Determinants of adoption of green financing by commercial banks in Kenya

Abstract

Climate change presents an unparalleled test to the management of global socioeconomic and financial structures. Our current models of production and consumption lead to unsustainable greenhouse gas emissions, primarily carbon dioxide (CO2), with their levels in the atmosphere surpassing critical limits that our ecosystem can absorb and recycle. Banks committed to sustainability must place greater emphasis on integrating long-term strategies into their business choices. However, the banking sector's response to the emerging challenges of sustainability has been notably sluggish compared to other industries. Bankers often perceive themselves as part of an environmentally considerate sector in terms of emissions and pollution. Despite this perception, they have been relatively tardy in assessing the environmental impact of their clients, despite the potential risks involved. The study aimed to examine the determinants of adoption of green financing by commercial banks in Kenya. The study employed a post - positivist approach. The research adopted a descriptive research design. The study targeted senior officers in the thirty-nine commercial banks in Kenya. From the findings of the study, it was concluded that the adoption of green financing by commercial banks in Kenya is driven by Bank-level characteristics, board composition, banking sector regulations and risk management. The study also found that the four independent variables, were statistically significant in adoption of green financing by commercial banks in Kenya. The study recommends that regulatory bodies in Kenya develop and implement comprehensive, uniform guidelines for green financing. Future research should conduct longitudinal studies to evaluate the long-term impact of green financing on the financial performance and sustainability practices of commercial banks in Kenya.