Kenya’s banking sector has taken a significant step toward enhanced climate transparency with the development and launch of a specialised reporting template aligned with IFRS S1 and IFRS S2.
This initiative, led by the Kenya Bankers Association (KBA) in collaboration with key partners, positions Kenyan banks as pioneers in adopting global sustainability disclosure standards within the African context.
Understanding IFRS S1 and IFRS S2
The International Sustainability Standards Board (ISSB) issued IFRS S1, which refers to General Requirements for Disclosure of Sustainability-related Financial Information, and IFRS S2, referring to Climate-related Disclosures, in 2023.
These standards establish a comprehensive global baseline for sustainability reporting.
IFRS S1 requires entities to disclose material information about sustainability-related risks and opportunities that could reasonably affect their cash flows, access to finance, or cost of capital over short, medium, and long-term horizons.
It emphasises governance, strategy, risk management, and metrics and targets.
IFRS S2 builds on this foundation with a specific focus on climate-related risks and opportunities.
It mandates disclosures on physical and transition risks, greenhouse gas (GHG) emissions (including Scope 1, 2, and material Scope 3), climate resilience, and any transition plans.
For banks, this includes financed emissions embedded in lending portfolios, which represent a critical area of exposure.
These standards integrate seamlessly with financial reporting, promoting consistency, comparability, and reliability in sustainability disclosures.
The Kenyan Background and Banking Sector Leadership
Kenya faces pronounced climate vulnerabilities, including droughts, floods, and shifting agricultural patterns, which directly impact economic stability and the financial sector.
Recognising this, the Institute of Certified Public Accountants of Kenya (ICPAK) released a national roadmap in late 2024 for the adoption of IFRS S1 and S2.
The roadmap adopts a phased approach:
- Voluntary adoption for all organisations from January 2024.
- Mandatory adoption for Public Interest Entities (PIEs), including listed companies, commercial banks, and insurers, for accounting periods beginning on or after 1 January 2027.
- Subsequent phases for large private companies (2028) and SMEs (2029).
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In this landscape, the banking sector has demonstrated proactive leadership.
In April 2025, the KBA launched a sector-specific IFRS S1 and S2 Disclosures Reporting Template for banks.
Developed with technical support from Deloitte and funding from FSD Kenya and WWF Kenya, the template builds upon the KBA’s earlier TCFD-aligned guidance issued under Central Bank of Kenya (CBK) directives.
This initiative harmonises reporting practices across member banks, facilitates capacity building through upcoming training programmes, and aligns the sector with international expectations while addressing local priorities such as sustainable finance and climate risk management.
Key Benefits for Kenyan Banks and Stakeholders
Adoption of these standards offers multiple strategic advantages:
- Enhanced Transparency and Accountability: Banks provide investors, regulators, and the public with clear, decision-useful information on how climate factors influence their operations and portfolios.
- Improved Risk Management: Integrating climate-related risks into governance and strategy enables better scenario analysis, stress testing, and resilience planning.
- Access to Sustainable Finance: Alignment with global benchmarks attracts international capital and supports Kenya’s broader green economy transition.
- Regulatory Preparedness: Early movers gain a competitive edge ahead of the 2027 mandatory deadline while contributing to industry-wide harmonisation.
- Stakeholder Confidence: Consistent disclosures foster trust among depositors, borrowers, and partners in a sector increasingly scrutinised for its role in financing sustainable development.
For the wider economy, this pioneering effort by banks strengthens Kenya’s position as a regional leader in sustainable finance.
Challenges and the Path Forward
Implementing IFRS S1 and S2 presents challenges, particularly in data collection (especially for Scope 3 financed emissions), capacity building, and integrating new processes into existing systems.
Kenyan banks must address data gaps, enhance internal governance, and invest in climate modelling tools.
The KBA template and associated training programs, supported by ICPAK and partners, are designed to mitigate these hurdles.
Banks are encouraged to conduct readiness assessments, engage stakeholders, and leverage transition reliefs available in the initial reporting periods, such as the climate-first approach and exemptions for certain comparative information.
Future Outlook
The Kenyan banking sector’s advancement in pioneering IFRS S1 and S2 adoption exemplifies a commitment to climate transparency and responsible finance.
By embedding sustainability into core reporting practices, banks not only comply with emerging global and national expectations but also contribute meaningfully to Kenya’s sustainable development goals.
As the 2027 deadline approaches, continued collaboration among regulators, industry associations, and international partners will be essential.
This initiative sets a commendable precedent, demonstrating that proactive leadership in sustainability reporting can drive both financial resilience and environmental stewardship in Kenya’s dynamic economy.
Stakeholders across the financial sector are urged to engage actively with the KBA template and supporting resources to ensure a smooth and impactful transition.
