As The World Embraces Eco-business NCBA Plans Carbon Credit Venture

In August, NCBA began offering asset finance for electric vehicles (EVs) as part of its green strategy, injecting an initial Ksh2 billion into the segment.

The Nairobi Securities Exchange-listed lender plans to venture into carbon credit banking and financing green conversion of buildings, saying the two environmentally sustainable ventures are key for revenue growth.

The green building venture will see the bank offer loans to companies and households to either retrofit or design climate-friendly buildings that emphasize energy and water-saving measures.

“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 Strategy, 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 who need carbon offsets ‘borrow’ carbon by making 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.

The bank in August launched Ksh2 billion electric vehicle financing as customers increasingly shift to battery-powered cars amid climate change advocacy and the rise in global oil prices. Under its EV asset financing plan, the bank will finance up to 80 percent of the total cost of any personal or public service vehicle in a five-year deal.

Other local commercial banks such as Stanbic, Absa Bank, StanChart and KCB Group are increasingly moving into green building financing seen as an expanding opportunity ground for issuance of credit.

KCB has recently received Ksh18 billion ($150 million) loan from the International Finance Corporation (IFC) to support its green finance strategy, pointing to the demand for and ready supply of capital for lenders who venture into the growing segment.

Green financing has grown in recent years as both lenders and borrowers become more aware of their obligation to meet Environmental, Social and Governance (ESG) standards which are now a key consideration for investors looking to pump in capital into these firms.