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Home Banking Laws

Banking Report Calls for Better Environmental Regulations

by Staff
July 7, 2022
in Banking Laws
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Banking Report Calls for Better Environmental Regulations
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Banking Report Calls for Better Environmental Regulations

By Soko Directory Team / Published July 7, 2022 | 2:29 pm

KEY POINTS

The study primarily focused on identifying regulatory, policy and institutional gaps that have  adversely exposed financiers to defaults and impaired asset values. 

Banking Report

KEY TAKEAWAYS

In the findings, disparity in environmental regulation, particularly riparian land zoning rules  were highlighted as a contributing factor to environmental risk exposure to banks and  investors. According to the study, the relationship between zoning guidelines under the  Physical Planning laws and the Environment Regulations riparian rules are not well defined. 

Kenya Bankers Association in collaboration with Financial Sector Deepening (FSD) Kenya, International Union for Conservation of Nature  (IUCN) with support from Mitsubishi Corporation Fund for Europe and Africa (MCFEA) have  today unveiled a study that quantified and analysed environmental risk exposure to banks.

The study primarily focused on identifying regulatory, policy and institutional gaps that have  adversely exposed financiers to defaults and impaired asset values. 

In the findings, disparity in environmental regulation, particularly riparian land zoning rules  were highlighted as a contributing factor to environmental risk exposure to banks and  investors. According to the study, the relationship between zoning guidelines under the  Physical Planning laws and the Environment Regulations riparian rules are not well defined. 

The study revealed that land survey and cadastral maps often do not demarcate expected  riparian boundaries. This has given way to real estate development being designed and  constructed on riparian zones on the strengths of unmarked survey maps.  

Additionally, the study highlights that the same applies to wildlife migratory routes. This has  led to demolition of properties financed by banks. Delays due to litigation by affected  members of the public, according to the study have also contributed to great losses to both  the banking client and financiers. 

The study also brought into focus the existing overlap between mandates of different  government agencies that has led to premature termination of projects contributing further  losses to bank clients and by extension, to the banking industry.

In the study, The  Constitution, under Part 2 (3) of the Fourth Schedule assigned the control of air, noise  pollution, other public nuisances, and outdoor advertising (“Delegated Functions”) to the  County Governments. This role had been previously carried out by National Environmental  Management Authority (NEMA) under the relevant Environment Management and  Coordination Regulations. 

Despite this re-allocation, NEMA officers continue to carry out the Delegated Functions,  citing enforcement powers under Environmental Management and Coordination Regulations.

Other challenges that are putting banks and investors at risks include deficient  Environmental Social Impact Assessments (ESIA) by NEMA agents, especially regarding the  quality of reports, ethics in undertaking the assessment and audits that lead to revocation  of project licences and eventual defaults on loans granted on the strength of the licence  issued by NEMA. 

Speaking during the launch of the study, KBA Chief Executive Officer, Dr. Habil Olaka called  on policy makers to address the disparities in riparian and wildlife migratory environmental  regulations. He also reiterated the need to reinforce Multi-Agency Alignment around  biodiversity and environment matters.

“It is our collective responsibility to ensure the stability  of the banking industry by encouraging sound risk assessment and management. By  harmonizing the spatial land use plans and the wildlife laws, we can reduce the financial  risks to both banks and Kenyans. We are also calling for strengthening of the oversight of  EIA experts to enhance the quality of the assessments and the ethics of the EIA experts  handling the projects,” Olaka said. 

IUCN ESARO Regional Director, Mr. Luther Anukur, encouraged policy makers to create an  enabling environment for developing scientific solutions backed by research as  demonstrated by the report.

He further added that “To deal with the triple planetary crisis  of climate change, biodiversity loss and pollution, public and private actors need to work  together. The transition to a blue and green economy demands recognition of the role  biodiversity and ecosystems play in human social and economic affairs. In the face of  climate change, biodiversity loss, growing water scarcities, rising prices for food and  energy, accompanied by an increasingly unstable and risk-laden global economy, the  notion of embracing sustainable finance principles in Kenya has become increasingly  relevant”.

He also called for increased investments from both public and private entities  towards nature-based solutions to reduce exposure to environmental and social risks.  

FSD Kenya CEO, Ms. Tamara Cook, echoed the sentiments from KBA and IUCN by  encouraging financial institutions to integrate environmental risks – both the risks of non compliance with existing environmental laws, policies, and regulations and those  associated with global and local environmental change and impact – into their business  strategies and operations.

This, she noted, will become increasingly important, as Kenya  transits into an industrial economy status that has traditionally been associated with  intensive resource consumption and pollution. FSD Kenya is keen to support the financial  sector to embrace sustainable finance principles as a key enabler of the transition to a  green and climate resilient development pathway that Kenya aspires to attain.

To this end,  FSD Kenya has partnered and will continue to partner with KBA and other partners and  stakeholders in various initiatives aimed at enhancing the capacity and capability of the  sector in sustainable finance. FSD Kenya recognises that this is important if the sector is to  remain competitive in an age when sustainability has become the most important currency  in business.  

The study also highlighted areas banks could improve on to ensure they are safeguarded  from environmental and social risks. It has recommended that banks should increase  project monitoring activities to identify and avoid environmental issues.  

About Soko Directory Team

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system.Find us on Facebook: facebook.com/SokoDirectory
and on Twitter: twitter.com/SokoDirectory

View other posts by Soko Directory Team

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