Green Bonds and Financial Performance of Commercial Banks in Kenya

Abstract

The study investigated the relationship between green bonds and the financial performance of commercial banks in Kenya. A quantitative research design using panel data analysis was used. The study adopted a census approach where 14 commercial banks having complete data for the period 2020–2024 were used. Secondary data was gathered from audited annual reports, financial statements, sustainability reports and publications by Central Bank of Kenya, using a structured data extraction template. Descriptive statistics (mean, standard deviation, minimum, maximum, skewness, and kurtosis) and inferential statistics (Pearson's correlation analysis and fixed-effects panel regression analysis) were used to analyse the data. The results showed that green bonds positively and statistically significantly influenced financial performance (β = 0.0905, p = 0.005). The results support the theoretical propositions of Institutional Theory. The study adds to literature by offering empirical evidence on the green bonds and financial performance relationship in the Kenyan banking context. The results can be used to develop policies on green finance adoption and sustainable banking. The commercial banks are urged to boost the issuance of green bonds to boost their profitability and promote environmental sustainability.