Nature and financial institutions in Africa: A first assessment of opportunities and risks

This report by FSD Africa provides a first quantitative risk assessment and stress-testing framework for financial institutions in Africa to evaluate nature-related opportunities and risks. Using the Taskforce on Nature-related Financial Disclosures (TNFD) LEAP approach, the study analyzes the impact of nature loss and nature-positive transitions on equity and lending portfolios across several African countries and private banks. It highlights that while aggregate portfolio impacts may appear small due to limited direct exposure, the risks are material for nature-intensive sectors like agriculture and extractives, where nature-related risks could double expected credit losses by 2030.

• Nature-related risks in the agriculture and extractives sectors are material and comparable in scale to climate-related risks in manufacturing, chemicals, and extractives. Under the most ambitious scenario, profits in agriculture and deforestation-linked extractives are projected to fall by 20 percent and 15 percent respectively by 2050.
• For the most exposed lending portfolios, nature-related risks in agriculture and extractives could roughly double expected losses due to credit risk by 2030. Traditional credit risks for diversified private banks typically range from 3 to 5 percent over ten years, which aligns with the highest estimated losses from nature-related risks in these sectors.
• Ambitious policy and consumer actions to reverse nature loss by 2030 would impact financial portfolios, with equity values shifting between +2 and -5 percent and loan books between +0.3 and -0.6 percent. Gains are driven by high-growth agricultural commodities like sugarcane and pulses, while losses are linked to pastoral farming commodities (corn, tropical roots) and deforestation-linked minerals.
• Water stress is a significant physical risk in Africa, with 25 percent of countries already water-stressed. In countries like Egypt, Morocco, and South Africa, unit production costs for staple crops such as pulses and cereals could increase by 20 to 40 percent by 2050 compared to a baseline scenario.
• The ecotourism sector, particularly in Southern and Eastern Africa (including South Africa, Namibia, Zimbabwe, and Kenya), is highly vulnerable to habitat loss and deforestation. There is a strong positive correlation between the number of visitors to national parks and the richness of flagship species such as lions, leopards, rhinoceroses, elephants, and buffalo.
• Deforestation associated with gold and copper production represents a significant market access risk for African extractives. By 2050, unit production costs could increase by 20 percent for gold and 33 percent for copper due to potential regulations and restoration requirements.
• Shifts in consumer demand, specifically reducing meat and dairy consumption and food waste, could alleviate pressure on the food system. Under ambitious scenarios, aggregate profits from crops like pulses and sugar crops could be 150 percent higher by 2050 than baseline amounts.
• African financial institutions face several barriers to implementing the TNFD framework, including limited capacity (80 percent are currently focused on climate risk), lack of standardized counterparty data on physical asset locations, and difficulty recruiting talent skilled in spatial data and scientific physical processes.
• The report recommends that financial institutions integrate climate and nature risk assessments to reduce costs and capacity pressures. It also suggests that regulators provide clear timelines for implementing NGFS recommendations and that data providers use AI-driven technologies to fill gaps regarding non-listed companies.

APA

FSD Africa (2022). Nature and financial institutions in Africa: A first assessment of opportunities and risks. https://fsdafrica.org/wp-content/uploads/2022/06/Nature-and-financial-institutions-in-africa-a-first-assessment-of-opportunities-and-risks_compressed.pdf

Chicago

FSD Africa. Nature and financial institutions in Africa: A first assessment of opportunities and risks. 2022. https://fsdafrica.org/wp-content/uploads/2022/06/Nature-and-financial-institutions-in-africa-a-first-assessment-of-opportunities-and-risks_compressed.pdf.

Wikipedia

{{cite report |author=FSD Africa |title=Nature and financial institutions in Africa: A first assessment of opportunities and risks |date=June 2022 |url=https://fsdafrica.org/wp-content/uploads/2022/06/Nature-and-financial-institutions-in-africa-a-first-assessment-of-opportunities-and-risks_compressed.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{fsdafrica2022nature, author = {{FSD Africa}}, title = {{Nature and financial institutions in Africa: A first assessment of opportunities and risks}}, institution = {FSD Africa}, year = {2022}, month = jun, url = {https://fsdafrica.org/wp-content/uploads/2022/06/Nature-and-financial-institutions-in-africa-a-first-assessment-of-opportunities-and-risks_compressed.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }