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Joseph Isangura
The Bank of Tanzania (BoT) has unveiled two new sets of guidelines requiring banks and financial institutions to incorporate sustainability and climate-related risks into their financial reporting.
The rules, set to take effect in 2025, aim to enhance transparency in the financial sector while aligning with global standards.
Under the new framework, banks and financial institutions will be required to disclose information about sustainability and climate-related risks in their financial reports. This includes identifying risks and opportunities that could impact cash flows, access to finance, or the cost of capital in the short, medium, and long term.
The BoT’s guidelines are part of Tanzania’s broader commitment to addressing environmental, economic, and social challenges. They also align with the International Financial Reporting Standards S2 (IFRS S2), which emphasize the importance of climate-related financial disclosures in fostering resilience and accountability across industries.
The sustainability guidelines highlight the connection between financial performance and interactions with stakeholders, the economy, and the natural environment. “A bank’s ability to generate cash flows over time is closely linked to these factors,” the draft document notes.
The climate-specific guidelines, meanwhile, emphasize the risks posed by climate change to the financial system. These include physical risks, such as extreme weather events, and transition risks tied to the global shift toward a low-carbon economy. “Climate change poses significant risks to economic stability, affecting the safety and soundness of banks and financial institutions,” states the climate framework.
By introducing these measures, the BoT seeks to prepare financial institutions for the challenges posed by climate change while encouraging them to adopt sustainable practices. The guidelines are also expected to help banks identify opportunities for investment in sustainable projects, such as renewable energy and low-carbon initiatives.
This initiative reflects a growing recognition of the interconnectedness of environmental sustainability and economic stability. It also reinforces Tanzania’s commitment to playing an active role in global efforts to address climate change and build a more sustainable future.
As the 2025 implementation date approaches, banks and financial institutions are expected to begin integrating these requirements into their operations. The BoT’s move is seen as a proactive step toward fostering a more resilient financial sector that is equipped to manage the risks and opportunities associated with climate change.
The guidelines are also part of a larger global trend, with countries and organizations around the world increasingly recognizing the importance of addressing climate-related risks in financial planning and decision-making.
