KENYA Trends and Developments Contributed by: Sammy Ndolo, Brian Muchiri and Damaris Muia, Kieti Law LLP
has also been updated to reinforce the impor - tance of board diversity, stakeholder engage - ment, and the protection of minority shareholder rights. These changes reflect a broader recog - nition that effective ESG governance is integral to long-term corporate success and resilience. Sector-Specific ESG Guidelines and Initiatives In Kenya, guidelines tailored to the ESG sector have emerged across various industries, pro - moting the adoption of sustainable practices. These guidelines offer specific recommenda - tions to companies in areas such as banking, energy, and agriculture, enabling them to effec - tively address the unique ESG challenges and opportunities specific to their industries. For example, the Kenya Bankers Association (KBA) has adopted the Sustainable Finance Ini - tiative (SFI) industry principles for the banking sector. The SFI requires banks to establish envi - ronmental and social risk management systems, monitor clients’ associated risks, and ensure compliance with labour standards. To promote sustainable finance practices, the KBA has also introduced an e-learning platform and the SFI Catalyst Awards, which incentivise best prac - tices and recognise leadership in sustainable finance. The Central Bank of Kenya (CBK) has issued the Guidance on Climate-Related Risk Man - agement, which outlines recommendations for banks to manage climate-related financial risks. The main recommendations contained in the CBK Guidance include: • the board of directors is responsible for overseeing the institution’s exposure to and responses to climate-related issues;
• the board of directors is tasked with formulat - ing and implementing strategies and policies to manage climate-related financial risks; • institutions are required to integrate climate- related risk considerations into their risk management frameworks; • institutions should develop systems for reporting on the management of climate- related risks; and • institutions in the banking sector are required to submit a time-bound plan approved by the institution’s board on implementation of the Guidance and, in addition, a quarterly report on the progress of implementation of this plan within 10 days after the end of every calendar quarter from the quarter ending 30 Septem - ber 2022. The CBK has also published the draft Kenya Green Finance Taxonomy, providing a standard - ised framework for green finance and facilitating informed decision-making on environmentally friendly investments. It outlines a minimum set of assets, projects, and activities that qualify as “green” according to international best prac - tices and national priorities. Through the Green Finance Taxonomy, banks will be able to make informed decisions on environmentally friendly investments that will help to promote sustain - able development. Legislative Developments: The Climate Change Act and Private Sector Obligations Under the Climate Change Act, Chapter 387A of the Laws of Kenya, the Climate Change Council and the Cabinet Secretary responsible for cli - mate change can impose obligations on private entities, such as companies. These obligations require the entities to implement actions that align with the national goal of achieving low- carbon, climate-resilient development. If a pri - vate entity is given such an obligation, it must
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