Banking & Finance
Explainer: Why Kenya is Considered a High Climate Risk for Development Bank
Kenya’s latest climate risk profile presents a summary of climatic trends over two decades, from 1991 to 2020. It reveals that approximately 68 percent of natural disasters in the country are attributed to extreme climatic events, primarily floods and droughts, while the remaining 32 percent is linked to disease epidemics.
NAIROBI, Aug 07 (IPS) – Climate change-related extreme weather jeopardizes Kenya’s development agenda; even though it contributes very little to global warming, it is marked as a high-risk country by development banks.Kenya contributes less than 0.1 percent of global greenhouse gas emissions every year, yet development banks have flagged the East African nation as a high climate risk. This is due to extreme weather changes that are increasingly threatening the country’s development agenda, widening socio-economic inequalities, and deepening rural poverty and hunger.
Climate change is a long-term shift in temperatures and weather patterns. Climate risk is the potential harm caused by climate change, such as financial, social, and environmental destruction and loss of life. Country-specific climate risk profiles are a summary of an analysis of climate trends over a long period of time, revealing how variability in weather patterns affects life and livelihoods.
Countries are advised to use these profiles to inform their development agenda, as failure to do so can significantly derail achievement of set development goals. For instance, unpredictability in weather patterns has a negative impact on certain sectors of Kenya’s economy.
This includes agriculture, tourism, horticulture, livestock and pastoralism, and forest products. Nearly 98 percent of agriculture is rain fed. Using climate risk projections, the country can invest in irrigation to reduce the impact of climate change on the sector, as approximately 75 percent of Kenyans draw their livelihood from agriculture.
Kenya’s most recent climate risk profile provides a climatic trend summary spanning two decades from 1991 to 2020, revealing that an estimated 68 percent of natural disasters in Kenya are caused by extreme climatic events, mostly floods and droughts. The remaining 32 percent represents disease epidemic.
High Temperatures Causing Frequent, Intense Droughts
Overall, 16 drought events are on record from 1991 to 2020, affecting millions of people and causing an overall estimated damage of USD 1.5 billion. Despite floods being a more recent phenomenon in Kenya they are becoming increasingly frequent, resulting in 45 flood events within the same period. While a pattern of droughts began to emerge as far back as 1975, a pattern of floods has only begun to emerge from 2012 to 2020.
A repeating pattern of droughts and floods costs the country approximately 3 to 5 percent of its annual Gross Domestic Product. Over the past two decades, Kenya’s mean annual temperature was 24.2 degree Celsius—with a high of 30.3 degree Celsius and a low of 18.3 degree Celsius.
To give a perspective of average temperatures in Kenya, 2023 was the hottest year on record and 2024 is following the trend. According to the Gilbert Ouma Associate Professor, Meteorology, University of Nairobi writing in The Conversation the capital Nairobi average temperatures fare normally moderate, between 24°C and 25°C on the higher side and 17°C-18°C on the lower side.
“These are generally very comfortable temperatures. However, in the December-January-February period, maximum temperatures are normally high, ranging between 26°C and 27°C.
“This year, temperatures in February went up to between 29°C and 30°C, even hitting 31°C. This is about 6°C higher than normal Nairobi temperatures. That is a big difference and our bodies are bound to feel the difference. If such an increase is sustained for a long time, it can lead to a heat wave.”
Droughts have been a most pressing and persistent problem in Kenya. As far back as 1975, drought cycles used to occur every 10 years. But as climate change escalates in both frequency and intensity, the drought cycle reduced from every 10 years to every five years, to every two to three years.
Each year there is an annual dry spell and a food shortage and the regularity of extremely dry periods makes it difficult for the country to recover from one drought to the next.
A History of Drought Cycles in Kenya From 1991 to 2020
Drought is a regular occurrence in Kenya. In 1991–1992, more than 1.5 million people were affected by drought. This was followed by another cycle of widespread drought in 1995–1996 that affected at least 1.4 million people.
