Friday, May 24, 2024

Going green to shape financing


Banking has acquired a first name; it is official, sustainable banking is the way to go for the sector.

It is no longer about the top-down legal enforcement and compliance but about the bottom up- voluntary and beyond compliance movement.

Some are getting it, and others are not. I have the privilege to understand one or two things when it comes to business strategy as well as sustainability.

This week and the last, I have been reviewing sustainability reports of the sustainability champions in our market.

In the banking sector, I had the opportunity to review KCB Group’s 2020 sustainability reports. The reports are the linkage between the bank’s strategy and sustainability outcomes.

KCB’s strategy for the period 2020 -2023, dubbed Beyond Banking is about the bank’s potential to traverse the limits of a traditional bank as the cornerstone of success.

The strategy is about the use digital transformation to offer the best customer experience.

Four strategic themes drive the process: putting the customer first, improving efficiency and productivity, integrating digital tools at the heart of the operations, and achieving regional relevance to scale.

KCB Board and Management have realised that the above will not be possible without a resolute commitment to a sustainable business.

Therefore, the bank’s is driven by the pursuit of positive environmental, social, economic, and financial impacts in its operations.

Looking at the banking industry in totality, the bank of the future will be the one that embraces emerging technology, puts customers and employees at the centre of every strategy, remains agile to the evolving business models, and integrates sustainability (economic, social and environmental) in its operations.

The board and management of proactive and future proof banks are currently emphasising environmental sustainability.

As a result, the environmental and climate risk component takes a centre stage and results are initiatives such as the Net Zero Banking Alliance.

Net-Zero Banking Alliance brings together 55 banks from 28 countries representing almost a quarter of global banking assets, committed to aligning their lending and investment portfolios with net-zero emissions by 2050.

KCB Group is the only bank from the African continent to join Credit Suisse, BN Paribas and HSBC to pledge net zero emissions by 2050.

The commitment is to focus not only on the internal operations and supply chains emissions (Scope 1 and 2 emissions) but also on their financed emissions or what is known as scope three emissions which can go up to 1,000 times greater than their emissions.

Commitments around climate change and environmental sustainability should not be seen as a compliance requirement only but as a way of bringing competitiveness to the bank.

Proactive banks are already looking into the green funding market with innovative green products such as bonds, sustainable mortgages, and sustainability-linked loans etc. They seek a competitive edge in their markets.

From the KCB sustainability report, the bank has defined its sustainability strategy with a clear action plan on how to deliver to become a “responsible bank.”

The business model and the required partnerships are clear especially with the recent accreditation by the Green Climate Fund (GCF) and funding from IFC.

In addition, the development of an organisation’s culture and embedding positive sustainability initiatives across the business lines are on a high-speed mode.

The efforts for KCB and other banks will, however, need to get deeper and include initiatives around capital requirements, innovative products, stress tests, risk modelling, pricing, disclosures and setting KPIs such as green asset ratios.

This is if the financial sector is going to tap the opportunities presented by sustainability and at the same time manage risks.

The efforts should also go beyond the loan portfolio where banks should consider their supply chains and how they can make them sustainable.

This would involve working with the suppliers and providing them with the relevant knowledge and tools to embed sustainability.


Banks will need to invest in the expertise that will enable them to position themselves as sustainable lenders in the new normal.

Banks struggle to find concrete systems and methodologies to implement, optimise and measure sustainable initiatives beyond the traditional CSR (cosmetic social responsibility).

Addressing sustainability issues will require responsibilities and actions taken at all levels and across all the key functions of a bank, which call for the need to embed sustainability into the bank’s strategy.

There is lack of capacity in the financial institutions for linking innovations and sustainability which, once developed, would provide a sea of opportunities for the banks as they move towards sustainability.

KCB has made an attempt, which in my view is paying off and should be emulated by other banks in the region not only as a way of doing good but as a way of doing good business.

Dr. Edward Mungai
Dr. Edward Mungai
The writer, Dr. Edward Mungai, is a global sustainability expert. He is the Lead Consultant and Partner at Impact Africa Consulting Ltd (IACL), a leading sustainability and strategy advisory in Africa. He is also the Chief Editor at Africa Sustainability Matters. He can be contacted via

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