Bank of Uganda (BoU) Deputy Governor Augustus Nuwagaba has cautioned against climate-related financial regulations that could unnecessarily restrict access to credit, urging regulators to balance financial stability with continued lending to productive economic activities.

"We must strengthen resilience without unnecessarily constraining access to finance," Nuwagaba said on Wednesday during the signing of a cooperation agreement between the Bank of Uganda and the European Investment Bank (EIB).

He said Uganda needed a financial system capable of identifying emerging risks, allocating capital effectively and continuing to finance productive activities.

"Our objective is a financial system that understands emerging risks, allocates capital effectively and continues to finance productive activity," Nuwagaba said.

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He added that achieving this would require cooperation across sectors, technical expertise, reliable information and sustained implementation.

Under the agreement, EIB Global, the European Investment Bank Group's international development arm, will provide technical assistance to the central bank to strengthen climate-risk supervision, improve disclosure and reporting by financial institutions, and develop a roadmap for greening Uganda's financial sector.

The support will also help BoU implement the National Green Taxonomy, launched in 2025 to classify economic activities according to their environmental sustainability.

The partnership comes as Uganda seeks to mobilise $28.1 billion for climate action by 2030, amid growing recognition that climate change poses risks to macroeconomic stability and the financial system.

Beyond the central bank, the programme will support selected commercial banks to improve climate-risk management and develop policies to expand lending to environmentally sustainable projects. Housing Finance Bank is the first Ugandan commercial lender expected to benefit.

EIB Vice-President Marco Primorac said improving financial institutions' ability to identify and manage climate risks would help banks finance environmentally sustainable investments with greater confidence.

"Banks can't manage a risk they can't see," Primorac said.

The programme is financed by Germany and Luxembourg in coordination with the NDC Partnership, a coalition that supports countries in advancing their commitments under the Paris Agreement on climate change.

Uganda joins Kenya, Rwanda, Nigeria and Ethiopia among the countries receiving support under the programme.