Climate change and banking sector (in)stability in Kenya: A vulnerability assessment

Arbeitspapier

This paper offers a climate change vulnerability assessment of the Kenyan banking sector by examining the time-varying linkages of climate risk drivers, economic sectors that get impacted by a disorderly low-carbon transition (climate policy relevant sectors (CPRSs)), and banking sector stability. We use temperature and precipitation climate data, identify 5 CPRSs and their quarterly outputs, construct a banking sector stability index, and examine the time-varying linkages of these variables. Effectively, we assess the response of banking sector stability to sectoral output shocks arising from physical and transition risks. Three important findings emerge: First, the agriculture sector is the sole channel of physical climate risk transmission. Second, manufacturing and utilities sectors are becoming increasingly critical/significant channels for transmitting transition risks. Third, during the COVID-19 era, all CPRSs have become increasingly linked to banking sector stability, effectively exacerbating the transmission of climate risks to the banking sector.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: KBA Centre for Research on Financial Markets and Policy Working Paper Series ; No. 66

Classification and Topics

• Classification: Wirtschaft
• Subject: climate change ; climate risk drivers ; climate policy relevant sectors (CPRS) ; banking sector ; stability

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kimundi, Gillian ; Wambui, Reuben
• Event: Veröffentlichung
• (who): Kenya Bankers Association (KBA)
• (where): Nairobi
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/271527
• Last update: 10.03.2025, 11:43 AM CET