Nature and financial
institutions in Africa:
A first assessmentof opportunities
and risks
Report prepared for FSD Africa
June 2022

About FSD Africa and the African Natural Capital Alliance (ANCA)
FSD Africa carried out this joint research to support the work of the African Natural Capital Alliance (ANCA). ANCA is an
African-led collaborative forum for mobilising the financial community’s response to the risk of nature loss in Africa which is
being supported by the United Nations Economic Commission for Africa (UNECA) and the United Kingdom’s Department forEnvironment, Food & Rural Affairs (Defra).

Foreword
As underlined in the sixth report of theIntergovernmental Panel on Climate Change (IPCC),
African countries are among the most vulnerable
to climate change and have the least capacity torespond to climate risks and to climate-related
disasters. This vulnerability is compounded by
Africa’s exposure to external economic shocks.
This report aims to strengthen Africa’s resilience byproposing opportunities to redefine the continent’s
economic model to sufficiently leverage its natural
capital, and by helping to redesign Africa’s financial
system so that critically needed investments can bemade in nature, climate resilience, and associatedopportunities to improve livelihoods. Such changes
are needed because over 60 percent of Africa’s
population directly depend on ecosystem services,
naturally occurring services that benefit humans,such as the provision of food and water, for theiressential needs and livelihoods.
Perhaps more than in any other region, successful
strategies to advance Africa’s Sustainable
Development Goals will require significant naturepositive investments, that is, investments which
support net additions to the natural capital uponthat not which people rely for services. Such naturepositive investments could have a three-fold returnon investment – namely, a financial, environmental,
and social return. First, recent studies by the United
Nations Economic Commission for Africa (UNECA)
have confirmed that nature-based solutions toclimate change – such as rehabilitating wetlands

and mangroves, as well as sustainably managing
forest resources – can yield a high return on
investment. Second, nature-positive investments bydefinition strengthen the natural environment andimprove the provision of natural ecosystem services
and often add to Africa’s contribution to climatechange mitigation. Third, these strategies canalso contribute significantly to livelihoods, throughenhanced food and fibre production and related
manufacturing. In particular, a high proportion of theAfrican population directly depend on sectors thatare highly dependent on nature for their income andsustenance, and it is these individuals that might
benefit the most.
Tapping into this opportunity requires collaboration
between governments, development partners, andthe private financial sector. That is because natureis relevant to nearly all sectors of the economy andreversing nature loss will require the definition of
new products and markets, as well as substantial
net investment. We look forward to working with allpartners to develop this opportunity to its fullest –to deliver growth and resilience, both globally andlocally.
Jean-Paul Adam
Director, Technology, Climate Change andNatural Resource Management Division
United Nations Economic Commission for Africa(UNECA)

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

3

Acknowledgements
This report draws on joint research carried out between FSD Africa and Vivid Economics by McKinsey.
This work is independent, reflects the views of the authors, and has not been influenced by any business,government, or other institution.
The authors would like to thank the United Kingdom's (UK) Department for Environment, Food and Rural
Affairs (DEFRA) for their support of this effort. The authors gratefully acknowledge the invaluable time andexpertise the African Natural Capital Alliance (ANCA), UN Economic Commission for Africa contributed tothe project steering group, and the willingness of the Bank of Zambia, FirstRand, Kenya Commercial Bank
(KCB), Mauritius Commercial Bank (MCB), Sanlam, and Ecobank to engage generously. Vivid Economics
would also like to acknowledge its partners’ contributions to the NatuRisk Toolkit; these partners include
the Natural History Museum of London, and Neural Alpha.
This work is only possible because of the work that others have carried out before, especially the Taskforce
on Nature-related Financial Disclosures (TNFD) and the Taskforce on Climate-related Financial Disclosures(TCFD), as well as the work of financial supervisors, standard setters, and thought leaders in developing
approaches to assess climate- and nature-related risks. These include the Bank of England, the European
Central Bank, De Nederlandsche Bank, Banque de France, the Network of Central Banks and Supervisors
for Greening the Financial System (NGFS), the Finance for Biodiversity Initiative, and the Global
Reporting Initiative.

4

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

Executive
summary

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

5

Context
This report applies, for the first time, aquantitative risk assessment and stresstesting framework for financial institutions to
the opportunities and risks relating to nature.
It builds on the pioneering nature-related risk
assessments undertaken by Banque de France and
De Nederlandsche Bank (DNB), which estimatedthe share of assets held in the French and Dutch
financial systems considered at high risk fromnature loss. The analysis in this report extends thisapproach to quantify how the value of financial
assets would change under scenarios of future
action on climate and nature. The scenarios definea series of plausible narratives and goals, and theassessment considers how the actions needed toreach those goals would impact the performance offinancial portfolios.
The emerging findings offer proof that it ispossible for financial institutions to assess
nature-related opportunities and risks and thatthese are material. Globally, this report is thefirst to present the results of applying the Locate,
Evaluate and Assess stages of the Taskforce on
Nature-related Financial Disclosures’ (TNFD) LEAP
approach to a private financial institution’s portfolio
and to a national financial system. In doing so, it
offers an example of what is feasible in Africa, andthus of what is feasible across much of the world. It
also shows that nature-related opportunities andrisks are material in Africa, a region with high growth
opportunities and globally important natural capital.
This assessment describes the changes in
asset values and company-level financial
performance that might result from naturerelated opportunities and risks. Using new data
sets and tools, this study evaluates the degree towhich companies impact and depend on nature,and how nature affects their business activities,
including their supply chains. It estimates how thesefactors influence average company-level financial
performance over time, sector by sector, andcountry by country across Africa, before applying
these results to a high-level stress test. The final
outputs are estimates of changes in expected

6

losses from lending and changes in equity prices,aggregated into the portfolios of several leading
African commercial financial institutions. It also
estimates these changes for the national aggregate
lending portfolios of six African countries.

The case for action
If current trends continue, Africa may breachenvironmental tipping points causing largescale physical risks for financial assets. The
transgression of tipping points, such as thecomplete loss of pollinators or dieback of coral
reefs, would create severe costs for businesses andis becoming more likely, both globally and in Africa.
For example, research suggests the loss of 20 to30 percent of remaining forest cover in the Amazon
rainforest would trigger an irreversible conversionof all remaining forest to savannah. Equivalent
figures are not yet available for the Congo Basin,
though studies have confirmed that projected future
deforestation in Western and Central Africa is likely
to disrupt the West African monsoon, dramaticallyaffecting rain-fed agriculture, in particular maizecrops north of the equator. twenty-five percent ofAfrican countries, including South Africa and mostof Northern Africa, are already water stressed today.
Acute tail risk events like these have the potential to
make business practices that are highly dependent
on nature infeasible and strand assets in affectedareas. Examples include rain-fed agriculture,pharmaceutical research, and ecotourism.
The modelling framework does not capture
these tipping points and underestimates naturerelated physical risks. Across all the portfolios
considered, the changes in asset value driven byphysical risk exposure are limited. However, they
are underestimates for four reasons. First, current
frameworks model risks from incremental changes
in ecosystems, and do not model the large-scale
tail risks associated with crossing environmental
tipping points. Second, the assessment considers
average risk at the country level, masking a broad
distribution of impacts across sub-national locations
and companies. Risks for some individual locations
and companies will be substantially higher than the
average. Third, the assessment evaluates a subset

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

of physical risks considered to be the most material
and feasible to model (see Appendix 1). There arealso physical risks that are not modelled such as
the loss of natural water filtration or flood and storm
protection, and these could be material. Fourth,similar to climate change, the physical risks ofnature loss will intensify over time, with more severe
impacts beyond 2050, the time horizon consideredin this analysis.

corn and tropical roots), exposure to deforestationlinked minerals, and to a lesser extent, exposure to
related downstream sectors, such as manufacturing,
wholesale trade, and retail trade. Losses canbe offset by diversifying portfolios to include
companies with less nature-intensive practices
and by focusing on areas of opportunity that may
emerge in a nature-positive scenario.

Looking specifically at the agriculture andextractives sectors, expected gains and losses
Mounting physical risks make global consumer
by 2030 are an order of magnitude higher,
and policy action to address the nature crisis
representing material shifts in value that require
more likely. The fast pace at which nature
immediate attention. For equity, changes in value
is degrading and the severe consequence ofare significant, reaching between -2 percent andenvironmental tipping points have led many
-5 percent for agriculture in most countries, andresearchers to proclaim a state of nature crisis.
between +1 percent and -4 percent for extractives.
Policymakers and regulators around the world
In the most extreme examples, the value ofare already acting to address nature loss andagricultural investments increases by +55 percent
are cooperating to facilitate a ‘net-zero andin one country and falls by -22 percent in another.
nature-positive’ transition – a transition that not
For lending, changes in loan book value can also
which ensures a future state of nature (including
be large, reaching between +5 percent and -3
biodiversity, ecosystem services, and natural
percent for agriculture, and +0 to -3 percent forcapital) that not which is greater than the current
state. For example, in 2021, summit statements from extractives. Again, these results are averages for acountry-sector combination. The impacts for someleaders of the G7, G20, and COP26 committed to a
individual subsectors, locations, and companies are‘net-zero and nature-positive transition’.
significantly higher.

Asset value results

Ambitious consumer and policy actions taken
to halt net nature degradation will substantially
impact the financial institution portfolios
considered, with changes in the value of equity
portfolios ranging from +2 to -5 percent by
2030 and of loan books ranging from +0.3 to-0.6 percent. These changes are large given thelimited exposure to nature-intensive sectors suchas agriculture and extractives across the portfolios.
As mentioned above, they also reflect average
impacts. Individual subsectors, locations, andcompanies can experience much larger impacts.
Gains are driven by exposure to high-growth
agricultural commodities that not which benefit fromthe expansion of alternative proteins (for example,
sugarcane and pulses) which have lower impacts
on nature than traditional proteins. Losses are
driven by exposure to slower-growth agriculturalcommodities linked to pastoral farming (for example,

For the most exposed lending portfolios, naturerelated risks in agriculture and extractives would
roughly double expected losses due to credit riskby 2030. Based on our experience in working withthe financial sector, diversified private banks would
typically expect losses from traditional credit risks(unrelated to climate or nature) of around 3 to 5
percent over a ten-year period. This is roughly inline with the highest estimated losses from lending
to agriculture and extractives as a result of naturerelated risks, presented above. This represents a
substantial decrease in the profitability of lending
to these sectors unless these risks are carefully
managed, for example, through stewardship.
Nature-related risks in agriculture andextractives are of the same (large) scale
as climate-related risks in manufacturing,chemicals, and extractives. Equity values closely
track changes in the expected future flow of profits.

Nature and financial institutions in Africa: A first assessment of opportunities and risks7Based on our nature-related risk assessment,
profits in agriculture and deforestation-linked
extractives will likely fall by 20 percent and 15
percent respectively in 2050 under our mostambitious scenario. By contrast, climate-related
risk assessment work by Vivid Economics andPlanetrics has shown that in a 2050 net-zeroscenario, manufacturing, chemicals, and extractives
would see profit losses in 2050 of roughly 10
percent, 15 percent, and 25 percent respectively.
For both nature and climate, this is primarily driven
by transition risk.