In January 1997, the government declared drought a national disaster, affecting more than two million people, and the famine continued into 1998. Shortly after, in 1999–2000, an estimated 4.4 million people were in dire need of food aid due to a severe famine. As far as natural disasters go, this was declared the worst in the preceding 37 years.
The 1998–2000 drought cost the country an estimated USD 2.8 billion, and this was largely due to crops and livestock loss, forest fires, damage to fisheries, reduced hydropower generation, reduced industrial production and reduced water supplies.
In 2004, failure of the March to June long rains led to a severe drought that left more than three million Kenyans in need of urgent food aid. In December 2005, the government declared drought a national catastrophe, affecting at least 2.5 million people in northern Kenya alone.
The drought in 2008 affected 1.4 million people and an overall 10 million people were at risk of hunger after an unsuccessful harvest due to drought in late 2009 and into early 2010. The severe and prolonged drought caused the country USD 12.1 billion in damages and losses, and cost over USD 1.7 billion in recovery.
There are 47 counties in Kenya. As only 20 percent of Kenya receives high and regular rainfall, Kenya’s arid and semi-arid (ASAL) areas comprise 18 to 20 of the poorest counties, which are particularly at risk from increased aridity and periods of drought.
ASAL regions have endured three significantly severe droughts from 2010 to 2020. The 2010–2011 period was severe and prolonged, affecting at least 3.7 million people, causing USD 12.1 billion in damages and losses, and costing over USD 1.7 billion in recovery and reconstruction needs.
That cycle was followed by the 2016–2017 drought. The 2020–2022 famine, which was the most severe, longest and widespread as more than 4.2 million people, or 24 percent of the ASAL population were facing high levels of acute food insecurity.
Overview of Natural Disaster Events in Kenya, 1991–2020
Kenya is increasingly enduring periods of intense, heavy rainfall. During this period, there were a total of 45 flood events, directly affecting more than 2.5 million people and causing an estimated damage of USD 137 million. These events took place in 1997, 1998, 2002, 2012 and 2020, as they were short, frequent and intense.
Unlike drought and famine, Kenya’s history with floods is much shorter. There were many consecutive drought seasons from 1991 to 1997. From 1997, a pattern of floods begun to emerge in this East African country.
It all started with the historic severe and deadly El Nino floods in 1997–1998 that were widespread and affected 1.5 million people. This was followed by the 2002 floods, that affected 150,000 people. Kenya has experienced flooding almost every year from 2010 to 2020.
Projected Risk Moving Forward
“From 2020 to 2050, projections show that ASAL regions will continue to receive decreasing rainfall. Temperatures in the country will continue to rise by 1.7 degree Celsius by 2050 and even higher by approximately 3.5 degree Celsius before the end of this century. The escalation in climate change will increase our climate risk,” Mildred Nthiga, a climate change independent researcher in East Africa, tells IPS.
“We will have even more frequent and damaging floods, and this will be followed by longer periods of drought. We have already started to experience some worrisome landslides and mudslides and, this will become an even bigger concern, especially in the highlands.”
Stressing that additional soil erosion and water logging of crops will significantly affect agricultural productivity, reducing yields and increasing food security. There will also be significant economic losses, severe damage to farmlands and infrastructure.
Worse still, as already witnessed in the recent 2024 deadly floods—human causalities. This will deepen rural poverty and hunger, and derail Kenya’s progress towards achieving the UN’s Sustainable Development Goals.
Note: This feature is published with the support of Open Society Foundations.
IPS UN Bureau Report
Commercial Banking
Equity Green Finance Africa Leads Growth
The bank’s mobile and branch network ensures deep rural penetration. It reaches areas where formal banking is scarce.
Equity green finance Africa drives mass-market climate solutions, funding solar, agriculture, and MSMEs for sustainable development.
