposure to climate-related risks, which could range from financing fossil fuels to supporting environmentally friendly businesses.

A Step Toward Sustainability

At its core, this directive represents a recognition by the CBK that climate risk is financial risk. The age of greenwashing in financial markets is fading, and Kenya is stepping up to ensure that financial institutions are accountable for the environmental impact of their portfolios. The new rules will force banks to focus their capital on climate-positive projects, making it clear that sectors contributing heavily to greenhouse gas emissions will face tighter scrutiny.

Banks will need to align their strategies to meet both climate change mitigation and adaptation goals outlined in the KGFT. This may also include shifting away from high-carbon sectors like oil, gas, and large-scale agriculture toward cleaner, more sustainable industries. With climate risks affecting the global financial ecosystem, Kenya is ensuring its banking sector is not left behind.

The African Green Finance Opportunity

Kenya’s green finance evolution is not isolated. This policy reflects a growing trend across the continent, as African nations recognize the role finance plays in combating climate change. By establishing clear rules for green finance, Kenya is tapping into a growing global market for sustainable investments, which has seen explosive growth in recent years.

This could give Kenya a competitive edge, attracting green capital from international investors who are increasingly focusing on ESG (environmental, social, and governance) criteria. It’s an opportunity for Kenyan banks to become major players in the green finance space, offering products like green bonds and climate-aligned loans, both of which have seen significant demand from environmentally-conscious investors.

The CBK’s decision also positions Kenya as a regional leader in financial regulations related to climate. As other African countries grapple with their own green finance frameworks, Kenya’s forward-thinking approach could become a model for the continent, helping to define the standards of tomorrow.

The Path Ahead

The 18-month period serves as a testing ground for Kenya’s banks to implement internal systems for climate risk assessment, train teams on new reporting standards, and refine their lending practices to meet the KGFT criteria. This transition period will also allow the CBK to collaborate with the banking sector, ensuring smooth implementation of the taxonomy by late 2026.

For Kenyan banks, this is a pivotal moment. The choice is clear: embrace this transformation and be part of the future of sustainable finance, or risk falling behind as global capital increasingly flows toward low-carbon, climate-resilient projects.

Kenya is betting on its financial sector to lead the way in green finance—and the next few years could be a defining period for both the country’s banks and its place in the future of global finance.