Africa’s Banking Sector Leading the Way in Green Finance Integration
Africa’s banking sector is integrating green finance from within, using existing institutions to bypass the cost and complexity of standalone green banks. The result is a strategic, locally grounded model tackling the continent’s climate finance shortfall.
African banks are making significant strides in incorporating green finance instruments into their operations, marking a crucial step towards establishing green banks and addressing the pressing climate finance gap on the continent.
A recent report titled “Sustainable Banking Assessment for Africa (SUSBA)” released by the World Wide Fund for Nature on April 30th has shed light on this transformative trend.
The report highlights that most banks in Africa are increasingly aligning with regulatory and industry guidelines. They are also hiring more ESG professionals to embed sustainable finance practices and drive a green development and transition.
The assessment examined 25 banks across eight countries, including Cameroon, Gabon, Kenya, Namibia, South Africa, Tanzania, the Democratic Republic of Congo, and Zambia.
Interestingly, only 11% of these banks scored above 50% in green finance readiness. South Africa (50.1%) and Kenya (43.7%) emerged as leaders on the continent, supported by robust regulatory frameworks. Nigeria (30%), Tanzania (37.7%), and Ghana (28%) are also making progress, driven by national sustainable banking initiatives and frameworks.
However, countries like Namibia (21.1%) and Zambia (19.3%) are lagging due to weaker regulatory foundations. Nonetheless, individual banks such as Stanbic Zambia and Ecobank Senegal are taking voluntary steps in ESG reporting and risk assessment.
The report also points out systemic weaknesses across Africa’s banking sector. While 72% of banks mention sustainability in their strategies, only 52% demonstrate this commitment through leadership’s responsible lending practices.
Only 32% of the banks have adopted standardized environmental and social (E&S) due diligence frameworks, and a mere 8% have policies tailored to high-risk sectors like mining, agriculture, or energy.
Transparency remains a challenge, with less than 24% of banks disclosing how E&S responsibilities are allocated internally, and only 20% subjecting their ESG disclosures to external assurance.
Despite these challenges, development finance institutions are demonstrating the potential impact of integrating green practices. Tanzania’s Cooperative Rural Development Bank (CRDB) and Namibia’s Development Bank (DBN) are setting examples by incorporating sustainable practices into long-term project financing, urging commercial banks to follow suit.
Notably, the report highlights that while still in its early stages, these institutions play a crucial role. Unlike developed markets that advocate for standalone green banks, Africa is forging its path through hybrid models, integrating green finance into existing banks.
This approach leverages established trust, networks, and infrastructure to accelerate the green transition in a relevant and scalable manner.
The ‘2025 State of Green Banks’ report confirms that integrating green instruments into existing banks enables African countries to avoid the high upfront costs and regulatory hurdles typically associated with launching dedicated green banks.
“Africa is not lagging behind; it’s adapting green banking to its realities,” notes the report released in April by the Climate Policy Initiative.
Based on a 2024 survey of 32 green finance institutions, the report highlights a global increase in green finance, with 50% of institutions describing their involvement as substantial and 33% operating exclusively in the space.
In emerging markets like Africa, public revenue serves as the primary source of capital, cited by 88% of institutions, indicating a shift away from private capital. Presently, all instruments are debt-based, with a growing utilization of credit enhancements and guarantees to de-risk investments and attract private sector participation.
Key focus sectors include commercial and residential solar (78–89%), energy efficiency (78%), and low-emission transport (78%, up from 44% in 2020). However, sectors like sustainable agriculture, forestry, and water infrastructure continue to be underfunded.
Currently, the continent hosts only three dedicated green banks: the Rwanda Green Fund (FONERWA), South Africa’s Development Bank of Southern Africa (DBSA), and an emerging initiative at the West African Development Bank (BOAD).
For instance, DBSA’s portfolio includes Kenya’s Menengai geothermal project and South Africa’s Water Reuse Programme aimed at enhancing water security. BOAD supports climate-resilient agricultural projects in Niger and rural solar electrification in Senegal and Mali.
Last year, FONERWA made headlines by providing a RWF 300 million (over US$220 thousand) grant to IZI, a Rwandan e-mobility provider, to deploy five electric buses in Kigali. Recently, IZI launched the Impala E30—an electric Toyota Coaster powered by CATL’s high-efficiency, fast-charging BC5 battery system, the latest in the market.
The urgency of addressing climate finance gaps is evident. According to the Climate Policy Initiative, Africa attracts only US$30 billion annually in climate finance, a mere 12% of the US$277 billion required yearly to meet 2030 climate targets. This leaves a substantial US$247 billion annual shortfall, with public actors currently providing 86% of this funding.
Furthermore, only 39% of tracked funds support adaptation efforts, despite Africa’s vulnerability to climate shocks. Countries like Mozambique, Somalia, and Sudan are grappling with escalating climate disasters amidst limited financial resources.
As donor fatigue sets in, in-country green finance systems are becoming indispensable tools for resilience and self-reliance. Many mainstream banks are now at the forefront of driving this transformative shift.
The shortlist for the “Sustainable Bank of the Year” category at the 2025 African Banker Awards reflects this paradigm shift, featuring institutions like Commercial International Bank Egypt (CIB), CRDB Bank Plc, Kenya Commercial Bank (KCB Group Plc), Nedbank, and Trade and Development Bank Group (TDB).
KCB, for example, screened US$4.7 billion—15.5% of its loan book—for environmental risk and issued US$163 million in green loans in 2023. The bank also secured a US$95 million facility from Proparco for climate projects.
In Tanzania, CRDB Bank issued a US$68.3 million green bond in October 2023, which was oversubscribed by 429%. Accredited by the Green Climate Fund (GCF), CRDB can access up to US$100 million in concessional finance. Additionally, a US$50 million facility from Proparco, co-financed with US$75 million, will support climate- and gender-focused lending.
Nedbank in South Africa has been a trailblazer, issuing over US$136 million in renewable energy bonds in late 2023, alongside R14.5 billion (over US$800 million) in sustainability-linked bonds over two years. The bank’s financing supports 1,355 MW of clean energy and more than 5,700 affordable housing loans.
CIB in Egypt has developed a US$130 million sustainable finance portfolio under the country’s first corporate green bond, while integrating ESG governance at the board level. TDB Group, also GCF-accredited, has mobilized over US$250 million in concessional finance and launched a US$150 million facility to support climate-smart transport and health infrastructure across member states.
The African Banker Awards, organized by African Banker magazine, have garnered significant support this year, with sponsors like the African Development Bank (AfdB), Afreximbank, and the African Guarantee Fund.
The 2025 Awards Ceremony is scheduled to take place in Abidjan, Côte d’Ivoire, on Wednesday, 28th May, during the African Development Bank’s Annual Meetings.
The African Development Bank (AfdB) projects that for Africa to bridge the climate financing gap by 2030, the private sector must mobilize US$213.4 billion annually to complement the limited public resources already available.
Credit: Bonface Orucho, Bird Story Agency