Equity Green Finance Africa: Scaling Climate Impact at the Base
Equity Group Holdings is leading the charge in Equity green finance Africa, placing climate-smart financing directly into the hands of smallholder farmers, micro, small and medium enterprises (MSMEs), and households. As global finance increasingly tilts toward sustainability, the bank has deliberately focused on mass-market climate inclusion, thereby delivering measurable economic and environmental outcomes at scale.
At the center of this strategy sits the Equity Group Foundation, which channels blended finance and donor capital into solar, biogas, irrigation, and climate-smart agriculture solutions. Furthermore, the 2025 Integrated Annual Report indicates that the group has committed over $500 million (≈ KSh 64.5 billion) toward climate-related financing, reaching millions of smallholder farmers and MSMEs.
Image suggestion: Smallholder farmers using solar irrigation
Alt text: “Equity green finance Africa solar irrigation impact”
Scaling Climate Finance at the Base of the Economy
In contrast to peers such as Stanbic Bank Kenya, which prioritize structured ESG corporate lending, Equity has chosen a different path. Instead, the bank deploys small-ticket, high-volume financing, enabling rapid adoption of green technologies among underserved communities.
To illustrate, the bank’s 2025 initiatives include:
- Solar home systems and off-grid energy financing
- Biogas and clean cooking solutions for households
- Climate-smart agriculture inputs such as irrigation kits and drought-resistant seeds
Additionally, partnerships with World Bank financial inclusion programs have expanded outreach across rural economies. As a result, climate resilience is embedded directly into livelihoods, rather than remaining a top-down policy ambition.
Real-Life Impact Across Communities
Across regions, the results are increasingly visible. In western Kenya, for instance, a group of 100 smallholder maize farmers accessed solar-powered irrigation systems financed through Equity-backed programs. Consequently, their yields rose by approximately 30% within a single season.
At the same time, micro-enterprises in Kisumu adopting biogas systems have reported energy cost reductions of up to 40%, while also lowering dependence on charcoal. Taken together, these outcomes highlight how Equity’s climate inclusion model converts capital into measurable impact, rather than abstract sustainability commitments.
Image suggestion: Biogas-powered SME in Kisumu
Alt text: “Equity green finance Africa clean energy SME”
Distribution as a Strategic Advantage
Crucially, Equity’s strength lies not in complex product design but in distribution scale. With one of the largest customer bases in Africa, the bank leverages multiple channels to expand access efficiently.
For example:
- Mobile and agency banking platforms extend reach into remote regions
- A customer base exceeding 14 million in Kenya supports rapid rollout
- Community-based engagement strengthens grassroots adoption
Because of this, the bank scales Equity green finance Africa far more effectively than competitors. In contrast to traditional banking models, it penetrates informal economies where collateral is limited but demand remains strong.
A Different Approach to ESG
Rather than focusing on headline ESG transactions, Equity has built a model centered on inclusion. Specifically, its approach prioritizes climate inclusion at scale, livelihood-linked financing, and economic resilience in underserved communities.
Moreover, this framework aligns closely with global financial inclusion standards, which emphasize access as the primary constraint in emerging markets. Consequently, the bank demonstrates that sustainability can be achieved through breadth of access, not just financial structuring.
Strategic Trade-Offs and Market Position
Naturally, this approach involves trade-offs. On one hand, Equity delivers broad-based impact and deep market penetration. On the other, it generates fewer high-profile ESG transactions compared to peers.
For comparison:
- Stanbic Bank Kenya focuses on structured ESG and sustainability-linked loans
- KCB Group emphasizes large-scale infrastructure financing
- Absa Bank Kenya drives ESG product innovation
Even so, Equity’s model stands apart. By prioritizing scale over sophistication, it positions itself as East Africa’s largest climate inclusion engine.
Global Context and Future Outlook
Across emerging markets, demand for climate finance continues to rise. At the same time, investors are increasingly seeking models that combine financial returns with measurable impact.
In this context, Equity’s approach offers a compelling blueprint. Not only does it attract development finance, but it also appeals to private capital focused on sustainability outcomes. Furthermore, its scalability makes it adaptable across African markets where smallholder farmers and MSMEs dominate economic activity.
Conclusion: Redefining Green Finance
Ultimately, Equity Group Holdings is reshaping the meaning of green finance in Africa. By deploying over $500 million into solar, biogas, and climate-smart agriculture, the bank is embedding sustainability directly into everyday economic activity.
While competitors focus on structuring large ESG deals, Equity is transforming livelihoods at scale. Therefore, the future of Equity green finance Africa may not lie in financial complexity but in access, distribution, and measurable real-world impact.
Commercial Banking
Stanbic vs Rivals in Kenya’s Green Finance Race
KCB is financing large green infrastructure and corporate projects. Its strength lies in balance sheet capacity.
Stanbic, Equity, KCB and Absa are racing to dominate green finance in Kenya. Here’s how their ESG strategies compare in 2025.
Kenya’s Green Finance Battle: Who Is Really Leading?
Kenya’s banking sector is entering a decisive phase in climate finance, with Stanbic Bank Kenya, Equity Group Holdings, KCB Group and Absa Bank Kenya all scaling environmental, social and governance (ESG) lending.
But beneath the shared narrative of sustainability lies a clear divergence in strategy, execution and scale.
Stanbic: Structured ESG as a Core Banking Model
Stanbic has taken perhaps the most institutionally embedded approach to green finance.
Its model is defined by:
- ESG screening integrated into all large loans
- Active structuring of sustainability-linked deals
- Target to green ~10% of its loan book
The bank’s participation in a KSh 15 billion (≈ $116 million) sustainability-linked loan for Safaricom illustrates its edge—not just lending, but structuring performance-based ESG financing.
Crucially, Stanbic is leveraging its parent, Standard Bank Group, to align with global climate finance standards—giving it stronger access to international capital.
👉 Positioning: Most sophisticated ESG structurer in Kenya
Equity Group: Scale and Climate Inclusion at the Base
Equity Group Holdings is taking a different route—focusing on scale and mass-market climate financing.
Through its foundation and partnerships, Equity has:
- Committed over $500 million toward climate finance initiatives
- Financed clean energy solutions such as solar kits and biogas
- Targeted millions of smallholder farmers and MSMEs
Its model is less about complex ESG instruments and more about broad-based climate inclusion.
Equity’s strength lies in distribution—its vast customer base allows it to push green products deep into rural and informal markets.
👉 Positioning: Largest climate inclusion engine
KCB Group: Corporate Green Deals and Balance Sheet Strength
KCB Group sits somewhere between Stanbic and Equity.
Its strategy focuses on:
- Large-scale corporate and infrastructure financing
- Green project funding (energy, manufacturing, agribusiness)
- Regional expansion of ESG lending
KCB has committed billions toward sustainable finance and is actively aligning with global frameworks such as the UN Principles for Responsible Banking.
However, its ESG model remains more portfolio-driven than structurally embedded, compared to Stanbic.
👉 Positioning: Corporate-scale green financier
Absa Kenya: ESG Integration and Product Innovation
Absa Bank Kenya is focusing on product innovation and internal ESG alignment.
Key initiatives include:
- Green bonds and sustainable finance products
- Internal carbon reduction strategies
- SME-focused green financing
Absa has also been active in advisory and structuring roles, though at a smaller scale compared to Stanbic.
Its strength lies in financial engineering and ESG product design, but it is still building scale.
