Nature-related risks are hurting Africa’s natural ecosystems, economy

By Steve UMIDHA

The African Natural Capital Alliance (ANCA) and FSD Africa have released a report detailing the findings of the nature stress test conducted on the banking systems of five African countries.

The report, “Nature Stress Test: Assessing Exposure of Five African Banking Systems”, is the first to assess the implications for African economies of the Kunming-Montreal Global Biodiversity Framework (GBF) which was agreed in December 2022 and sets out goals and targets to halt and reverse nature loss by 2030.

The report conducted in partnership with the McKinsey, examines how business profits across these five economies could be impacted—positively or negatively—depending on different nature-positive transition scenarios.

It finds that an orderly transition scenario, where businesses adopt nature-positive practices (in line with the GBF), showed the lowest financial risks while under a disorderly transition, where businesses do not substantially reduce their negative impacts on nature, profit losses in critical sectors like agriculture and mining could reach up to 50% leading to job losses.

Higher production costs and prices for agricultural goods could also lead to higher food prices and inflation.

The stress test follows on from ANCA and FSD Africa’s first report in embedding the protection of nature within regulatory frameworks in Africa.

With 62% of Africa’s GDP reliant on nature, and 70% of sub-Saharan communities depending on forests and woodlands, the findings underscore the critical need for robust financial strategies to mitigate nature-related risks.

Here’s the link to the report: https://www.mckinsey.com/capabilities/sustainability/our-insights/nature-stress-test-assessing-exposure-of-five-african-banking-systems