Risks and opportunities driving asset
value
If current trends continue, water stress across
Africa would make agricultural production in
the worst affected areas significantly more
expensive by 2030. As already high levels of water
stress worsen in the future, countries that face
the highest pressure on limited water resources
may consider methods to manage access to water.
For agricultural businesses, this could increase
the unit production costs of several agriculturalcommodities by +20 to +40 percent in 2030,
relative to a baseline scenario which does notaccount for these risks. Without mitigating action,
this would create large knock-on increases incommodity prices, often between +15 and +30
percent, affecting both downstream businesses
and consumers.
Projected changes in land use between now and2030 would affect the population of species
that attract tourists in Africa and hence thefinancial performance of ecotourism. In thisrespect, Eastern and Southern African countries areat highest risk, as they account for a large share of
tourism activity and are projected to see the fastest
rates of change in land use. As mentioned above, if
environmental tipping points linked to tourism arereached, such as the dieback of coral reefs in Southeastern Africa, impacts on demand and profits
would be severe.
The need to mitigate these physical risks andpreserve space for nature would require supply-

8

side adjustments in land-intensive industries,
often increasing production costs. Areas thatare afforested, reforested, or become protected
would no longer be available for agriculture. As aresult, farmers would intensify yields to meet risingfood demand. The investment in intensification
would increase unit production costs in 2030,
often by +5 to +20 percent relative to a baseline
scenario. Over time, yield improvements would
bring unit costs down, resulting in lower-thanbaseline costs by 2050. The highest levels ofintensification would occur in Central and Eastern
Africa, where deforestation pressures andbiodiversity value are high. In extractives, if export
markets introduce deforestation standards suchas those under consideration in the European
Union (EU), deforestation associated with gold
and copper could become a market access risk.
In addition, regulators may require businesses torestore affected land. Although the additional costs
might be small through 2030, they could reach -2
to -33 percent of baseline unit production costs by
2050. In the food sector, in which local demand is
predominantly met by local supply, consumers willbear the rising cost of production, leaving profit
margins in the food business largely unchanged. For
minerals, the incidence of cost pass-through may belower, leaving producers and asset owners to bear agreater share of rising costs.
Shifts in food demand can reduce the nature
impact of the food system and make room forthe nature-positive transition. Based on existing
literature, discouraging diet shifts towards meatand dairy and reducing food waste would be key
levers to significantly reduce the future nature- andclimate-impacts of the African food system. This
would decelerate growth in food demand, primarily
driven by population and income growth, andrelieve pressure on the food system. Staple grainsused for livestock feed would be most affected,
with compound annual growth rates in demandfalling substantially under the most ambitious
scenarios from +3 percent to +1 percent. By
contrast, alternative proteins would offer growth
opportunities for agribusinesses. With ambitious
action, aggregate profits in 2050 from relevant
crops – such as pulses and sugar crops – would

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

be +150 percent higher than baseline amounts.
Looking at agriculture as a whole, aggregate profits
would not grow as fast as they do in the baseline
scenario, with profits -1 to -3 percent below baseline
in 2030, and -10 to -23 percent below baseline
in 2050. Put differently, aggregate profits would
increase by +365 percent between 2020 and 2050
in our most ambitious scenario, compared to +470
percent in the baseline. This difference primarilyreflects moderated increases in demand rather than
reduced profit margins. This demonstrates thatgrowth prospects would still be strong and robustin Africa, even with ambitious action to reduce andreverse net nature loss across the continent.

opportunities, such as financial services (up to
20 percent in some cases) and tourism-relatedindustries (up to 7 percent). The ways in whichthese sectors impact or depend on nature are
not yet well understood.
•

Counterparty data availability: The datarequired for assessments are not routinely
collected from counterparties. For example,
none of the institutions we examined collected
data on the location of physical assets in astandardised way across industries. Financial
institutions cannot close this data gap bypurchasing third-party data, as datasets do
not yet comprehensively cover non-listed
businesses. As a result, institutions can only
perform a coarser sector-level assessment.
It is also challenging for financial institutions
to understand and assess complex tail risks
associated with highly localised tipping points.

•

Attracting skills and talent: Financial
institutions reported difficulty in recruiting
staff with the right skills and experience fornature-related oversight. Requirements include
proficiency with spatial data, understandingof scientific physical processes, and the ability
to work across several departments including
sustainability, financial risk, and compliance.

•

Regulatory expectations and support:
Financial institutions indicated that it would beeasier to secure internal investment to develop
nature-related oversight capacity if there areclear signals that such oversight will becomea regulatory requirement. Regulators have notyet set a timeline for when they may implement
the recommendations of the NGFS on naturerelated risks.

Practical management of naturerelated opportunities and risks
Financial regulators and supervisors are
moving towards bringing nature-related risks
into the scope of financial regulation. In March
2022, the Network for Greening the Financial
System (NGFS), representing 114 central banks
and financial supervisors, concluded ‘that naturerelated financial risks should be considered bycentral banks and supervisors for the fulfilment of
their mandates’. In the same month, the Taskforce
on Nature-related Financial Disclosures (TNFD)
released its beta framework, laying the foundation
for how businesses across the world – including thefinancial sector – might be expected to manage anddisclose their actions on nature.
For African financial institutions, this presents
several challenges given current capacity,
processes, and guidance:••

Limited capacity: Eighty percent of theinstitutions we engaged with are building out
their climate risk capabilities and have notallocated capacity to take on nature. It is not
yet clear how to effectively integrate nature
with climate thereby minimising the internal
resources required to act on nature.
Lending to sectors with indirect exposure:
The portfolios we examined had significant
exposure to sectors with indirect andcomplex exposure to nature-related risks andOptions for action
In preparing to address nature-related risks
and comply with any future regulation, financial
institutions can:•Consider climate and nature together fromthe start. Build integrated climate- and naturerelated risk assessment and management

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

9processes. Integration makes both
approaches more robust (due to climatenature interactions), reduces overall cost, andalleviates capacity pressures.

10•

Engage with the TNFD and other key actors.
Through engagement, financial institutions
can infuse frameworks such as the TNFD’sframework with practical considerations fortheir application in Africa. Engagement canreflect each organisation’s own experience
with nature-related risks and opportunities.
High-priority topics raised in our working
group focused on how to overcome the barriers
discussed above, such as guidance on what
data to collect and how to assess exposure forfinancial services and tourism.

•

Link training and capacity with climate. To
tackle difficulties in recruitment, organisations
can build the skills of their current staff. Manyof the same skills are required for climate- andnature-related oversight, so capacity can bebuilt for both within the same team.

•Upgrade support systems. More data will
be needed on the sectoral and geographicaldistribution of clients’ revenues, the locationof clients’ operations, the state of local
ecosystems on which they depend, and theactions being taken to address the clients’
impacts and dependencies on nature and its
services. Many of the data needed for climate
assessments are also needed for nature, and sodata collection strategies can address 		
both simultaneously.

•

Support customers. Customers and investees
will need support to navigate the net-zerocarbon and nature-positive transition. This
includes providing advice and expertise tosupport clients to understand and manage
nature-related risks as well as access to capitalfor investment.

Financial regulators, framework issuers,
policy-makers, and data providers can play apivotal role. Regulators can clearly communicate
their plans to integrate climate and nature risk
management and a timeline for implementing
the NGFS recommendations on nature-related
risk. They can work together to provide guidance
to the private sector, including how to deal withissues specific to African financial systems, suchas working with currently available data. They can
examine how this would change micro-prudential
supervision frameworks such as supervisory review
processes, disclosure templates, and minimum
capital requirements. Framework issuers andstandard setters – including but not limited to the
TNFD – can follow structured piloting processes
covering each of the most important sectors andasset classes in Africa. In a similar way to regulators,
policymakers can outline in advance the future
direction of policy to protect and restore Africa’s
natural capital, in order to help financial institutions
anticipate medium- and longer-term risks. Finally,
data providers can engage with financial institutions
and leverage new AI-driven technologies to solve
data gaps, such as access to data on private 		(non-listed) companies.

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

Contents
Foreword

3

Acknowledgements

4

Executive summary5

1. Introduction

15

2. Background17

The state of nature in Africa

18

Global action on nature

18

Link to TNFD beta framework

19

Comparison to existing assessments of nature-related risks and opportunities

20

3. Case studies

21

Introduction to nature scenarios

22

Portfolio composition

23

Aggregate impact on equity portfolio

24

Aggregate impact on lending portfolios

25

Impacts on equity and lending portfolios by sector

27

Agriculture sector deep dive29

Extractives sector deep dive31

Downstream sectors deep dive32

How to interpret the results

32

4. Risks and opportunities driving asset value

35

Nature-intensive sectors are central to the African economy

36

Current trends draw us closer to severe physical risks

36

Making space for nature involves supply-side adjustments

38

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

11

Shifts in consumer demand might create space for nature

43

Producers could capture competitive advantages or capture new markets

47

5. Practical management of nature-related opportunities and risks

55

6. Options for action

63

Financial institutions

64

Financial regulators

65

The broader ecosystem

65

Appendix 1: Approach to opportunity and risk assessment
Scenarios

68

Sector-level risk assessment

71

Company-level impacts

72

Portfolio-level impacts

73

Appendix 2: Context and coverage for top-priority countries

74

Appendix 3: Risk definitions and taxonomy

77

Nature, ecosystem services, and their economic value

77

Nature-related risks and opportunities

80

Value of nature-related risk management for financial institutions and systems

81

The climate-nature nexus

82

Appendix 4: Evolving regulatory ecosystem

1267Nature and financial institutions in Africa: A first assessment of opportunities and risks

84Introduction

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

13This report presents, for the first time, risk
assessment and stress-testing frameworks
that financial institutions can extend to theopportunities and risks relating to nature. The
completed quantitative risk assessment provesthat nature-related risk assessment for financial
institutions is feasible. It shows materiality in aregion with high growth opportunities and globally
important natural capital. And in a world-first for
Africa, it offers an example of what is feasible in
Africa – and thus of what is feasible across much of
the world.
In showing how the TNFD framework forassessing and managing nature-related risks
and opportunities can be applied in Africa, thereport:•14

applies the Locate, Evaluate, and Assessstages of the TNFD beta framework’s LEAP
process in practice (see Section 3 for a moredetailed discussion of how this study maps tothe LEAP approach).

•estimates the exposure key African economic
sectors to nature-related opportunities andrisks.

•

completes first-of-their-kind stress tests for aselection of commercial financial institutions
and financial systems in Africa, covering both
corporate lending and equity.

The remainder of this report is structured asfollows:•

Section 2 covers the materiality of nature for
Africa’s financial sector.

•

Section 3 quantifies some of the connections
between nature and the value of the lending
portfolios of commercial financial institutions
and nations.

•

Section 4 lays out evidence of the links
between nature and non-financial corporate
performance.

