From left: United Nation Global Compact Kenya Chairman Martin Ochieng, Absa Bank Kenya Chairman Charles Muchene, Managing Director Abdi Mohammed, Non Executive Director and Board Member Christine Sabwa and Chief Financial Officer Yusuf Omari during the official launch of the Sustainability Report 2022 at the Arboretum Gardens. PHOTO | POOL
Absa Bank Kenya Plc plans to double its portfolio of credit advanced under climate financing to Sh120 billion by 2025.
So far, the tier-1 lender has stated its green lending book at Sh60 billion which includes Sh1.5 billion ($10 million) for climate smart agriculture, Sh25 billion for climate finance and Sh15.2 billion disbursed through Timiza to support financially excluded groups.
Absa says it is diversifying its portfolio and increasing funding and capital allocation to initiatives that support renewable and clean energy, industries, innovation and infrastructure, financially excluded groups, sustainable cities and communities, responsible consumption and production and value chains.
“The subject of sustainable finance is one that has been growing and developing around the world and in Kenya, and as Absa, we have been taking the lead in it,” noted Absa Bank Kenya managing director Abdi Mohamed.
In previous climate-related financial disclosures, Absa noted it was in mapping out climate risks and assessing its exposure.
The bank has collaborated with the International Finance Corporation (IFC) to conduct a portfolio review which will inform its climate finance strategy and provide a suitable baseline for benchmarking.
“Absa Bank Kenya is committed to aligning its portfolio to sector appetite based on risk and attractiveness by December 2023,” the bank noted.
The bank seeks to mobilise at least Sh25 billion in green and transition finance through both internal and external funding with partners.
Under green building, Absa Bank has collaborated with Acorn Holdings Limited to support green buildings in Kenya through a Sh6.7 billion financing agreement.
The funding is expected to support the development of 10 purpose-built student accommodation developments in Nairobi, adding a further 12,000 beds to the Acorn Student Accommodation Real Estate Invest Trusts, bringing the total bed count to 21,000 beds.
The projects will be certified under IFC’s EDGE, the internationally recognised green building certification.
Climate financing at Absa Bank Kenya is monitored by a unit — the Climate Change Risk Management Absa Bank Kenya — which has a board that branches into four committees including the audit and risk committee. The bank has a sustainability steering committee, a sustainability team and a business and enterprise function unit under the country management committee.
Despite the short-term risks faced by commercial banks in the form of high interest rates and deteriorating asset quality, Absa notes that climate financing would remain a sustainable opportunity for credit markets, offsetting the short-term headwinds.
“I think once you have a medium to long-term view of the economy, sustainable finance ticks all the boxes looking at either the return or asset quality picture," Mr Mohamed said.
Some work has already been looking at the cost structure of green buildings versus those that are not, in the long-term it makes sense to take the sustainable finance route.”
