Maroa, Ibrahim Jackson2026-03-182026-03-182025-11https://ir-library.ku.ac.ke/handle/123456789/32793A Research Project Submitted to the School Of Business, Economics and Tourism, In Partial Fulfillment of the Requirement for the Award of Degree in Master of Business Administration (Finance Option) Kenyatta University. November 2025 Supervisors Eddie SimiyuThis study generally aimed at examining sustainable finance and financial performance of identified Kenyan commercial banks. The specific objectives were to examine the effect of impact investments on the financial performance of selected commercial banks in Kenya; assess how green banking affects the financial performance of selected commercial banks in Kenya; examine the effect of credit risk sustainability assessment on the financial performance of selected commercial banks in Kenya; determine the moderating effect of bank size on the relationship between sustainable finance and financial performance of selected commercial banks in Kenya. A causal research design was employed in answering the pertinent questions. Particularly, 10 commercial banks that have complied with the regulations of sustainable finance within Nairobi City County were targeted. All of the commercial banks which have initiated and adopted sustainable finance programs in their activities were purposively selected. Data was gathered out of the two sources, primary and secondary. Therefore, original evidence collected from surveys, while existing materials from previous research, print media and the internet sources were also gathered. Questionnaires were utilized in the collection of raw information from 41 participants, after which it was refined and structured for analysis using numerical numbers. The data was then uploaded into SPSS software for analysis. Measurement of how the variables related to each other entailed the analysis of distributions, as well as predictive data. Content analysis technique enhanced qualitative data analysis. The outcome established that the regression model for this study was highly significant, with an F-statistic of 213.407 (p < 0.05) and an adjusted R-squared of 0.671, indicating the model explained 67.1% of the variance in bank financial performance. Impact investment and credit risk sustainability assessment (β = 0.109, p = 0.001) have a statistically significant and positive effect on the financial performance of commercial banks in Kenya (β = 2.682, p = 0.045, and β = 0.109, p = 0.00, respectively). In contrast, green banking exhibited a significant negative relationship with financial performance (β = -3.702, p = 0.000). The moderating effect of bank size produced mixed outcomes, with no significant moderation for impact investment (β = -0.014, p = 0.269) and green banking (β = -0.147, p = 0.156), but a strong positive moderation for credit risk sustainability assessment (β = 0.575, p = 0.005), showing that larger banks derive greater financial benefits from sustainability-linked risk management practices. It was concluded that while impact investments and sustainability-linked credit risk assessments enhance financial performance, green banking currently poses short-term financial challenges for commercial banks in Kenya due to high implementation costs and low market uptake. The study recommends that banks should strategically allocate capital to measurable impact investments, adopt phased and cost-effective green banking initiatives, and integrate ESG criteria into credit risk assessment processes to improve portfolio quality and profitability. Future studies should explore sustainable finance practices across other sectors to assess comparative outcomes and identify strategies for aligning financial sustainability with broader corporate performance goals. This study contributes to knowledge by demonstrating that sustainable finance is multidimensional, producing distinct financial effects depending on the specific practice and institutional context.enThesis