CLIMATE FINANCING STRATEGIES AND STOCK MARKET RETURNS OF LISTED COMMERCIAL BANKS IN THE NAIROBI SECURITIES EXCHANGE, KENYA
Ivy Wambui Muriithi - Postgraduate Student, Department of Accounting and Finance, School of Business Economics and Tourism, Kenyatta University, Kenya
Dr. Francis Gitagia (Ph.D, CPA) - Lecturer, Department of Accounting and Finance, School of Business Economics and Tourism, Kenyatta University, Kenya
ABSTRACT
The study examined the effect of climate financing strategies on the stock market returns of banks listed on the Nairobi Securities Exchange (NSE), Kenya. The study was motivated by the slow adoption of climate financing initiatives among Kenyan banks despite increasing global emphasis on sustainable finance and the limited empirical evidence on how such strategies influence stock market performance. Specifically, the study investigated the effect of green lending practices, sustainable investment practices, climate risk management practices, and regulatory compliance practices on stock market returns. The study was anchored on Signalling Theory, Legitimacy Theory, Stakeholder Theory, Financial Sustainability Theory, and Institutional Theory. A mixed methods research design was adopted involving both quantitative and qualitative approaches. The target population comprised senior officers from the 11 banks listed on the NSE, including Chief Investment Officers, Chief Risk Officers, Chief Sustainability Officers, and Heads of Compliance, resulting in a census of 44 respondents. Primary data were collected using structured questionnaires, while secondary data were obtained through document review. Data analysis involved descriptive statistics, thematic analysis, diagnostic tests, correlation analysis, and Ordinary Least Squares (OLS) regression analysis using SPSS Version 28. The findings revealed that green lending practices had a negative and statistically significant relationship with stock market returns, while sustainable investment practices, climate risk management practices, and regulatory compliance practices exhibited statistically insignificant relationships with stock market returns. The study concluded that among the climate financing strategies examined, only green lending practices significantly influenced stock market returns of banks listed on the NSE. The study recommends that listed banks strengthen investment in climate financing initiatives, enhance the integration of sustainability into lending and investment decisions, improve climate risk management frameworks, and ensure greater compliance with national and international sustainability regulations. The study further recommends that policymakers and regulators provide supportive frameworks that encourage wider adoption of climate financing practices to enhance investor confidence and long-term market performance.