•

Section 5 explores some of the potential
obstacles that African financial institutions
might face when implementing the TNFD.

•

Section 6 identifies options for unlocking
financial risk management in relation to naturein Africa.

•

Four technical appendices detail: (i) the
methodology used; (ii) the coverage andcontext of five selected countries: Egypt,
Ghana, South Africa, Kenya, and Mauritius; (iii) ataxonomy of nature-related opportunities andrisks; and (iv) the evolving regulatory system.

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

Background

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

15

The state of nature in Africa
The African economy relies upon the planet’s
natural systems. Twenty-three percent of African
GDP is highly dependent on nature, as is thestability of the financial systems within Africa – andthus opportunities for economic growth and wellbeing.¹ Yet, nature systems are currently in a stateof crisis, with nature degrading at rates faster thanhumanity has previously experienced.² As we haveseen with climate change, exposed businesses
that adapt to changes, mitigate adverse impacts,
and build resilience enjoy significant opportunities
and competitive advantage. They face risks as well.
Nature loss is equally urgent – perhaps even moreurgent – than climate change for African citizens; inAfrica, the immediate need is to avoid environmental
tipping points such as local ecosystem collapse. The
physical hazards associated with the collapse of
local ecosystems, for example, stark reduction of
rainfall due to rainforest die back or desertificationof farmland, and the resulting impacts on the
livelihood of African citizens could be severe.
Yet Africa’s natural capital is declining at a highrate, exceeding global trends. For example,
between 2001 and 2020, several African countries
lost up to 30 percent of their tree cover, comparedto 11 percent globally.³ African biodiversity has
declined on average by 4.2 percent, considerably
higher than the global average of 2.7 percent.⁴
twenty-five percent of African countries are alreadyconsidered water stressed today and acute water
shortages such as South Africa’s 2018 water crisis
are becoming more likely.⁵ The production of someof Africa’s top export commodities – such as copperand fruits – contribute to this nature loss.

Global action on nature
Policy-makers and regulators around the world
are already acting to address nature loss and arecooperating to facilitate a ‘net-zero and naturepositive’ transition. In 2021, summit statementsfrom leaders of the G7, G20, and COP26 committed
to a ‘net-zero and nature-positive transition’. At theUnited Nations’ COP26 climate-change conference,
45 governments pledged to protect nature throughwide-ranging reforms in agriculture, food systems,
and marine industries.⁶ Central banks in France andthe Netherlands published innovative nature stresstests.⁷’ ⁸ In March 2022, the Network for Greening
the Financial System (NGFS), representing 114
central banks and financial supervisors, concluded
that ‘nature-related financial risks should beconsidered by central banks and supervisors
for the fulfilment of their mandates’.⁹ Later thisyear, China will host the Convention on Biological
Diversity (CBD) COP15 conference, at which global
leaders may adopt a Post-2020 Global Biodiversity
Framework (GBF). Over the last two years, the UK
has introduced legally binding targets to halt the
decline in national wildlife populations by 2030
and increase species populations by 10 percent by
2042.¹⁰ Perhaps the GBF will be a turning point for
global action on nature, as the Paris Agreement wasfor climate.
The private sector has also begun to commit
to action. Under the Finance for Biodiversity
Pledge, 84 financial institutions, managing €12.6
trillion in assets, have committed to set targets fortheir impacts on nature, and to disclose progress
towards them. Financial institutions are developing
nature-positive investment strategies andproducts; early movers in Europe include HSBC
Global Asset Management, Lombard Odier, andMirova. At COP26, 100 British-affiliated companies
committed to becoming ‘nature-positive’, joining
global giants such as GSK and Holcim. More than
1,000 companies with combined revenues of around
US $5 trillion signed Business for Nature’s Call to
Action, demanding that ‘governments adopt policies
now to reverse nature loss this decade’.

1(World Economic Forum, 2020)(IPBES, 2019)3(Global Forest Watch, 2022)
4
Measured by the Biodiversity Intactness Index as provided by (Phillips, et al., 2021)
5
Water stress level based on analysis by Vivid Economics; water stress projections assuming a RCP 8.5 provided by (Gassert et al., 2015)
6(UKCOP26, 2021)
7(Banque de France, 2021)
8(DeNederlandscheBank, 2020)
9(Network for Greening the Financial System, 2022)¹⁰ (UK Department for Environment, 2022)
2

16

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

Link to TNFD beta framework
Against this backdrop, the Taskforce on Naturerelated Financial Disclosures (TNFD) released
its beta framework in March 2022, thus laying
the foundation for businesses to disclose their
exposure to and actions on nature.¹¹ Following
in the footsteps of the TCFD, which set the global
standard for climate disclosures, the TNFD
framework is expected to be the predominant,globally coordinating framework for businesses
to report and act on nature-related risks andopportunities.¹² After its full launch in 2023, theframework is expected to be integrated into
sustainability reporting standards – such as thestandards developed by the new IFRS International
Sustainability Standards Board – and hence into
mandatory reporting regulations around the world.¹³
It is intended to be acted upon alongside the TCFD,
with the framework aligned with the four pillars of
the TCFD framework: governance, strategy, risk
management, and metrics and targets.
The study demonstrates that the TNFD’s LEAP
(Locate, Evaluate, Assess, Prepare) approachof the TNFD beta framework can be applied tofinancial portfolios in Africa to quantify naturerelated risks.¹⁴ Globally, this report is the first topresent the results of applying the Locate, Evaluateand Assess stages of the LEAP approach to a
private financial institution’s portfolio and to anational financial system. Moreover, the assessment
focuses on Africa, demonstrating feasibility evenwhen less data is available.

The assessment maps to the LEAP approach in
the following way:•

Locate interface with nature: The approachaccounts for country-specific drivers of both
physical and transition opportunities and risks.
It accounts for the integrity of ecosystems
at the national level including through the
Biodiversity Intactness Index, remaining
forest cover, and air and water pollutant
concentrations. It also accounts for the
likelihood of nature-related policy or regulation
across different sector-geographies.

•

Evaluate dependencies and impacts: 		
The approach takes a focus on the agriculture
and extractives sectors, identifying their mostimportant dependencies and impacts onnature, and quantifying their size and scale
relative to production. It also considers how
these dependencies and impacts are likely toimpact downstream sectors that source inputs
from nature-intensive primary sectors throughchanges in the price of primary commodities.

•

Assess material risks and opportunities:
The approach uses forward-looking scenario
analysis with a focus on 2030 and 2050
to estimate the risks and opportunities
corresponding to these dependencies andimpacts, assuming current risk management
approaches continue in the future. In doing so,
it identifies which risks and opportunities arematerial.

•

Prepare to respond and report: In Section 6,
the report discusses how financial institutionsin Africa may wish to adjust their strategies
in order to respond to these opportunities
and risks. The Prepare section of the LEAP
framework will be bespoke to each individualorganisation and is not presented here.

11(Taskforce on Nature-related Financial Disclosures, 2022)(Taskforce on Climate-related Financial Disclosures, 2015)(International Sustainability Standards Board, 2021)
14(Taskforce on Nature-related Financial Disclosures, 2022)
12

13Nature and financial institutions in Africa: A first assessment of opportunities and risks

17Comparison to existing assessments ofnature-related risks and opportunities
Over the past few years, several landmark
studies have helped us understand how to assess
nature-related risks and opportunities, as wellas the impacts and dependencies that underpin
them. The academic, development-finance, NGO(non-governmental organisation), and regulatorycommunities have assessed nature-related risks
across financial systems in France, the Netherlands,
Brazil,¹⁵ Malaysia,¹⁶ and the global asset base of DFIs
(development financial institutions).¹⁷’¹⁸’¹⁹ Guidanceis also emerging on the use of tools and data toassess risks and opportunities.²⁰’ ²¹ The authors are
early movers in the space and there is yet to be anassessment focused on Africa.

This study is the first of its kind to estimate
the impact of nature-related risks on financial
institutions and financial systems in terms ofchanges to expected loan book value and equity
value. It builds on the pioneering nature-related
stress tests undertaken by Banque de France and
De Nederlandsche Bank (DNB), which estimatedthe share of assets held in the French and Dutch
financial systems considered at high risk fromnature loss.²²’ ²³ For the first time, the analysis
extends this approach to quantify changes in valueof financial assets under scenarios of future action
on climate and nature. For lending portfolios, itcalculates changes in expected losses given default,
accumulated over time. For equity portfolios, theanalysis reports changes in market value.

15(World Bank, 2021)(World Bank, 2022)
17(Finance for Biodiversity Initiative, 2021)
18(Cambridge Institute for Sustainability Leadership, 2022)
19(Finance for Biodiversity Initative, 2022)
20(Finance for Biodiversity Initiative, 2022)
21(World Wildlife Forum, 2021)
22(Banque de France, 2021)
23(DeNederlandscheBank, 2020)
16

18

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

Case studies

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

19Introduction to nature scenarios
The analysis employs five scenarios of future
action on climate and nature, taking an approachthat not which is typical for systemic andfinancial institution stress testing. The scenarios
track a series of plausible narratives and states of

the world. Unlike climate change, nature loss has
not resulted in an internationally agreed global goal
nor a set of national policy instruments to direct
the transition. A scenario-based approach to risk
assessment is an appropriate response to this policy
uncertainty; see Appendix 1 for a discussion of the
scenarios.

We consider five scenarios of action on climate and/or nature and a baseline.
Exhibit 1

We consider five scenarios of action on climate and/or
nature and a baseline.
Low exposure
High exposure
Scenario

Description

Transition
risk

Physicalrisk

Natural outcome

Baseline

No accounting of physical or transition risk.
All results are measured relative to baseline.

N/A

Current
policies

Continuation of accelerating biodiversity loss,
widescale depletion of natural capital and fallin the availability and quality of ecosystemservices.

Continuation of current nature policies andcommitments with no expected increase inambition for both nature and climate.

Climateonly

Ambitious action is taken on climate withlimited focus on, or coordination with, nature
action. Actions can benefit nature or drive
nature loss.

Any nature co-benefits from climate action
are largely ineffective at halting the overall
decline in nature. Accelerating nature loss
continues, but at a slightly reduced pace.

Climate +Protection

Climate action is coupled with substantial
expansion and protection of nature but withno further action.

Effective area-based conservation improves
nature integrity in key hotspots by 2030, but
significant decline continues in other areas of
the world.

Climate +NatureFutureAmbitious and coordinated nature action
works towards co-benefits for both climate
and nature goals. However, transformativechange is achieved late.

Trends of nature loss continue to accelerate
to 2030 and then decelerate, leading toeventual reversal (i.e., positive nature trend)by 2050.

Climate +NatureNow

Ambitious, holistic, and early nature action
is well coordinated with climate, maximisingco-benefits and minimising disruption.

Rapid transformation to halt and reverse
nature loss by 2030 with significant
biodiversity gains achieved by 2050.

Source: Vivid Economics.

