The Central Bank of Kenya (CBK) has dropped the hammer—banks must start disclosing the environmental impact of the businesses they back. They’ve got 18 months to get their house in order before the rules become compulsory.
This isn’t about PR or green labels for marketing brochures, accountability has become indispensable. The CBK has rolled out the Kenya Green Finance Taxonomy (KGFT)—a list that defines what’s actually green and what’s not.
Banks are expected to use this as a yardstick when deciding who gets the money and at what environmental cost.
And it’s not just about making sure banks say the right things. It’s about what they fund. The move targets one of the biggest problems in sustainable finance—greenwashing.
That’s when companies slap on the “eco-friendly” badge without the receipts to back it up. According to CBK, “The taxonomy may support the reduction in financial sector risks through enhanced management of environmental performance.”
For now, banks in Kenya can ease into it. Voluntary use of the taxonomy is allowed until the end of the 18-month grace period. After that, compliance will no longer be optional.
The regulator said: “The CBK is issuing this framework to commercial banks and mortgage finance companies licensed under the Banking Act (Cap 488) for application on a voluntary basis, for a period of 18 months from the date of issuance. Thereafter, implementation will be mandatory.”
So, what’s in it for the banks? Clarity. Direction. And for those who get it right—trust from green investors. KGFT will help lenders separate real climate-aligned projects from those just playing dress-up.
It provides a consistent method for measuring how much of their portfolio is tied to carbon-heavy industries. Oil and gas, large-scale agriculture, and heavy polluters? They’ll no longer fly under the radar.
What’s driving this? The urgency is real. Kenya ranks among the countries most exposed to climate shocks. Floods, droughts, unpredictable rain patterns—you name it. And with vital sectors like agriculture and energy hanging in the balance, the financial sector can’t afford to keep fuelling the problem.
The KGFT has roots in international best practice, with the European Investment Bank lending its expertise. CBK says it’s tailored to local needs, but draws lessons from systems already running in the EU and South Africa. “During the 18-month transition, institutions will build their capacity and make the necessary adjustments in preparation towards mandatory application of the taxonomy,” CBK added.
To be clear, this isn’t just a box-ticking exercise. It’s a change in how the financial sector thinks. It changes how banks assess risk, who they lend to, and how they report on their exposure to climate-related liabilities. Once the full rollout kicks in, no bank will be able to hide behind vague sustainability claims.
