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.
Central Bank of Kenya
As far back as 2021, Kenya’s central bank issued guidance to help banks better report climate risks. However, the central bank and local banks did not have the adequate technical capabilities or trained staff to implement these rules effectively.
“Most banks were very focused on the bottom line, and were not very receptive to changes that could affect profits,” says Chepng’ar, the central bank manager. “Most banks felt that implementing the guidelines from the central bank was too complex.
Enrique Rebolledo, a climate specialist who also worked on the EIB technical assistance programme, says that this time around, the central bank and commercial banks cooperated closely to make sure the new climate reporting guidelines could be understood and followed by everyone.
“Instead of the central bank working out the green taxonomy guidelines itself, we were encouraged to involve many commercial banks in the country in the process,” Rebolledo says. “Everyone discussed the regulatory proposals together, made adjustments where necessary based on their perspectives and came up with guidelines that were very well received by all financial-sector players in Kenya.”
The local banks in Kenya have a test period of 18 months before the new climate guidelines are fully implemented.
“The EIB’s work in Kenya exemplifies the importance of aligning financial flows with climate goals and strengthening banks’ capabilities to support a just transition,” says Isabelle Van Grunderbeeck, who works on advisory projects in Luxembourg for EIB Global, the development arm of the European Investment Bank.
Kenya is the first country in Africa to benefit from the European Investment Bank’s Greening Financial Systems technical assistance programme. Other countries that have used the programme are Albania, Armenia, Ethiopia, Georgia, North Macedonia and Rwanda. The European Investment Bank is in the process of extending the programme to West Africa, Egypt, Uganda, Jordan, Bosnia and Herzegovina, and Vietnam.