The scenarios become more ambitious overtime, progressively layering on additional action
on climate and nature. The business-as-usual
scenario, ‘Current Policies’, assumes that current
trends in climate change and nature loss continue.
The ‘Climate Only’ scenario is consistent with global
warming of 1.5 degrees celsius and considers the
cessation of deforestation, extensive bioenergy
production, and moderate shifts in diets and foodwaste as levers to reduce global climate impacts(without consideration of nature impacts). The‘Climate + Protection’ scenario adds ambitious

20

expansion of protected nature areas, thereby
improving nature outcomes. The two nature
scenarios, ‘Climate + Nature’, include a broader setof measures that tackle pollution, reduce bioenergyuse, and show more dramatic shifts in diets andfood waste habits, specifically to reduce global
nature impacts. These two scenarios halt andreverse nature loss but differ in timing. The baseline
scenario serves as a comparator in which physicaland transition risks are not accounted for. Exhibit 1
briefly describes the scenarios, while the details arelaid out in Appendix 1.

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

Portfolio composition
The TNFD framework is applied to a synthetic
equity portfolio, three private banks in Africa,
and the national lending portfolios of six Africancountries. The synthetic equity portfolio²⁴ is spread
across five countries of focus; the three privatebanks are headquartered in different countries; and,the national lending portfolios are in Egypt, Kenya,
Ghana, Mauritius, South Africa, and Zambia.
The portfolios have exposure across a range ofAfrican countries with a regional spread acrossthe continent. This geographical variety affects
factors such as the crop mix of the agriculture sector,
exposure to deforestation pressure, the likelihoodthat protected areas will be expanded, and themineral mix of the extractives sector. Different
countries will also vary in the pace and ambition ofpolicy action under a given scenario. For the threeprivate banks, lending is diversified across several
countries, but with the majority of assets held in asingle country.
The level of exposure to agriculture andextractives ranges considerably across theportfolios, from 2 percent to 20 percent of total
portfolio value. Exposure to agriculture ranges
from 2 percent to 14 percent of total portfolio
value, while exposure to extractives (mining andquarrying) ranges from 0 percent to 9 percent.
Exhibit 2 below shows the sectoral composition of
the financial portfolios.²⁵ There is greater exposure
to downstream sectors that use agricultural or
extractive commodities as inputs. In particular,
exposure to manufacturing ranges from 6 percent
to 54 percent, and exposure to wholesale and retailtrade ranges from 7 percent to 42 percent.

Exposure
to agriculture and extractives together ranges from 2% to 20% of
Exhibit 2
total
portfolio
value.
Exposure to agriculture
and extractives together ranges from 2 percent to 20
percent of total portfolio value.
Agriculture

Real Estate Activities

Information andCommunication

Extractives

Financial and Insurance Activities

Transportation and Storage

Wholesale And Retail Trade; Repair Of Motor Vehicles andMotorcycles

Accommodation and Food Service Activities

Service Activities¹

Manufacturing

Construction

Others²

7

5

9

7
8

6
9

14

9

7
39

18
6
10

42

19

43

8

24

1.
2.

Zambianfinancialsystem10

32

Egyptianfinancialsystem

14
6

28
8
6

20
18

10

14

23

12
13

14
Ghanaianfinancialsystem

6

5

11

12

15
Private bank 1 Private bank 2 Private bank 3

54

11

12
9

10

8
13

30

6

8

Mauritianfinancialsystem19

25
5
Kenyanfinancialsystem

12

6
7

12
16

25
South African
financialsystemDiversified
equity portfolio

Includes ISIC sectors Professional, Scientific and Technical Activities, Administrative And Support Service Activities, other Service Activities
Includes ISIC sectors Electricity, Gas, Steam and Air Conditioning Supply, Public Administration and Defence; Compulsory Social Security, Water Supply; Sewerage, Waste
Management and Remediation Activities, Education, Human Health and Social Work Activities, Arts, Entertainment and Recreation, Forestry

Note:

1. Includes ISIC sectors Professional, Scientific and Technical Activities, Administrative and Support Service Activities, Other Service Activities
2. Includes ISIC sectors Electricity, Gas, Steam and Air Conditioning Supply; Public Administration and Defence; Compulsory Social Security; Water Supply; Sewerage, Waste
Management and Remediation Activities; Education, Human Health and Social Work Activities; Arts, Entertainment and Recreation; Forestry
Source: Vivid Economics, based on data shared by working group members and published by central banks. (Bank of Zambia, 2021), (South African Reserve Bank, 2021), (Bank of Maritius,
2022), (Central Bank of Egypt, 2020), (Central Bank of Kenya, 2020), (Bank of Ghana, 2021)

24

The data collected on private sector equity investments through the engagement process had negligible exposure to the agriculture andextractives sectors;the focus of our assessment framework. For this reason, we chose to construct a synthetic equity portfolio that reflected
the structure of several African national economies.
25
As the scope of the risk assessment is to consider opportunities and risks to financial assets linked to corporate activity in Africa, we exclude
assets linked to counterparties outside of Africa, as well as personal lending.

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

21

Aggregate impact on equity portfolio
Predicted changes in value to the equity portfolio
are significant, with country-specific segments
experiencing shifts in value between -5 and +2
percent by 2030, rising to roughly -8 and +2
percent by 2050, under the Climate + Nature
Now scenario. ²⁶ Changes in equity values arecalculated as the present discounted value ofchanges in the underlying companies’ expected
profits. As a result, the estimated impacts of naturerelated opportunities and risks on companies’
profits are of a similar or larger magnitude than
the impacts on equity value. Section 4 discusses
changes to expected firm profits in detail. As shownin Exhibit 3, the market values of the countryspecific segments follow different trends overtime.
The variance in financial impacts is mainly driven by
two factors:•

estimated changes in equity value linked toagriculture and extractive producers, and toa lesser extent manufacturers of food andbeverage products and electrical components.
•

Direct exposure to the agriculture andextractives sectors. The scope of theanalysis encompasses risks to agriculture
and extractives as primary sectors, as wellas to their downstream secondary sectors
through price increases. Portfolios with greater
exposure to these sectors exhibit higher

Geographical exposure. The geographicalexposure influences the expected change inequity value in several ways. For agriculture,
the equity values are sensitive to the crop
mix. Some commodities experience more
rapid profit growth under ambitious action,such as those associated with alternative
proteins. Others experience slower growthsuch as those associated with livestock feed.
Similarly, equity values linked to the extractives
sector are sensitive to whether the country
in question produces minerals closely linked
with deforestation. In addition to sectoralcomposition, many risk drivers are locationspecific, such as water availability and land-use
regulation. For example, holding investments
in cotton producers located in one place might
be associated with higher nature-related risks
relative to another. Financial institutions facehigher expected changes in equity value if
they hold stakes in producers which operate,
for example, in water-stressed locations ordeforestation hotspots.

Exhibit3
By
2030,
total equity value could fall by up to 5% under ambitious action to
By
2030,
total
reverse natureequity
loss. value could fall by up to 5 percent under Climate + Nature
Now.
Equity portfolio value accounting for changes in profits, by country of focus
Scenario: Climate + Nature Now

103
102
101

+2%

+2%

100
99
98

-5%

97

-8%

96
95

Local portfolio - Mauritius
Baseline
Local portfolio - South Africa
Local portfolio - Egypt
Local portfolio - Kenya
Diversified equity portfolio
Local portfolio - Ghana

94
93
92
2020 22 24

26 28

30 32

34

36

38 40 4244 46 48 2050

Note: Change in equity market value relative to baseline scenario.
Source: NatuRisk, Vivid Economics
26

22

The synthetic equity portfolio contains equal shares of investments in Egypt, Ghana, Kenya, Mauritius, and South Africa and the sectoral
distribution mirrors the GDP contribution of each sector to the respective economies.

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

Aggregate impact on lending portfolios
Aggregate impacts for lending vary significantly
across portfolios with a spread of cumulative
gains and losses from +0.3 to -0.6 percent
by 2030, under the most ambitious scenario,
Climate + Nature Now. This demonstrates thatnature-related opportunities and risks could beof sufficient magnitude to affect the probability
that companies are unable to service their debts
and default. This changes the total amount oflosses expected from lending in a given period.
Cumulatively, over the next ten years, increases
in gains or losses could reach as high as +0.3 and-0.6 percent of loan book value respectively. As
explained above, the variation of impacts acrossportfolios is driven by their geographical andsectoral composition. By 2050, so over 30 years,
cumulative gains and losses could reach +1.1 and-2.8 percent respectively, as illustrated in Exhibit 4.²⁷
Impacts are generally lower for lending relative
to equity as the relationship between profitsand expected losses is not linear. Expected
losses remain minor until changes in companylevel profits cross a certain threshold at which
point the company is unable to repay its loans. This
threshold depends on the balance sheet strengthand the credit rating of the company in question.
The rationale is simple: companies’ earnings andassets will be used to repay loans first before paying
dividends to equity owners.

Exhibit 4

By 2030, total loan book value could change by +0.3% to –0.6% under
By 2030, total loan book values could change by +0.3 percent to -0.6 percent
ambitious
action.
under Climate+ Nature Now.
Loan book value accounting for changes in expected losses, by lender
Scenario: Climate + Nature Now
102
101

+0,3%

+1,1%

100

–0,6%

99

–2,8%

98
97
96
2020 22

24

26

28

30

32

34

36

38

40

42

44

46

Mauritian financial system
Private bank 2
Baseline
Egyptian financial system
Kenyan financial system
Private bank 3South African financial system
Ghanaian financial system
Private bank 1
Zambian financial system

48 2050

Note: Change in loan book value relative to baseline scenario.
Source: NatuRisk, Vivid Economics

27

As an example, imagine a bank’s loan portfolio is worth US $ 1 million in 2020 and background losses (for reasons other than nature) are
expected at 0.3 percent per year. Before accounting for nature, cumulative background losses by 2030 would reach 2.9 percent, leaving a
total loan book .

Nature and financial institutions in Africa: A first assessment of opportunities and risks23

Under less nature-ambitious scenarios, negative
financial impacts on lending portfolios could belower, but ubiquitous. For instance, cumulative
expected losses reach a maximum of -0.4 percent
by 2030 under the Climate + Protection scenario,
compared to -0.6 percent under the Climate +Nature Now scenario. Moreover, under the Climate+ Protection scenario, impacts are all negative.
Please see Exhibit 5. This suggests that a significant
portion of nature-related risks are driven byinterventions needed to address the climate crisis;
and, second, action to address the nature crisis willbring significant, beneficial opportunities to somefinancial institutions. The results primarily reflect
two differences between the scenarios. First, fooddemand grows more slowly under Climate + Nature
Now due to changes in meat consumption and foodwaste habits. This slows growth in production of arange of commodities, which alleviates land-use
competition and at the same time slows down thegrowth of sales. Second, costs associated with
deforestation and protected areas are higher under
Climate + Nature Now. A more detailed discussionof the differences in results among the scenarios
follows Section 4.

