Nairobi — The Central Bank of Kenya (CBK) has entered into an agreement with the European Investment Bank (EIB) to enable Kenyan commercial banks to access climate-related investments.

The two-year technical assistance scheme is the first of its kind to be implemented in East Africa under the IEB's Greening Financial Systems Programme, which is financed by the German government through the dedicated International Climate Initiative Fund (IKI Fund).

It will serve as a model for mobilizing climate finance by tackling barriers that hold back engagement by commercial banks and will enable CBK to incorporate climate risk into the Kenyan regulatory framework.

EIB Vice President Thomas Östros said that greater efforts are being made to understand the barriers holding back green financing in Kenya.

"This new technical best practice partnership with the Central Bank of Kenya builds on the European Investment Bank's long-standing partnership with Kenyan financial institutions to increase the impact of climate finance and unlock investment that better protects infrastructure and business from climate change," said Östros.

According to the EIB's 2023 Finance in Africa Report, the increasing prevalence of climate risks on balance sheets has made climate an important part of the risk appraisal process for both new loans and existing portfolios.

The latest EIB survey found that 59 percent of banks in Africa have a climate change strategy, and another 22 percent plan to introduce one.

"Towards this end, CBK issued Guidance on Climate-Related Risk Management in October 2021, to commercial banks The Guidance was intended to facilitate banks in incorporating climate-risk related considerations in their governance, strategy, risk management and disclosures frameworks. Considerable progress has been made by banks in implementing the Guidance, but more remains to be done," CBK Governor Kamau Thugge said.