Kenya Puts Climate at the Center of Financial System Reforms

Facing projected climate-related gross domestic product (GDP) losses of over 7% by 2050, Kenya is taking steps to safeguard its financial system. With support from the European Investment Bank (EIB) mobilized through the NDC Partnership, Kenya is equipping banks and regulators with practical tools to drive climate-aligned investment and reduce systemic risk.

In early 2025, the Central Bank of Kenya (CBK) launched a green finance taxonomy and a climate risk disclosure framework — two foundational tools that enable the banking sector, investors, policymakers and government agencies to align financial decision-making with national climate goals. These reforms were supported under the Greening Financial Systems (GFS) Programme, established in 2021 by Germany and the EIB with International Climate Initiative (IKI) funding. The GFS Programme delivers assistance as part of the NDC Partnership’s Greening Central Banks (GCB) initiative, with the Support Unit helping to coordinate and connect partners to provide support.

Since the GFS Programme launch, the NDC Partnership Support Unit has helped match technical support to Kenya’s priorities. It brought CBK and EIB together early on in Kenya’s engagement, which identified the green finance taxonomy and risk disclosure framework as critical tools to develop. The taxonomy provides a nationally defined benchmark for what qualifies as a green investment in Kenya — enabling banks, investors and regulators to identify and prioritize finance for projects that support the country’s climate goals. It helps align financial flows with national priorities such as renewable energy, clean transport and climate-smart agriculture. Future updates are expected to expand coverage to include biodiversity-related investments, aligning financial flows with Kenya’s nature and resilience priorities.

Complementing the taxonomy, the climate risk disclosure framework introduces standardized guidelines for commercial banks to identify, assess and disclose climate-related risks in their portfolios. By increasing transparency and helping investors and regulators assess institutional and systemic risks, the framework promotes risk-informed lending and sustainable investment.

Developed jointly by CBK and EIB under the GFS Programme, both tools draw on global best practices tailored to Kenya’s regulatory and institutional context. Support included targeted capacity building, stakeholder consultations and technical guidance to put the tools into practice.

Now rolling out across Kenya’s banking sector, these tools are helping banks align lending with climate goals while reducing economy-wide exposure to risk. CBK is taking a phased approach to implementation, with targeted training to build enforcement capacity and regulatory briefings to help banks comply with new standards.

By reshaping how its financial system manages risk and channels investment, Kenya is laying the groundwork for a more sustainable, resilient economy.

Countries interested in developing similar tools — such as green taxonomies, risk disclosure frameworks or climate finance roadmaps — can access tailored support through the NDC Partnership’s Readiness Support for Greening Central Banks initiative, which provides embedded advisory support, technical expertise and peer learning to help central banks and finance ministries strengthen resilience and unlock investment.