In recent years, the global financial landscape has witnessed a paradigm shift in the way financial institutions perceive and manage climate-related risks. In response to the escalating threat posed by climate change, regulatory bodies worldwide are urging banks to adopt robust strategies to assess, adapt to, and mitigate these risks. The Central Bank of Kenya has been proactive in this regard, introducing the Guidance on Climate-Related Risk Management in 2021 to provide a framework for Kenyan banks to address climate-related challenges.
Aligned with global initiatives such as the Task Force on Climate-Related Financial Disclosures (TCFD), the guidance mandates banks to establish comprehensive processes for identifying, assessing, monitoring, and reporting exposures to climate-related risks and opportunities. Furthermore, banks are urged to integrate climate risk management into their governance structures, strategic planning, risk management frameworks, and disclosure practices.
In a bid to equip professionals within the banking sector with the requisite knowledge and skills to navigate climate risk management effectively, Strathmore University Business School (SBS), in collaboration with the Kenya Bankers Association (KBA), organized a workshop titled Climate Risk Management in the Kenyan Banking Sector, which took place on 26th of April 2024 at the Radisson Blu Hotel. This workshop aimed to provide participants with a comprehensive understanding of climate-related risks and equip them with practical tools to integrate climate risk management into their institutions’ operations.
The workshop agenda covered key aspects of climate risk management, including climate risk measurement, data sources, and management; climate models and scenario analysis; real-world applications of climate risk integration; and building climate risk models. Led by esteemed facilitator Reuben Wambui from SBS, each session delved into specific topics essential for effective climate risk management within banking institutions.
The sessions kicked-off with an overview of climate risk measurement, focusing on identifying macro and micro sources of climate-related financial risks and exploring measurement tools and approaches. Subsequent sessions explored the intricacies of conducting scenario analyses, stress testing, and sensitivity analysis for climate-related risks, followed by real-world case studies demonstrating the integration of climate risk into materiality assessment, strategic targets, and risk appetite.
A key highlight of the workshop was the hands-on exercise where participants had the opportunity to develop a basic climate risk model under the guidance of the facilitator. This practical session aimed to reinforce participants’ understanding of climate risk modeling methodologies and their applicability in real-world scenarios.
By the end of the workshop, the participants had gained a comprehensive understanding of climate-related risks in the banking sector, acquire practical skills in climate risk modeling and scenario analysis, and enhance their awareness of global and regional regulatory guidelines.
In navigating the complex landscape of climate risk management, collaboration and knowledge-sharing are paramount. The workshop serves as a platform for professionals within the banking sector to exchange insights, best practices, and innovative approaches to climate risk management, ultimately fostering a more resilient and sustainable financial ecosystem in Kenya.
Article by Juliet Hinga
Share This Story, Choose Your Platform!
Your journey to business excellence starts here. Subscribe today and be at the forefront of innovation and leadership.
