Why eco-funding is banks’ best bet

Why eco-funding is banks’ best bet

Last week the Green Climate Fund (GCF) approved a climate adaptation project on enhancing community resilience and water security in the upper Athi River Catchment Area, Kenya, worth $10 million. The project is under National Environmental Management Authority (Nema) which is a GCF accredited entity in the public sector in Kenya.

The upper Athi project is the second in Kenya that GCF is funding after $35 million on ecosystem-based adaptation in arid and semi-arid rangelands which is supported by the International Union for Conservation of Nature (IUCN)

KCB is the second accredited entity for the GCF funds in Kenya, having received the nod last November. The accreditation will be instrumental in catalysing the bank’s green lending portfolio, which is targeted to be 25 percent of its loan book by 2025.

Kenya requires an investment of $6 billion each year for the next decade if it is going to meet the commitments that it has made on the Paris Agreement on climate change which calls for emissions cut by 32 percent by the year 2030.

Nema and KCB efforts alone will not close the financing gap. There is need for the private sector, financial and non-financial institutions to realise that there is an opportunity to solve the climate change menace but at the same time, create value for stakeholders.

Climate finance and green lending for commercial banks need to be prioritised as it will offer FIs an opportunity to become more competitive as well as better in managing their portfolio and operational risks.

Embracing climate change and having products and services that are sensitive to it will lead to many benefits for the private sector including brand building, reduced costs, risk management, revenue enhancements as well as acquiring the social license to operate.

Unfortunately, not many private sector C-suites are having discussions on climate change and how it affects their operations as well as their shared value.

This is even more so for financial institutions which should have the topic of climate change and the broader topic of sustainability taking the centre stage.

Financial institutions are more susceptible to climate change. Changes in climate and their impacts on socioeconomic conditions will alter some of the parameters and methods that financiers have used to develop financial projections and evaluate credit risks for their loans and investments. This will have a direct impact on their bottom lines.

In addition, banks have environmental and social goals associated with their lending and investments. If […]

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