Exhibit 5

By 2030, total loan book values could fall by up to -0.4 percent under Climate +By 2030, total loan book values could fall by up to -0.4% under Climate +Protection.
Protection.
Loan book value accounting for changes in expected losses, by lender
Scenario: Climate + Protection
102
101
100
-0,4%

99

-1,4%

98

Baseline
Kenyan financial system
Private bank 3
Ghanaian financial system
Private bank 1
Private bank 2
Mauritian financial system
Zambian financial system

97
96
2020 22

Note:
Source:

24

26

28

30

32

34

36

38

40

42

44

46

48 2050

Change in loan book value relative to baseline scenario
NatuRisk, Vivid Economics

Value of US $ 971,000. If we then account for nature-related opportunities and risks for the Mauritian financial system, theselosses could be offset by 0.3 percent gains reducing total cumulative losses to 2.6 percent and increasing total loan bookvalue to US $ 974,000. For the Zambian financial system, these losses would increase by 0.6 percent to a cumulative total of
3.5 percent decreasing total loan book value to US $ 965,000.

24

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

In aggregate, the impacts on whole lending
portfolios are material but relatively small,reflecting the limited exposure to the sectors
modelled in the analysis across portfolios.
As demonstrated in Exhibit 2, agriculture andextractives, where risk exposure is highest, makeup only a small share of the portfolios, whereas formost assets within the portfolios, risk exposure issmall. As a result, aggregate impacts across theentire portfolio appear small, while the impacts on
agriculture and extractives specifically are material.
The assessment does consider some but not all risk
channels associated with downstream sectors suchas manufacturing and trade, which make up muchlarger shares of the portfolios considered (see thelater discussion at the end of this section). Naturerelated opportunities and risks for these sectors will
be considerably higher than the resultspresented here.

Impacts on equity and lending
portfolios by sector
For loans or investments in exposed sectors, theimpacts are proportionately larger; expected
losses reach a maximum of 3.2 percent and 2.6
percent of total loan book value for agriculture
and extractives, respectively, by 2030 under
Climate + Nature Now. In other words, for countryspecific equity portfolios, negative impacts
extend to -22 percent and -7 percent in 2030 for
agriculture and extractives respectively. Also, if afinancial institution considers only its loans to theagriculture sector, it could expect losses on thoseloans from nature-related risks to reach a maximumof -3.2 percent of their initial value by 2030. Below
these maximum values, there is significant variation
across portfolios.

Exhibit 6

Nature-relatedrisks
risks
could
roughly
doubleexpected
agriculture
Nature-related
could
roughly
doubleexpected
losseslosses
from fromagricultureby2030
for some
portfolios.
by 2030for some
portfolios.
Changes in expected losses for lending to agriculture by lender, % of loan book value
Scenario: Climate + Nature Now
Traditional credit risk

Date: 2030

Nature-related risks andopportunities

6
4
2

4,5%

5,4%

0
-2

-3,9%

-3,9%

-3,9%

-3,2%

-3,0%

-2,9%

ZambianfinancialsystemGhanaianfinancialsystemPrivatebank 3

-4
-6

-3,9%

-3,9%

-3,9%

-1,7%

-1,3%

-1,2%

KenyanfinancialsystemSouth
AfricanfinancialsystemPrivatebank 1

-3,9%

-3,9%

-3,9%

EgyptianfinancialsystemPrivatebank 2

Mauritianfinancialsystem-8

Note:
Source:Change in loan book value.
NatuRisk, Vivid Economics

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

25

For the most exposed lending portfolios, naturerelated risks in agriculture and extractives would
roughly double expected losses due to credit riskby 2030. Based on our experience with working
with the financial sector, diversified private banks
would typically expect losses from traditional credit
risks (unrelated to climate or nature) of around 3 to
5 percent over a ten-year period. This is roughly inline with the highest estimated losses from lending
to agriculture and extractives as a result of naturerelated risks, presented above. Exhibit 6 compares
traditional credit risks to the gains and losses seen
across the case study portfolios from lending toagriculture. For the most affected portfolios, thisrepresents a substantial increase or decrease in the
profitability of lending to these sectors.

changes and the expected performance of a loan
is ultimately driven by companies’ profits. Thus, tocompare the relevance of nature- and climaterelated risks, Exhibit 7 provides a comparison of
their impact on companies’ profits in highly exposed
sectors – namely, agriculture and extractives
in Africa for nature-related risks as well as
manufacturing, chemicals, and extractives globallyfor climate-related risks. Profits in agriculture might
be lower than baseline by -20 percent in 2050
under the strongest transition scenario, and by-15 percent for extraction of deforestation-linked
minerals. A comparison to climate-related risk
assessment work reveals that these impacts roughlyalign with typical climate-related risk exposure in
net-zero scenarios for highly exposed sectors suchas manufacturing, chemicals, and extractives, which
Nature-related risks in agriculture and extraction see profits in 2050 lower by of roughly -10 percent,of deforestation-linked minerals are of the same -15 percent, and -25 percent respectively.²⁸ Climaterelated risks for the most exposed sectors are muchscale as climate-related risks in manufacturing,higher; for example, oil and gas experiences profit
chemicals, and extractives. Both equity values
losses of roughly -70 percent by 2050.

Exhibit 7

Nature-related risks in deforestation-linked extraction and agriculture are of acomparable scalerisks extraction
in manufacturing,chemicals
Nature-relatedriskstoinclimate-related
deforestation-linked
and agriculture
are andof acomparable
scale
toclimate-relatedrisks
inmanufacturing,chemicals
andextractives.
extractives.
Changes in expected 2050 profits by sector relative to baseline, %Nature scenario: Climate + Nature Now
Climate scenario: Net-zero 2050
Deforestationlinked extractives

Agriculture

–15

–20

0
–10

Date: 2050

Nature-related risk

Manufacturing

Chemicals

–10

–15

–20
–30
–40
–50
–60
–70
Note: Expected losses relative to baseline scenario.
Source: NatuRisk, Vivid Economics

28

26

Source: Vivid Economics and Planetrics

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

Extractives

Climate-related risk

Oil and gas

–25
–70

Agriculture sector deep dive
Gains and losses in 2030 on equity investments
in agriculture are again much larger, ranging from+55 percent to -22 percent across countries.
Two factors determine the contribution of the
agriculture sector to aggregate portfolio losses:
the expected change in equity value linked toagriculture producers and the relative exposure to
agriculture within each portfolio; see Exhibit 8. For
example, consider the equity portfolio mirroring
the Mauritian economy. In Mauritius, where profits
of sugar cane producers are predicted to grow byroughly 60 percent under Climate + Nature Now,
the value of investments in agricultural businesses
could increase by more than 50 percent). ²⁹ Despite
the size of this increase, the aggregate value ofthe Mauritian portfolio only increases by 2 percent(Exhibit 2) in 2030, as agriculture accounts for only 4
percent of the portfolio.

Agricultural commodities can be classified
into three categories based on their financial
impacts: high growth, minor impacts, and slow
growth. First, high-growth commodities such as
sugar cane and alternative proteins experiencefinancial gains from ambitious actions to reverse
nature loss due to diet shifts. For example, sugar
cane in Mauritius sees an increase in equity value ofroughly +55 percent by 2030. Second, commodities
such as fruits, nuts, and vegetables experienceminor impacts due to moderate cost increases
and slower growth in demand due to reduced foodwaste. For example, the equity value of fruits, nuts,
and vegetables producers in Kenya decreases by -5
percent by 2030. Third, commodities such as corn
and tropical roots are used as livestock feed andsee significantly slower growth due to changes inmeat and dairy consumption.³⁰ For example, equity
investments in corn producers in South Africa could
see a decline in value by -33 percent by 2030.

Exhibit 8

By 2030, the equity value of agriculture producers could increase and decline
By 2030,+55.5
the equityof agriculture
producers
could
increase
betweenpercentvalueand -22.0
percent under
Climate+ Nature
Now.and decline
between +55.5% and -22.0% under Climate + Nature Now.
Scenario: Climate + Nature Now Date: 2030
Portfolio

Change in equity value of companies in the
agricultural sector, %Diversified equity portfolio
Local portfolio - Egypt
Local portfolio - Ghana

-5,84

7%

-5,47

11%
22%

-22,04

Local portfolio - Kenya
Local portfolio – South Africa

29

29%

-2,02

Local portfolio - Mauritius

Note:
Source:Share of equity portfolio, %

55,48
-5,84

4%
3%

Expected change in equity value relative to baseline scenario.
NatuRisk, Vivid Economics,

Details on the evolution of sector-level profits will be provided in Section 4.

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

27

The variation in impacts for lending to agriculture
is largely driven by the national mix of crops
across these three categories. Mauritius, forexample, has a particularly high exposure to highgrowth commodities, with sugar cane representing
90 percent of crop production. South Africa has
a relatively mixed exposure, with fruits, nuts, andvegetables accounting for 56 percent of crop
production, and the remainder relatively diversified.
In Ghana, exposure to slow-growth commodities isrelatively high, with tropical roots, corn, and cereals
accounting for 68 percent of crop production.

Cumulative changes in losses by 2030 on
agricultural loans range from an improvement of+5.4 percent to a worsening of -3.2 percent andlargely explain aggregate portfolio-level impacts.
Analogous to the equity portfolios, the impact of
the lending portfolio depends on the cumulative
expected gain or loss from lending to agriculture
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By 2030, lending to agriculture could see gains and losses between +5.4% and–3.2% under Climate + Nature Now.
By 2030, lending to agriculture could see gains and losses between +5.4% and–3.2% under Climate + Nature Now.​
Scenario: Climate + Nature Now
Date: 2030
Exhibit 9

Financial institution/system

Cumulative expected loss for loans extended
to companies in agricultural sector, %Private bank 1

7%

–1,22

Private bank 2

Share of loans extended tocompanies in agriculture sector, %

3%

4,45

Private bank 3

–2,94

2%

Zambian financial system

–3,19

14%

Egyptian financial system
Ghanaian financial system

2%

–0,31

3%

–2,99

Mauritian financial system
Kenyan financial system
South African financial system

5,41
–1,68
–1,25

6%
5%
4%

Note: Expected closses relative to baseline scenario.
Source: NatuRisk, Vivid Economics

30

28

While we do not explicitly model livestock within this analysis, we expect nature-related risks to be of an equivalent or greater magnitude to
the risks faced by livestock-linked crops.

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

Extractives sector deep dive
Similarly, in 2030, the change in equity value
for holding in the extractives sector range from
+1.0 percent to -3.7 percent, and +0.1 percent
to -2.6 percent for loans, with variation driven by
exposure to different countries across Africa. Ourmodelling assesses risks to the extractives sector
through its impact on deforestation, which within
Africa is highly concentrated in gold and copper
production. This is due to the fact that almost all

deforestation linked to extractives within Africa
is driven by gold and copper (see discussion of
extractives in Section 4). The results presented in
Exhibit 10 and Exhibit 11 reflect this. Impacts aresubstantial for portfolios with high exposure tocountries that are key producers of gold and copper.
For example, Ghana is a key producer of gold, which
accounts for 41 percent of total mineral export value.
Impacts on other portfolios are limited, as mining
activities largely focus on other minerals.