👉 Positioning: Emerging ESG product innovator
Where the Real Differences Lie
1. Depth vs Breadth
- Stanbic: Deep, structured ESG integration
- Equity: Wide, mass-market reach
- KCB: Large corporate deals
- Absa: Product innovation
2. Type of Green Finance
- Stanbic: Sustainability-linked loans, structured ESG deals
- Equity: Solar, agriculture, MSME financing
- KCB: Infrastructure and corporate green lending
- Absa: Green bonds, advisory, niche products
3. Access to Global Capital
- Stanbic: Strong (via Standard Bank Group)
- Equity: Strong (DFI partnerships)
- KCB: Moderate to strong
- Absa: Growing
The Strategic Divide: Two Competing Models
Kenya’s green finance market is effectively splitting into two dominant models:
🔹 1. Institutional ESG Finance (Stanbic Model)
- Structured deals
- Performance-linked lending
- Global capital alignment
🔹 2. Mass Climate Inclusion (Equity Model)
- High-volume lending
- Rural and SME penetration
- Development-driven approach
KCB and Absa operate in hybrid territory between these poles.
Who Is Winning?
The answer depends on the metric:
- Most advanced ESG structuring: Stanbic
- Biggest reach and impact: Equity
- Largest corporate deals: KCB
- Most innovative products: Absa
But in terms of future positioning, Stanbic’s model may offer the strongest leverage.
Why?
Because global capital is increasingly flowing toward:
- Measurable ESG outcomes
- Structured sustainability-linked instruments
- Banks with integrated climate risk frameworks
The Bigger Picture: A Market Entering Maturity
Kenya is one of Africa’s most advanced green finance markets, supported by:
- Over 80% renewable energy generation
- Strong regulatory backing
- Growing investor interest in ESG assets
This is pushing banks to move beyond narrative into execution and measurable impact.
Conclusion: A Defining Decade for Green Banking
The competition between Stanbic, Equity, KCB and Absa is not just about market share—it is about defining the future model of African banking.
- Will it be structured, globally aligned ESG finance?
- Or mass-market climate inclusion at scale?
For now, Kenya is hosting both experiments in real time.
And for investors watching closely, one thing is clear:
green finance is no longer optional—it is the next battleground for banking dominance in Africa.
Commercial Banking
Stanbic Green Finance Push Accelerates
Stanbic is targeting at least 10% of its portfolio as green. The shift reflects a structural change in lending strategy.
Stanbic Bank Kenya scales green finance in 2025, expanding solar loans, ESG deals and climate-linked funding to back Kenya’s transition.
Stanbic’s Green Finance Strategy Enters Scale Phase
Stanbic Bank Kenya is accelerating its transition into a sustainability-led lender, scaling climate finance across its portfolio in 2025 as it positions itself at the centre of Kenya’s green economic shift.
Building on momentum from its latest sustainability disclosures, the bank has moved beyond policy commitments into active capital deployment across renewable energy, green real estate and sustainability-linked corporate financing.
This is no longer ESG as narrative—this is ESG as balance sheet strategy.
2025: From Commitments to Capital
Stanbic’s green finance activity in 2025 reflects a clear acceleration phase.
The bank expanded its renewable energy lending, issuing over KSh 500 million (≈ $3.9 million) in solar financing, while deepening participation in sustainability-linked transactions tied to measurable environmental outcomes, as detailed in recent sector reporting.
At the corporate level, Stanbic also participated in a KSh 15 billion (≈ $116 million) sustainability-linked loan for Safaricom, one of Kenya’s largest ESG-linked financings to date, where pricing is tied directly to environmental performance targets.
This signals a structural shift: capital is increasingly being priced against sustainability metrics.
Leadership Signal: ESG as Core Strategy
Stanbic’s leadership has been explicit about the shift.
Speaking in recent sustainability updates, Joshua Oigara emphasized that “sustainability is embedded in how we allocate capital and manage risk,” reinforcing the bank’s transition toward climate-aligned lending.
This marks a departure from traditional banking models, where environmental considerations were often peripheral. At Stanbic, ESG is now integrated into:
- Sector selection
- Credit structuring
- Risk assessment frameworks
Every major deal is increasingly screened through an environmental and social lens.
