“Green” has become one of the most used words in banking. In Kenya, it now has a regulatory definition that banks are required to apply.
What CBK issued
On 4 April 2025 the Central Bank of Kenya (CBK) published the first edition of the Kenya Green Finance Taxonomy (KGFT) together with a Climate Risk Disclosure Framework. Both apply to commercial banks and mortgage finance companies licensed under the Banking Act. Banks could use them voluntarily for 18 months; after that, CBK said, implementation would become mandatory. That window closed in early October 2026, and CBK has described a phased approach to enforcement with training and regulatory briefings for banks.
The tools build on CBK’s 2021 guidance on managing climate-related risks and were developed with technical support from the European Investment Bank under the Greening Financial Systems programme. The taxonomy is rooted in Kenya’s climate commitments under the Paris Agreement and initially focuses on climate change mitigation and adaptation. Later editions are expected to cover biodiversity and extend to the wider financial sector.
How classification works
Like the EU and South African taxonomies it draws on, the KGFT uses three tests. An activity is taxonomy-aligned only if it makes a significant contribution to a climate objective, does no significant harm to other environmental objectives and meets minimum social safeguards. Banks can report aligned finance at portfolio, fund or debt instrument level. The disclosure framework is designed to be consistent with IFRS S2 and the Basel Committee’s principles on climate-related financial risk.
What changes for lenders and borrowers
- Credit processes. Banks need to screen loans against the taxonomy and collect data from borrowers to support classification.
- Disclosure. Claims about green lending will need to rest on the taxonomy, which raises the bar for marketing and reduces the scope for greenwashing.
- Capital markets. A national definition makes it easier to structure green bonds and attract investors who need consistent standards.
- Borrowers. Businesses seeking green loans should expect requests for technical specifications and evidence of benefits.
Open questions
The first edition acknowledged practical challenges, including mapping loans to specific activities and the absence of a body to verify taxonomy claims. How CBK supervises alignment, and how much data banks can realistically obtain from smaller borrowers, will shape whether the taxonomy changes lending or simply relabels it. With climate-related losses projected to exceed 7% of Kenya’s GDP by 2050, the stakes for the financial system are high.
Sources: Central Bank of Kenya: KGFT and Climate Risk Disclosure Framework · Afriwise / ENSafrica: Kenya’s Green Finance Taxonomy · NDC Partnership: Kenya puts climate at the center of financial reform · TechCabal: 18-month deadline for banks