Exhibit 10

By 2030,
2030,equity
equityvalue
valueofof
extractives
companies
could
increase
declineBy
extractives
companies
could
increase
and anddeclineup toupto +1and
and
-3.7%
under
Climate+ Nature
Now.
+1.0
-3.7
percent
under
Climate+ Nature
Now.
Scenario: Climate + Nature Now Date: 2030
Portfolio

Change in equity value of companies in theextractives sector, %Diversified equity portfolio

6%

-0,94

Local portfolio - Egypt

0,65

Local portfolio - Ghana

10%
11%

-3,68

Local portfolio - Kenya

1%

-0,17

Local portfolio - Mauritius

0%

-0,59

Local portfolio – South Africa
Note:
Source:Share of equity portfolio, %

1,04

7%

Expected change in equity value relative to baseline scenario.
NatuRisk, Vivid Economics,

Exhibit 11

By 2030,
2030,lending
lendingtotoextractives
extractivescould
couldseeseelossesunder
Climate+ +Bylossesupup
to to
2.62.6%
percent
under
ClimateNatureNow.
Nature Now
Scenario: Climate + Nature Now Date: 2030
Financial institution/system

Cumulative expected loss for loans extended
to companies in extractices sector, %Share of loans extended tocompanies in extractives
sector, %Private bank 1

-0,18

1%

Private bank 2

-0,07

9%

-0,01

2%

Private bank 3
Zambian financial system

5%

-1,96

Egyptian financial system

0%Ghanaian financial system

2%

-2,57

Mauritian financial system

-0,05

6%

Kenyan financial system

-0,01

1%

South African financial system
Note:
Source:0,07

2%Expected losses relative to baseline scenario
NatuRisk, Vivid Economics,

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

29

Downstream sectors deep diveHow to interpret the results

The impacts of price increases on downstream
sectors are more muted, reaching a maximal
decline of equity value of -0.1 percent in 2030 for
wholesale and retail trade, and -1.4 percent for
manufacturing. Impacts for the loan portfolio arealso muted, with an expected loss of -0.7 percent
and -0.4 percent for wholesale and retail trade andmanufacturing, respectively. It is important to notethat these results capture the impact of input pricechanges, but not demand changes. Put differently,
the impact of diet shifts on the sales of meatproducers is not reflected in these figures. Generally,
impacts from input price changes are significantly
smaller for downstream sectors than for primarysectors, as these commodities account for only alimited portion of downstream sectors’ production
costs. Price changes can vary across commodities,
depending on the change in production costs
and the competitiveness of the market, which inturn determines the degree to which costs can bepassed on to consumers. As a result, changes incrop mix can also affect the scale of impacts on
downstream sectors. Finally, price changes are
relevant for manufacturing and trade associatedwith food and electrical products. These subsectors
vary in importance across different countries, andhence different portfolios.

We estimate risks for assets in the mostnature-intensive sectors, namely agriculture
and extractives, and further down the supply
chain. Agriculture and extractives face three typesof nature-related physical risks in this analysis;changes in: water availability, soil productivity, andpollination. They also face transition opportunities
and risks in five categories: demand shifts,
deforestation, protected areas, water pollution,
and air pollution.³¹ For primary sectors, each ofthese categories affects a company’s profitability
by changing its profit margin or the volume ofgoods it produces. Downstream sectors such as
manufacturing, wholesale trade, and retail trade areaffected by changes in the prices of commodities.

However, if policies or regulations accountfor the full range of impacts on supply chains,
downstream sectors will see risk exposurecomparable to that of primary sectors. As
mentioned above, we conservatively assume thatpolicy and regulation will penalise companies
based on the nature-related impacts of theirown operations, and not of their value chains. If
regulation were to include full value-chain impacts,
as is suggested within the TNFD framework, thenthe risk exposure of downstream sectors that rely
heavily on agricultural commodities or minerals
would be similar to that of the primary sectors fromwhich they purchase inputs.

31

30

From a risk management perspective, thesenature-related risks are additional to thosearising from climate change. The nature-relatedchannels of physical and transition risk are nottypically accounted for in climate risk assessments.
However, nature loss and climate change arelinked, and financial institutions can address bothin an integrated fashion. Please see Section 5 for a
detailed discussion.
To assess the impact of nature-related
opportunities and risks on lending and equity
portfolios, we deploy a micro-level model
providing firm-level estimates of profit changes.
As illustrated in Exhibit 12, we estimate the impacts
on lending and equity portfolios in three steps. First,
we assess how nature-related opportunities andrisks will change production costs, how much of thiscost change will be passed through to consumers,
and how demand is likely to change in the future.
Second, we evaluate how the cost and demandchanges will impact firm-level profits. Third, we
assess how the change in firm-level profits willchange the book value of lending to that company,or the value of equity issues by that company.
Appendix 1 provides a more detailed description of
the methodology and how we determine the impliedchanges in production costs and demand.

The scope of the opportunity and risk assessment covers crop production within agriculture. For the case study analysis, we assume that theagriculture sector overall experiences financial impacts that are similar to the impacts on crop production.

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

Exhibit 12
Changesin loan book and equity value are estimated based
Changes in loan book and equity value are estimated based on firm-level profitonfirm-level profit changes.
changes.
Demand channel only estimatedfor primary sectors

Selected demand,
cost and price drivers

Determined endogenously, but driven by assumptions
on deforestation deterrents, production standards, etc.

Impact on company-level profits

Assumptions

Impact on equity and loan value

Deforestation cost
Cost of producing inprotected areas
Production
costs

Fertiliser cost
Innovation cost¹

ProfitmarginYield changes²

Probability ofdefault

Demand elasticity³
Costpass-throughCompetitivenessBook valueof loanNumber of firms

ProfitLoss given
default

Demand for bioenergy
Diet shifts
Demand of food waste

DemandSales

Expected
shareholder
earnings

Equity value

Demand for transition
metals⁴
Population growth

1. In order to intensify production
3. Responsiveness of demand to price changes
Note:
Source:2. Due to pollinator losses or as result of production intensification
4. E.g., metals required for the production of EVs like lithium, cobalt and nickel

1. Innovation costs reflect investments in capital to improve agricultural yield; 2. Due to changes in the physical environment or as a result of intensification; 3.
Demand elasticity is the responsiveness of the demand for a good to changes in its price; 4. For example, metals required for the production of electric vehicles suchas lithium, cobalt, and nickel.
NatuRisk, Vivid Economics

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

31

The effects of nature loss on company-levelprofits translates directly into changes in equity
value; the effect on the performance of loans ismore complex. For equity investments, changes
in market value reflect changes in the discounted
value of future profits. For lending, the effects alter
credit ratings and, thereafter, the probability ofdefault. The change in probability of default is used
to model the change in loss given default. Together,
these outputs determine annual expected losses
given default, which accumulate over time.
This analysis spans a subset of material risk
channels. There are several other risk channels
not included in the scope that may also be material,
particularly for downstream sectors. As a result,
our estimates of risks and opportunities may beunderestimates. For example, for downstream
sectors, the scope includes only cost increases
through primary commodity price changes; it does
not account for risks and opportunities associatedwith direct operations or demand changes. Please
see Appendix 1 for more detail.
If current trends continue, Africa may breachenvironmental tipping points causing largescale physical risks for financial assets. The
transgression of tipping points, such as thecomplete loss of pollinators or dieback of coral
reefs, would create severe costs for businesses andis becoming more likely, both globally and in Africa.
For example, research suggests the loss of 20 to30 percent of remaining forest cover in the Amazon
rainforest would trigger an irreversible conversionof all remaining forest to savannah.³² Equivalent
figures are not yet available for the Congo Basin,
though studies have confirmed that projected future
deforestation in Western and Central Africa is likely
to disrupt the West African monsoon, dramaticallyaffecting rain-fed agriculture, in particular maizecrops north of the equator.³³ Twenty-five percent ofAfrican countries, including South Africa and most of
Northern Africa, are already waterstressed today.³⁴
Acute tail risk events like these have the potential to
make business practices that are highly dependent

on nature infeasible and strand assets in affectedareas. Examples include rain-fed agriculture,pharmaceutical research, and ecotourism.
The modelling framework does not capture
these tipping points and underestimates naturerelated physical risks. Across all the portfolios
considered, the changes in asset value driven byphysical risk exposure are limited. However, they
are underestimates for four reasons. First, current
frameworks model risks from incremental changes
in ecosystems, and do not model the large-scale
tail risks associated with crossing environmental
tipping points. Second, the assessment considers
average risk at the country level, masking a broad
distribution of impacts across sub-national locations
and companies. Risks for some individual locations
and companies will be substantially higher than the
average. Third, the assessment evaluates a subsetof physical risks considered to be the most material
and feasible to model (see Appendix 1). There arealso physical risks that are not modelled such as
the loss of natural water filtration or flood and storm
protection, and these could be material. Fourth,similar to climate change, the physical risks ofnature loss will intensify over time, with more severe
impacts beyond 2050, the time horizon consideredin this analysis.
If physical risks are underestimated, the negative
financial impacts in less nature-ambitious
scenarios might in reality be significantly higher.
Recall that the value of the lending portfolios
declined consistently under the Climate + Protection
scenario, but less than the most impacted portfolio
under the Climate + Nature Now scenario. Also
recall that overall risks under the Current Policies
scenario were limited. Physical risks are expected tobe highest under Current Policies, moderate under
Climate + Protection, and lowest under Climate +Nature Now. Thus, in a hypothetical assessment that
not which accounts for all possible physical risks,
the negative impacts under the Current Policies andClimate + Protection scenarios are likely to 		be higher.

32(Lovejoy and Nobre, 2018)(Abiodun, 2010)
34(Gassert et al., 2015)33

32

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

Risks andopportunities
driving asset
value

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

33

Nature-intensive sectors are central to
the African economy

have smaller impacts, albeit with localised effects
on specific crops.

The importance of the agriculture, extractives,
and tourism sectors, which are particularly
exposed to nature-related risks andopportunities, to gross domestic product (GDP)varies considerably across different countries.
Across the continent as a whole, the three sectors
together accounted for roughly 30 percent of
GDP in 2019. Agriculture, extractives, and tourism
contributed 16.0, 5.8 and 6.9 percent respectively.
The relative importance of these sectors varies
across countries. In Kenya and Ghana, the threesectors together account for roughly 40 percent ofGDP, yet only 16 percent in South Africa. In Mauritius,
the agriculture and extractives sectors only accountfor 4 percent of GDP, while tourism represents
almost 20 percent. The importance of agriculture
in particular varies considerably, accounting for
60 percent of GDP in Sierra Leone and less than 3
percent in South Africa.³⁵

Water stress is already a strategic priority for aquarter of Africa. Thirteen countries are alreadyconsidered to be ‘water-stressed’ today, meaningthat water demand exceeds 50 percent of water
availability (see Exhibit 13). This condition willcontinue to worsen in the next ten years.³⁶ Northern
Africa is most exposed, with levels of water stresscomparable to much of Central and Southeast
Asia. Acute episodes of shortage, such as South
Africa’s 2018 water crisis, are likely to become
more frequent and severe, leading to disruption.
Although most of Central Africa is not considered to
be waterstressed, due to the landscape’s retention
capacity, land-use change could lead to sharp rises
in water stress.

