The Central Bank of Kenya (CBK) has introduced a comprehensive Climate Risk Disclosure Framework for the banking sector, marking a significant step toward embedding climate considerations into financial supervision and risk management practices.
The framework, released in April 2026, requires regulated financial institutions to systematically identify, measure, manage, and disclose climate-related financial risks.
This initiative aligns Kenya with international best practices, including the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and the evolving global standards from the International Sustainability Standards Board (ISSB).
Key Components of the Framework
The new disclosure framework is structured around four core pillars:
- Governance: Institutions must demonstrate clear board and senior management oversight of climate-related risks and opportunities.
- Strategy: Banks are required to assess and disclose how climate change affects their business strategy, including scenario analysis for physical and transition risks.
- Risk Management: Financial institutions must integrate climate risks into existing risk frameworks, including credit, market, operational, and reputational risk processes.
- Metrics and Targets: Banks must report quantitative and qualitative metrics, such as financed emissions, exposure to high-carbon sectors, and progress toward climate-related targets.
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The framework applies a phased implementation approach, beginning with the largest banks and progressively extending to smaller institutions.
Initial focus areas include transition risk in carbon-intensive sectors and physical risk in agriculture, infrastructure, and coastal regions.
Strategic Rationale and Expected Impact
The CBK’s move addresses the growing recognition that climate change poses material financial risks to the stability of the banking system.
Kenya’s economy is highly exposed to climate variability, with agriculture, tourism, and infrastructure sectors particularly vulnerable to droughts, floods, and rising temperatures.
By mandating structured disclosure, the framework aims to:
- Improve the quality and comparability of climate risk information available to regulators, investors, and the public.
- Encourage banks to integrate climate considerations into lending decisions and capital allocation.
- Support the mobilisation of finance toward low-carbon and climate-resilient projects.
- Enhance overall financial system resilience against climate-related shocks.
This regulatory development complements Kenya’s National Climate Change Action Plan and the recently launched Green Finance Taxonomy, creating a more coherent policy environment for sustainable finance.
Future Outlook
The Central Bank of Kenya’s introduction of a Climate Risk Disclosure Framework represents a forward-looking regulatory advancement that strengthens transparency, risk management, and climate alignment within the financial sector.
As of April 2026, the framework positions Kenya among the leading African countries in integrating climate considerations into banking supervision and supports the broader goal of a resilient, low-carbon economy.
For the most current implementation guidelines or compliance timelines, refer to official publications from the Central Bank of Kenya.
