The NCBA Group plans to venture into carbon credit banking and financing the green conversion of buildings, saying the two environmentally sustainable businesses are key to revenue growth.
In August, the Nairobi Stock Exchange-listed lender began offering asset financing for electric vehicles (EVs) as part of its green strategy, injecting an initial amount of Sh 2 billion into the segment.
The green building venture will see the bank offer loans to businesses and households to retrofit or design climate-friendly buildings that emphasize energy and water saving measures.
“The EV option was a low-hanging fruit through our asset finance business. As the risks become clearer in terms of designing and renovating our buildings to be ready for climate risk, it creates a refinancing opportunity for banks like ours,” said Louisa Wandabwa, Chief Strategy Officer, NCBA Group.
NCBA also plans to venture into carbon banking, where investors are allowed to “deposit” carbon, in exchange for an annual payment, and those in need of carbon offsets “borrow” carbon by making a annual payment.
“The next trickle in managing these carbon sales will have to be managed by someone. These are some of the opportunities we are considering,” she added.
The bank launched a 2 billion shilling electric vehicle financing in August as customers increasingly turn to battery-powered cars amid the fight against climate change and rising global oil prices . Under its EV Asset Financing Plan, the bank will finance up to 80% of the total cost of any personal or public service vehicle under a five-year agreement.
Other local commercial banks such as Stanbic, Absa Bank, StanChart and KCB Group are increasingly turning to financing green buildings, seen as a growing opportunity ground for issuing credit.
KCB recently received a $150 million (18 billion shillings) loan from the International Finance Corporation (IFC) to support its green finance strategy, highlighting the demand and supply of capital for lenders venturing into the growing segment.
Green finance has grown in recent years, with lenders and borrowers becoming more aware of their obligation to meet environmental, social and governance (ESG) standards, which are now a key consideration for investors looking to inject capital in these companies.