Current trends draw us closer to severe
physical risks
Nature in Africa is degrading at rates thatwill disrupt businesses in the next ten years,
particularly through declining water availability
and habitat loss. The degradation of natural
capital has direct consequences for the primarysectors that rely on it. First, among the drivers of risk
included in this analysis, water stress has by far thelargest economic impact due to agriculture’s strong
dependency on water. Second, habitat degradation
linked to forest loss and agricultural expansion
could undermine the tourism industry, especiallyin parts of East and Southern Africa. The otherphysical risks considered – such as deteriorating
soil quality and declining pollinator populations –

35
36

34

If water-stressed countries choose to impose
regulations to address shortages, unit
production costs in agriculture could increase by
20 to 40 percent in 2030 for some crops. A wide
range of sectors consume large amounts of water,
including agriculture, extractives, heavy industry,
chemicals, and utilities. Our work has focused on
agriculture, where water stress could increase costsby requiring more irrigation or curtailing production.
Costs could rise by 20 to 40 percent for staple
crops – such as pulses and cereals – in Egypt,
Morocco, and South Africa by 2050 in comparison
to a baseline scenario in which water stress does
not generate added costs. For some crops andcountries, the effects of water stress can be severe;
the cost of producing cereals, for example, could
jump by an estimated 74 percent in Morocco, where
wheat is a staple commodity already hit by droughts.
The cost of water stress for Africa could reach 9
percent in 2050 – more than five times the global
average.

(Word Travel and Tourism Council, 2021); (World Bank, 2022); (IHS Markit, 2022)(Gassert et al., 2015)

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

Exhibit 13

Water stressstress significantly
raisesproduction
costs.
Water
significantly
raisesproduction
costs.
Water demand as share of water availability
Not stressed in 2050
Becomes stressed in 2050
Stressed in 2020 andincreasing

Percentage change in unit production costs in
2050 under current policies relative to baseline

Morocco

Egypt

South
AfricaNote:
Source:

100
75
50
25
0
100
75
50
25
0
100
75
50
25
0

74
44
5

30
3

37

28

3
Pulses

Cereals

CottonA country is defined as ‘stressed’ if the ratio of water demand to water availability is above 50 percent. This ratio is above the threshold for ‘high’water stress defined by the World Resources Institute.
Vivid Economics, water stress projections from RCP 8.5 in (Gassert et al., 2015)

Exhibit 14

Tourists are attracted by species richness, making tourism vulnerable to habitatand species loss.
Annual visitors, (log)Tourism attractiveness
High

Low

Deforestation 2020-2050

16

High

14

Low

Excluded countries

12
10
8
6
4
2
0

5

10

15

20

25

30

35

40

Flagship species richness

Note:
Source:Lefthand side: logarithmic scale using the natural logarithm; N = 125; p < 0.01. Flagship species are species that can successfully be used to attract
funding for conservation or commercial ends. They include the ‘Big Five’: lions, leopards, rhinos, elephants, and buffalo. Countries without nationalparks are excluded.
Analysis with data from (Institute for Economics and Peace, 2021), (Nelson, 2008), (McGowan, J., Beaumont, L.J., Smith, R.J. et al., 2020), (IBAT,
2021), and (Roser, 2017).

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

35

Ecotourism in Africa benefits from theabundance of animal species in tourist locations,making the tourism industry especiallyvulnerable to nature loss. Protected areas across
14 African countries generate at least US $142
million in entrance fees per year, but the revenue
associated with tourism is much higher, as visitors
spend on hospitality, accommodation, and transport
as well. Local communities and economies benefit
from multiplier effects and the influx of foreign
currencies. The richness of flagship species is anindicator of the richness of local species that attract
tourists; these prized species include lions, leopards,
rhinoceroses, elephants, and buffalo. There is astrong positive correlation between the number ofvisitors to national parks and the richness of flagshipspecies, as indicated by the left-hand chart in
Exhibit 14.
The potential for tourism revenue is highest inSouthern and Eastern Africa. The map on the rightpanel of Exhibit 14 shows the tourism attractivenessof locations across Africa, as proxied by theestimated number of visitors to national parks in thearea and influenced by species richness, national
GDP, and distance to the closest city. The countriesof Southern and Eastern Africa – South Africa,
Namibia, Zimbabwe, and Kenya – have the greatest
potential.
Land-use decisions taken between now and2030 will affect the population of flagshipspecies and future tourism revenues.
Deforestation and agricultural expansion contributeto the destruction of flagship species’ habitats. If noaction is taken to reverse current land-use trends,
Africa’s ecotourism sector could face significant
financial risks. The right panel in Exhibit 14 overlays
future deforestation – indicated by coloured country
boundaries – and tourism attractiveness. Eastern
Africa’s tourism attractiveness index could drop
lower than that of other regions due to a high risk of
deforestation. Tourism revenues in South Africa arealso threatened by habitat loss.

36

Making space for nature involves
supply-side adjustments
All effective responses to the climate and nature
crises will involve the cessation of deforestationand the expansion of protected areas, among
other actions. These steps are necessary
because land use in Africa is a critical driver ofnature loss and greenhouse-gas (GHG) emissions.
The left panel in Exhibit 15 shows estimates of
future deforestation due to crop and pastureland
expansion under current policies. Large areas ofCentral, Eastern, and Southern African forests could
be lost. If these forests remain intact, however, thatland could not be used for agriculture and hence
contribute to the supply of food.
Deforestation and the absence of protectedareas will increase crop production costs byabout 10 percent in 2030 or, in more extreme
scenarios,by up to 25 percent. To counterthe incentive to expand the area of land under
agriculture, new regulations might be introducedwith charges for expansion, commitments toundertake restoration, or other measures. The
costs of such measures would likely be especiallysignificant in Central Africa, where competition
for land would intensify if protected areas are
expanded and deforestation is curbed. Commodities
such as palm oil, coffee, and cocoa – which areclosely linked to deforestation or are grown on landwith high biodiversity value that could become
protected – would be more exposed. For example,
cotton companies operating in areas within the
Democratic Republic of Congo (DRC) that could
become protected in the future, may need to adopt
sustainable practices to comply with the newprotected area regulations. This could increase
unit production costs by 2 to 9 percent in 2030,
across all policy scenarios. In Kenya, deforestation
deterrents could raise unit production costs forcotton by 24 percent in 2030 in the Climate +Protection scenario.

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

Limited land availability would cause
intensification of agriculture production overthe next decade and might increase production
costs by 4 to 13 percent in 2030 in the mostland-constrained scenarios. In order to intensify
production, that is, increase yields per hectare,
producers could increase the use of fertiliser inputs
and invest in yield-enhancing machinery, andadopt better practices. The need for intensificationis strongest in the Climate Only and Climate +Protection scenarios, where more land is needed forbioenergy production, and thus the food and energy
system’s land footprint is largest. Production costs
would rise by 4 to 13 percent in African agriculture
overall in 2030 in the Climate Only and Climate +Protection scenarios, while costs would vary bycountry. For example, in 2030 cereal cultivation
costs would rise by 9 to 12 percent in South Africa,
which has more land constraints, whereas Angola
has less pressure and would see increases of 6 to
7 percent. The forestry sector might experiencesimilar pressures and costs.

Intensified agricultural activity generates
efficiencies in the long run. Though intensification
involves initial investment that increases unit
production costs up to 2030, it typically generates
cost savings in the long term by improving
productivity.³⁸ Taking the example of pulses in
Kenya, a yield improvement of roughly 6 percent(in terms of tonnes of pulses per hectare) would
reduce unit production costs by 1 percent. Yield
improvements explain why cost changes associatedwith limits to agricultural landarea are generally
larger (relative to the baseline) in 2030 than in 2050,
as indicated in the right panel of Exhibit 15. In fact,
intensification actions taken in the Climate Only andClimate + Protection scenarios for pulses in Kenya
might bring costs down by 6 to 9 percent in 2050.
In addition to improving the competitiveness ofsome agribusinesses, intensification also stimulates
demand for the manufacture of inputs such as
fertilisers, pesticides, machinery, andirrigation equipment.

Exhibit 15

Limitedlandavailability
availabilitycould
could
significantly
increase
agricultural
production
Limited landsignificantly
increase
agricultural
production
costs
by
2030
costs by 2030.
Deforestation, million ha

Change relative to baseline (min-max)
10 7.5 5 2.5 0

Source:
38

Kenya

2030

2050

Maize

17% − 19%

-1% − 0%

Pulses

4% − 5%-2% − 0%

Potatoes

2% − 8%0% − 7%

South Africa

2030

2050

Maize

11% − 17%-2% − 0%

Sugar cane

15% − 18%

8% − 21%

Fruits, nuts, vegetables

1% − 4%-1% − 0%NatuRisk, Vivid Economics

Subsistence and small-scale farmers may be less able to invest relative to larger-scale agribusinesses due to credit constraints. The resultspresented here reflect averages across the industry as a whole. In a scenario of ambitious action on nature, it is likely that development
partners and public agencies would provide financial support for investments in agriculture to reduce nature impacts.

Nature and financial institutions in Africa: A first assessment of opportunities and risks37Gold and copper are responsible for the majorityof the African extractive sector’s impacts onnature through deforestation. The extractive
sector’s greatest terrestrial impact on nature in
Africa is the deforestation resulting from opening
new mines or expanding existing sites. As shownin the top-left panel of Exhibit 16, iron, gold, andcopper are the minerals most closely linked with
deforestation globally, accounting for 20 percent,
10 percent, and 7 percent, respectively, of mines inselected forest areas in 2020.³⁹ Gold and copper
together accounted for 55 percent of sub-SaharanAfrica’s extractives export revenues in 2020 –roughly in line with Latin America and the Caribbean,
which have similar risk exposure (see the top-rightpanel of Exhibit 16). There is significant mining ofgold in Ghana and of copper in Zambia and the DRC.

39

38

The association of mining products with
deforestation may become a market access riskby 2030 and may generate material increases inunit production costs by 2050 – by 20 percent forgold and 33 percent for copper. Future regulation
may require mining companies to restore the land
they deforest and to avoid exploration in some
protected areas. Regulations may emanate fromlocal jurisdictions or from international markets suchas the European Union, which might introduce a due
diligence obligation on suppliers to ensure that the
production of imported commodities has not caused
deforestation. Costs associated with restoration,illegal deforestation, and strictly protectedareas could increase unit production costs by 1
to 3 percent in 2030 depending on the scenario
considered compared to the baseline, and by 2 to33 percent by 2050. While some costs are relatively
small, in specific markets they can make certain
activities unprofitable. For example, calculations
suggest that some gold mines might exit themarket in 2040 due to a 10 percent increase in unit
production costs in the Climate + Nature scenario.
Other minerals produced in Africa are relatively
unaffected by nature policies because they are notas strongly associated with deforestation.

