The NCBA Group intends to explore the carbon credit banking industry and finance green building conversions, claiming that these two environmentally friendly business projects are essential for revenue growth.
As part of its green strategy, the Nairobi Securities Exchange-listed lender started providing asset finance for electric vehicles (EVs) in August by investing the first Sh2 billion in the market.
The bank will provide loans to businesses and individuals as part of the green construction initiative to either renovate or construct environmentally friendly structures that place an emphasis on water and energy conservation.
“The EV option was a low-hanging fruit through our asset financing business. As the risks become clearer in terms of how we design and retrofit our buildings to become climate-risk ready, that creates a refinancing opportunity for banks such as ourselves,” said Louisa Wandabwa, director of the strategy, NCBA Group.
The NCBA also seeks to engage in carbon banking, which entails allowing investors to “deposit” carbon in return for an annual payment and allowing those who require carbon offsets to “borrow” carbon in exchange for an annual payment.
“The next net in the management of these carbon sales will need to be managed by someone. These are some of the opportunities we are thinking through,” she added.
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In August, the bank introduced Sh2 billion in electric vehicle financing as consumers shifted to battery-powered vehicles more frequently in response to environmental activism and the surge in world oil costs. The bank would finance up to 80% of the entire cost of any person or government car under a five-year agreement as part of its EV asset financing program.
Other regional commercial banks, like Stanbic, Absa Bank, StanChart, and KCB Group, are extending their involvement in green building financing as a growing market for credit issuance.
In order to support its green finance strategy, KCB recently acquired a $150 million (Sh18 billion) loan from the International Finance Corporation (IFC), demonstrating the demand for and easy availability of financing for lenders who move into the expanding industry.
Recent years have seen an increase in green financing as both lenders and borrowers have become more conscious of their need to adhere to environmental, social, and governance (ESG) criteria, which are increasingly major factors for investors willing to invest capital into these companies.