Green Portfolio Expansion and Targets
Stanbic’s green portfolio is steadily expanding, with sustainability-linked lending now accounting for a growing share of its overall loan book.
The bank is targeting at least 10% of its portfolio to be green or sustainability-linked, building on an estimated 8% base achieved by 2024, according to industry disclosures and sustainability reporting.
Key sectors driving this growth include:
- Renewable energy (solar and distributed power systems)
- Sustainable agriculture (climate-resilient inputs and irrigation)
- Green real estate (energy-efficient buildings)
- E-mobility (low-emission transport financing)
This sectoral diversification reflects a deliberate alignment with Kenya’s climate priorities.
Financing Kenya’s Energy Transition
Kenya already generates more than 80% of its electricity from renewable sources, making it one of Africa’s clean energy leaders.
Stanbic is positioning itself as a key financial intermediary in scaling this transition further, particularly in distributed solar and commercial energy solutions.
Through targeted solar lending and project financing, the bank is supporting:
- SMEs transitioning to off-grid solar
- Commercial and industrial energy users
- Real estate developers integrating green technologies
Internally, the bank is also advancing sustainability, including solar adoption across its own operations, reinforcing credibility with ESG-focused investors.
Structuring the Future: ESG-Linked Finance
Beyond direct lending, Stanbic is playing an increasingly important role in structuring ESG-linked financial instruments.
The Safaricom sustainability-linked facility represents a broader trend where:
- Loan pricing is tied to emissions reductions
- Borrowers commit to measurable ESG targets
- Banks embed sustainability into deal structures
This model is gaining traction globally—and Stanbic is among the early movers in East Africa.
Competitive Advantage in a Crowded Market
Stanbic’s green finance strategy provides a clear differentiator in Kenya’s banking sector.
Three advantages stand out:
1. Integrated ESG Risk Framework
Unlike many competitors, Stanbic embeds climate risk directly into credit decision-making.
2. Deal Structuring Capability
The bank is active not just in lending, but in structuring complex sustainability-linked transactions.
3. Global Alignment
Through its parent, Standard Bank Group, Stanbic aligns with global ESG standards, enhancing its ability to attract international capital.
This positions the bank as a bridge between global climate finance and local economic opportunities.
The Global Capital Angle
Climate finance is rapidly becoming one of the most important capital flows into emerging markets.
With global investors increasingly allocating funds toward ESG-compliant assets, Stanbic’s positioning offers a strategic advantage:
- Access to development finance institutions
- Alignment with global climate frameworks
- Ability to intermediate large-scale green capital flows
In effect, the bank is not just financing projects—it is building a pipeline for international climate capital into Kenya.
Conclusion: Banking on the Green Transition
Stanbic Bank Kenya’s green finance push has entered a decisive phase in 2025.
With KSh 500 million ($3.9 million) already deployed in solar lending, active participation in $116 million ESG-linked deals, and a clear roadmap toward greening its loan book, the bank is transforming sustainability into a core business line.
For global investors and policymakers, the message is unmistakable:
Stanbic is positioning itself not just as a bank—but as a climate finance platform for East Africa.
Equity Green Finance Africa Leads Growth
Stanbic vs Rivals in Kenya’s Green Finance Race
Stanbic Green Finance Push Accelerates
-
Commercial Banking6 days agoKenya Banks Competitive Growth Insights 2026
-
Commercial Banking4 days agoStandard Bank Growth Plan Faces Africa Risks
-
Top Banks7 days agoTop 10 Capitalized Banks in East Africa 2025
-
Boardroom Leadership6 days agoEast Africa Women CEOs 2025 Rankings
-
Insurance7 days agoTop 10 Capitalized Insurers in East Africa 2025
-
Entrepreneur5 days agoEast Africa’s Richest 2025: Top 10 Revealed
-
Commercial Banking3 days agoKenya Capital Drive Faces Execution Test
-
Fintech5 days agoTop Capitalized Fintechs in East Africa 2025