Nature stress test: Assessing exposure of five African banking systems

This report by FSD Africa and McKinsey Sustainability presents a nature stress test for the banking systems of Ghana, Mauritius, Morocco, Rwanda, and Zambia. It evaluates how nature-related physical and transition risks impact real economy profits and subsequent credit losses for financial institutions across three scenarios: current policies, a disorderly transition, and an orderly transition aligned with the Global Biodiversity Framework (GBF). The findings highlight that while portfolio-level risks may appear moderate, they are heavily concentrated in priority sectors like agriculture and mining, where unweighted losses can be severe. The report argues that a coordinated, orderly transition can significantly mitigate these financial risks and provide macroeconomic benefits.

• Financial risks to the real economy and banking systems are lowest under an 'orderly transition' aligned with the Global Biodiversity Framework (GBF), where businesses voluntarily reduce their nature impacts and mitigate risks.
• Under a 'current policies' scenario, extreme physical risks—including water scarcity, soil degradation, and pollinator decline—could lead to exposure-weighted portfolio NPV profit losses of between 1 and 7 percent from 2020 to 2050, with Morocco most exposed at 7.7 percent.
• A 'disorderly transition' scenario, where policy action is taken but businesses do not adapt, creates significant transition risks that can outweigh physical risks in four of the five studied countries. In this scenario, exposure-weighted NPV profit losses are highest in Zambia (6.7 percent) and Ghana (4.7 percent).
• Nature-related risks are heavily concentrated in a few priority sectors, with 83 to 98 percent of all profit losses occurring in three to five sectors. Agriculture and forestry are high-risk priorities for all five banking systems, with unweighted NPV profit losses exceeding 15 percent in all countries except Mauritius.
• In-year profit losses from nature-related risks in the most affected sectors are comparable in scale to climate-related risks for emissions-intensive sectors. For example, by 2050, annual unweighted profit losses in agriculture, mining, and some manufacturing subsectors could reach 50, 32, and 18 percent, respectively.
• Under a disorderly GBF-aligned scenario, exposure-weighted cumulative expected credit losses could increase by up to 9 percent by 2030 and up to 21 percent by 2050. Unweighted credit losses in priority sectors could be much higher, reaching up to 75 percent by 2050.
• Business mitigation actions in an orderly transition—such as adopting sustainable farming, relocating mines away from protected areas, and adjusting pricing—could reduce exposure-weighted NPV profit losses by 27 to 78 percent across the five banking systems.
• Nature-related risks pose significant macroeconomic threats, including inflationary pressure from rising agricultural commodity prices (up to 20 percent by 2030), job losses in sectors employing 39 to 59 percent of the population in Ghana, Rwanda, and Zambia, and foreign exchange risks for commodity-exporting nations.

APA

FSD Africa (2024). Nature stress test: Assessing exposure of five African banking systems. https://fsdafrica.org/wp-content/uploads/2025/05/nature-stress-test-assessing-exposure-of-five-african-banking-systems-1.pdf

Chicago

FSD Africa. Nature stress test: Assessing exposure of five African banking systems. 2024. https://fsdafrica.org/wp-content/uploads/2025/05/nature-stress-test-assessing-exposure-of-five-african-banking-systems-1.pdf.

Wikipedia

{{cite report |author=FSD Africa |title=Nature stress test: Assessing exposure of five African banking systems |date=July 2024 |url=https://fsdafrica.org/wp-content/uploads/2025/05/nature-stress-test-assessing-exposure-of-five-african-banking-systems-1.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{fsdafrica2024nature, author = {{FSD Africa}}, title = {{Nature stress test: Assessing exposure of five African banking systems}}, institution = {FSD Africa}, year = {2024}, month = jul, url = {https://fsdafrica.org/wp-content/uploads/2025/05/nature-stress-test-assessing-exposure-of-five-african-banking-systems-1.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }