KCB Group Bolsters Green Finance with KSh 53.2 Billion Disbursement

KCB Group, a leading East African financial institution, disbursed KSh 53.2 billion in green loans in 2024, marking a substantial increase in its commitment to sustainable finance. This strategic pivot aims to channel significant funding towards projects that promote clean energy, e-mobility, the blue economy, and climate change adaptation across Kenya. The bank's green portfolio now stands at 21.32 percent, up from 15 percent in 2023, with an ambitious target to reach 25 percent by 2025.

This increased investment underscores KCB's dedication to embedding environmental, social, and governance (ESG) considerations into its core operations and decision-making processes. The bank's efforts are aligned with Kenya's broader national agenda to transition to a green economy, which focuses on resource efficiency, sustainable natural resource management, and climate resilience.

Historical Context and Policy Alignment

KCB Group's journey into green finance gained significant momentum in November 2020 when it became the first Kenyan lender to receive accreditation from The Green Climate Fund (GCF). This accreditation enables the bank to support climate mitigation and adaptation projects through green financing, handling projects ranging from USD 50 million to USD 250 million.

The bank's sustainability framework is guided by the United Nations Sustainable Development Goals (SDGs) and the Principles for Responsible Banking (PRBs), to which KCB committed in 2019. These international frameworks provide a roadmap for integrating sustainability into banking operations, ensuring that financial activities contribute positively to environmental and social development.

Kenya has actively pursued a green economy strategy, outlined in its Green Economy Strategy and Implementation Plan (GESIP), which seeks to consolidate and scale up green growth initiatives within national development goals. The Central Bank of Kenya (CBK) has also introduced the Kenya Green Finance Taxonomy (KGFT) and a Climate Risk Disclosure Framework, providing clear standards for green investments and encouraging financial institutions to adopt sustainable practices.

Stakeholders and Testimonies

KCB Group CEO Paul Russo has emphasised that green financing is not merely an environmental imperative but also a social one. He highlighted the importance of safeguarding the planet and people while pursuing profits, stating that the private sector possesses the resources and expertise to drive sustainable growth.

The bank's sustainability initiatives extend to supporting micro, small, and medium-sized enterprises (MSMEs), women-owned businesses, and youth empowerment programs. For instance, KCB's Female-Led and Made Enterprise (FLME) program has disbursed KSh 139 billion since 2022, benefiting over 60,000 entrepreneurs. Additionally, the 2Jiajiri program has equipped thousands of youths with vocational skills, creating over 60,000 jobs.

Evidence and Data

• Green Loan Disbursement (2024): KSh 53.2 billion
• Green Portfolio Growth: From 15% in 2023 to 21.32% in 2024, targeting 25% by 2025.
• Loans Screened for ESG Risks (2024): KSh 578.3 billion.
• Cumulative Loans Screened (since 2020): Over KSh 2.5 trillion.
• Resource Consumption Reduction: 4% in 2024.
• Carbon Offset: 1.3 metric tonnes through planting over 1.3 million trees.
• Supplier Contracts to Special Interest Groups (2024): KSh 913 million.
• 2Jiajiri Program Loans: KSh 2.58 billion to 4,000 youth-owned MSMEs.

Risks and Implications

The increased focus on green finance by institutions like KCB is crucial for Kenya, a country highly vulnerable to climate change impacts, including floods and droughts, which can cost the economy between 2% and 2.8% of its GDP annually. By directing capital towards sustainable projects, financial institutions can help mitigate these risks and build a more resilient economy.

However, analysts emphasise the need for clarity on timelines, costs, and safeguards associated with these green finance projects to ensure their effectiveness and long-term impact. The full implementation and proper monitoring of Kenya's green finance strategy are vital for the country to become a leading destination for climate-smart investments.

Unknowns and Controversies

While KCB Group has made significant strides, the long-term effectiveness of Kenya's national green finance strategy in achieving its climate goals and mobilising sufficient green investments remains an area of ongoing study. Challenges in regulatory frameworks, financial inclusion, and public awareness still need to be addressed to fully unlock the potential of green finance in the country.

What to Watch

Stakeholders will be closely watching KCB Group's progress towards its 25 percent green portfolio target by 2025. The independent audit of KCB's climate scenario analysis and stress-testing capabilities by Deloitte, a first for a Kenyan financial institution, will also be a key indicator of the robustness of its climate risk management.

Furthermore, the periodic updates to the Kenya Green Finance Taxonomy by the Central Bank of Kenya, which initially focuses on climate change but will consider other environmental objectives like biodiversity in the future, will shape the landscape of green investments in the country.