The Central Bank of Kenya (CBK) has introduced the Kenya Green Finance Taxonomy (KGFT) and the Climate Risk Disclosure Framework, toward aligning the country’s banking sector with climate action goals.
Building on earlier initiatives, including the Guidance on Climate-Related Risk Management issued in October 2021, the latest frameworks are part of CBK’s second-generation reforms aimed at “greening” the financial system. This move also stems from the Greening Financial Systems Technical Assistance Programme supported by the European Investment Bank (EIB), which began in October 2023.
The KGFT is designed to help banks and other financial institutions evaluate and classify their economic activities based on their support or hindrance to climate objectives. Institutions will apply the taxonomy’s guiding principles to assess how well their operations align with the goal of transitioning to a low-carbon economy.
Drawing heavily from Kenya’s Nationally Determined Contributions (NDCs) under the United Nations Framework Convention on Climate Change (UNFCCC) and other national climate policy documents, the taxonomy will initially focus on climate change mitigation and adaptation, with future updates expected to include objectives related to biodiversity and broader environmental concerns.
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Complementing the taxonomy, the Climate Risk Disclosure Framework will guide commercial banks in gathering and presenting climate-related information in a consistent, transparent, and comparable manner. This will equip investors with the necessary insights to evaluate the financial risks and opportunities tied to climate change and recognize institutions best positioned for a low-carbon transition.
Additionally, greater transparency will foster accountability within the financial sector and encourage sustainable business practices across industries.
The new framework aligns with leading global standards, including the International Financial Reporting Standards (IFRS) S2 on climate-related disclosures and the Basel Committee on Banking Supervision (BCBS) principles on climate-related financial risks.
