Central Bank of Kenya issues Kenya Green Finance Taxonomy and climate risk disclosure framework for the banking sector

The Central Bank of Kenya has released the Kenya Green Finance Taxonomy and a Climate Risk Disclosure Framework for the banking sector, advancing its climate-related risk management reforms aimed at greening the banking system. The initiative was developed under the European Investment Bank’s Greening Financial Systems Technical Assistance Programme to CBK, which commenced in October 2023. The taxonomy is intended to guide target institutions in evaluating and classifying economic activities by the extent to which they support or hinder climate objectives and to support assessment of business activity alignment against the taxonomy’s guiding principles. It largely draws on Kenya’s Nationally Determined Contributions under the United Nations Framework Convention for Climate Change and other national climate policy documents, with an initial focus on climate change mitigation and adaptation. The disclosure framework is designed to help commercial banks collate and disclose climate-related information in a relevant, consistent and comparable way for investors and other stakeholders, and aligns with International Financial Reporting Standards S2 on climate-related disclosures and Basel Committee on Banking Supervision principles on climate-related financial risks. CBK noted that the taxonomy will be a live document subject to periodic updates, with future updates expected to add environmental objectives such as biodiversity.