Stanbic Bank Kenya will from next month start screening loans of Sh50 million and above for environmental, social and government (ESG) compliance, tightening the sustainability threshold which currently starts at Sh300 million.
The bank says the lower pre-credit screening threshold will help it ensure at least 20 percent of its loan portfolio is channelled to sustainable green projects within the next three to five years.
Stanbic Bank Kenya and South Sudan CEO Joshua Oigara said in an interview with the Business Daily that the increasing severity and frequency of climate change risks means lenders will have to elevate their accountability to society by not funding projects that aggravate the situation.
“Before, our screening was at Sh300 million and now we are coming down to Sh50 million and that will cover about 85 percent of our total portfolio,” said Mr Oigara.
He added: “It is not just about climate but also about how our clients do their businesses. So we will be looking at aspects such as human rights, child labour and their compliance with other laws and regulations.”
Stanbic’s tightening of pre-lending checks comes on the back of signing on to the 10 principles of the United Nations Global Compact on human rights, labour, environment and anti-corruption.
Other lenders such as Standard Chartered Bank Kenya, Absa Bank Kenya, KCB, Co-operative Bank of Kenya and Equity also have different thresholds for screening loans to block financing to clients not undertaking environment-friendly ventures.
The Central Bank of Kenya in 2021 gave banks up to June last year to include climate risk management in their business models, noting that climate-related risks are increasingly becoming a source of financial risks.
The ESG focus is expected to attract international investor funds and raise lending opportunities in the banking industry through activities aligned with net zero.