CBK gives banks a year to effect rules

CBK Governor Patrick Njoroge. [File, Standard]

Commercial banks and mortgage finance institutions have until June 2023 to fully comply with environmental, social and governance considerations in their operations. This is after the Central Bank of Kenya (CBK) issued guidance on climate-related risk management.

In a statement, CBK said it expects financial institutions to integrate climate-related risk management into their business decisions and activities and develop an approach on disclosure of the financial risks from climate change.

"This guidance sets out some basic requirements that institutions should consider adopting to effectively entrench climate-related financial risks in their risk management frameworks."

CBK said climate-related risks continued to expose financial institutions to credit, market and liquidity risks, warning that high reliance on physical collateral can up credit risk from stranded collateral assets.

“Extreme weather events can also increase operational risk for banks due to disrupted business continuity from the negatively impacted bank’s infrastructure, systems, processes and staff.”