(World Bank, 2020)

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

Exhibit 16

Deforestation could
could quickly
quickly become
become aa market
marketaccess
accessrisk
riskforforgold
goldandandcopper
copperDeforestation
exported fromfrom Africa.
Africaexported
Top production metal and minerals’ forest impacts, 2020
Share of total global mines in forest area

20

10
7
2

1

Manganese

Chromium

FigureFigure
16 continued
16 continued
Gold

Iron

CopperShare ofSharemetalsminerals
export revenue,
2020, in2020,
US $bnofandmetalsand minerals
export revenue,
in US $bn
Source: World Bank, 2020

Gold

Sub-SaharanAfrica ($128bn)($128 bn)
Sub-SaharanAfrica

43
(34%)

27
(21%)

Other
CopperOther

Latin America
Caribbean($163 bn)($163 bn)
Latin&America& Caribbean

60
(36%)

43
(34%)
57
(45%)

Copper
Gold

60
(36%)
78
(48%)

57
(45%)

25
(16%)

27
(21%)

78
(48%)

25
(16%)

Figure 16. Cont...cont

Source: Chatham
House,
2021House, 2021
Source:Chatham

Predicted production cost and profit changes relative to baseline in key sub-Saharan mining
countries, min-max range across all scenarios
2030

2050

Country

Commodity

Production costchangeProfit change

Production costchangeProfit change

ZambiaCopper

+1% − +3%

-1% − +0%

+4% − +33%

-19% − -2%

DRC

Copper

+1% − +3%

-1% − +0%

+4% − +33%

-19% − -2%

Ghana

Gold

0% − +1%-1% − +0%+2% − +20%

-17% − -2%

Source: NatuRisk, Vivid Economics.

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

39

In the food sector, consumers, not businesses,
will bear most cost increases. When businesses
face intense competition, the prices they charge
tend to reflect the costs of production; therefore,
when those costs change, prices adjust accordingly.
Agricultural commodity markets are highly
competitive markets populated by many small
producers, and demand for staples is inelastic.
These characteristics imply cost pass-throughrates of 80 to 95 percent – meaning that, when
production costs rise, the consumer prices are
increased. For example, in Ghana in 2030 the overall
cost of producing fruits, nuts, and vegetables would
increase by 6 percent in the Climate Only scenario
relative to the baseline, with a starting profit marginof 16 percent. Growers might pass on 83 percent of
this cost increase to consumers, with their margin
falling from 16 to 13 percent (see Exhibit 17).

Exhibit 17

Agricultural producers
producerspasspassaahighhighproportion
proportionofof
costs
onto
consumers
Agricultural
costs
onto
consumers.
Change of profit margin after production cost shock, %Scenario: Climate Only
Country: Ghana

6

Year: 2050
Crop: Fruits, nuts, and vegetables

5

16

Baseline profit margin
Note:
Source:15

Cost increase

40

Final profit margin

Production cost change expressed as percentage of final price in Climate Only scenario relative to baseline, 2030
NatuRisk, Vivid Economics.

In the minerals sector, miners would be hit
hardest by cost increases. The market structure
for minerals is more concentrated – there are fewer
mining companies and some large companies that
not which control major shares of the market.⁴⁰ As aresult, cost pass-through rates would be lower, andproducers would absorb more of the shock fromrises in costs. Profit margins, then, would take alarger hit. For example, the results show that costpass-through rates for gold producers in Ghana
are typically around 60 percent. Under Climate +Nature Now, unit production costs in 2050 rise by
40

Cost pass-through17 percent relative to baseline, of which 11 percent ispassed onto consumers. Overall, profit margins fallfrom 39 percent to 36 percent.
Rising production costs and high costpass-through rates in agriculture mean that
consumers might face price increases wherepressure on land use is high. For example,
theprices of fruits, nuts, and vegetables; pulses; andrice produced in Ghana might rise by 5 percent, 10
percent, and 10 percent respectively in the Climate(Kooroshy and Preston, 2014)

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

Only scenario compared to the baseline in 2030. If
this were to happen, vulnerable populations mightexperience inflation in food prices, which could
affect household-level food security. The impact
on industries that rely on agricultural commodities
and minerals would be more limited, however, as
raw material costs are a fraction of total costs. For
example, in Ghanaian food manufacturing, 2030
costs are negligible relative to the baseline in the
Climate Only scenario, and so profits don’t change
significantly. The cost and profit changes mentioned
here are only driven by the commodities covered in
the analysis - a subset of all commodities purchasedby food manufacturing businesses.

Shifts in consumer demand might
create space for nature
It may be possible to relieve pressure on landby preventing dietary shifts towards meat anddairy consumption and by cutting food waste.
As discussed above, ambitious action to tackle theclimate and nature crises limits the land available
for agriculture. If consumption of conventional
proteins such as meat and dairy in Africa follows
patterns observed in other regions and rises withincome, more output would be demanded from theland, as meat and dairy production are more landintensive per unit of protein produced than plantbased or alternative proteins are. If meat and dairy
consumption in Africa decouple from per-capita
income growth, and current trends in consumptionof plant-based proteins continue, some pressure
on the food system would be alleviated. Similarly,
reduced food waste means that less food would
be needed to feed people. The Climate Only andClimate + Protection scenarios assume a 25 percent
shift from meat and dairy consumption and a 25
percent reduction in food waste. These figuresincrease to 50 percent under the Climate andNature scenarios. (See Appendix 1 for a discussionof evidence relating to this shift.) These potential
shifts would eliminate or reduce demand for abroad range of crops, as illustrated in Exhibit 18. In
particular, demand for crops that are also used tofeed livestock – such as corn and tropical roots –are roughly 50 percent lower in 2050 in the Climate
and Nature scenarios as compared to the baseline.

Exhibit 18

Under ambitious action, some commodities see significantly slower demand
growth, while others see little change.
Change in demand for agricultural commodities over time (indexed to 2020)
Baseline

Climate + Nature Future

Climate + Nature Protection

Climate + Nature Now

Climate Only

Current Policies

Tropical Roots
3.5
3.0

Fruit, Nuts and Vegetables
3.5
3.0

2.5
2.0

2.5
2.0

1.5
1.0
2020

1.5
1.0
2020

25

30

35

40

45

2050

Corn
3.5
3.0

Potatoes
3.5
3.0

2.5
2.0

2.5
2.0

1.5
1.0
2020

1.5
1.0
2020

25

30

35

40

45

2050

25

30

35

40

45

2050

25

30

35

40

45

2050

Source: NatuRisk, Vivid Economics

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

41

When food systems are under less pressure
from demand, aggregate profits in agriculture
still increase over time, albeit at a slower pace.
Food demand in Africa is expected to keep rising
rapidly in the next decades in all scenarios, driven
by growth in population and per-capita income.
Exhibit 18 shows that demand for crops such asmaize, tropical roots, potatoes, and fruits, nuts,
and vegetables follow an upward trajectory in all
five scenarios – a pattern that not which applies
to all the agriculture commodities in this analysis.
Consequently, total profits in African agriculture also

rise over time, no matter how ambitious the natureand climate actions are. Aggregate profits in thein-scope agricultural subsectors increase by 470
percent between 2020 and 2050 in the baseline(see Exhibit 19). For instance, even in Climate +Nature Now scenario, which considers the mostambitious reductions in food demand, aggregate
profits grow by 365 percent over the same period.
Growth prospects are strong and robust in Africa,even when nature and climate constraints are
imposed on economic activities.

Exhibit 19

Under
all scenarios,
scenarios,agriculture
agricultureprofits
profitsincrease
increase
substantially
over
time
Under allsubstantially
over
time.
Profits for agriculture sector (indexed to 2020)

6.0
5.5
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
2020 22

Note:
Source:42+470%

Baseline
Current Policies
Climate + Protection
Climate Only
Climate + Nature Now

+365%

24

26

28

30

32

34

36

38

40

42

44

46

Climate + Nature Future

48 2050‘Agriculture’ only includes in-scope commodities – namely cotton; fruits, vegetables, and nuts; maize; palm oil; potatoes; pulses; rice; soybeans;sugar cane; temperate cereals; and tropical roots.
NatuRisk, Vivid Economics.

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

Lower costs help to keep food prices down, andmore capacity in the food system ameliorates
price volatility from short-term supply
fluctuations, benefitting both downstream
players and consumers. The relatively lower
unit production costs that result from ambitious
action to tackle nature loss help to contain priceincreases, with benefits for consumers and foodsecurity. When the food production system lacks
spare capacity, short-term supply fluctuations – due
to variable weather conditions, for example – cancause price volatility, particularly for commodities
largely produced and consumed within Africa.
Slower growth in demand would help containthese price fluctuations, which would in turn shieldvulnerable populations and downstream sectors
from price increases and volatility.

Slower demand growth reduces the pressure
to intensify agricultural activity and limits
short-term cost increases in parts of Africa’s
food system. As discussed in the previous section,
intensification driven by land scarcity can increase
production costs in 2030 relative to baseline unit
costs, particularly for crops grown in Central Africa.
Slower growth in food demand helps to limit theseincreases in production costs. In the Climate Only
scenario, intensification and protected-area costs
increase baseline unit production costs in 2030
for cereals, sugar cane, and palm oil. In the Climate+ Nature Now scenario, the same land-use drivers
lead to declines in production costs relative to thebaseline for cereals and sugar cane and to a more
moderate increase in palm oil costs compared to the
Climate Only scenario, as shown in Exhibit 20.

Exhibit 20

Costs
associatedwith
withlimitedland
availability
are higher
ClimateCosts associatedlimitedland
availability
are higher
underunder
ClimateOnly Only
relativeto
Climate+NatureNow.
relative to Climate + Nature Now.
Land use-related production costs in 2030 (percentage relative to baseline)
Deforestation

Protected areas

Cereals+10%

Fertiliser costs

Other intensif.

Sugar cane
-3%

+14%

5

9

3

-3

-7

Yield improvements

Palm oil
-11%

4

-1

Innovation costs

+3%

+1%

7

14

5

6

5

-4

-4

-4

-14

-9

-13
-6

Climate Only

Climate +Nature Now

Climate Only

Climate +Nature Now

Climate Only

Climate +Nature Now

Source: NatuRisk, Vivid Economics

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

43

A shift to plant-based and alternative proteinswould bring investment opportunities. In addition
to the manufacturing of alternative proteins,demand for certain crops – such as sugar cane,which can be used as a feedstock for fermentation– would rise rapidly. For example, in 2030, demand
for sugar cane cultivated in Africa could be 15 to36 percent higher in all climate- and nature-action
scenarios relative to the baseline, and almost 100
percent higher than baseline demand by 2050
due to feedstock demand. Total profit from thesecommodities more than doubles by 2050 in thesescenarios relative to the baseline, as shown in
Exhibit 21.

ExhibitA big21shift to alternative proteins would bring big growth opportunities for
agribusiness.
A
big shift to alternative proteins would bring big growth opportunities for
agribusiness.
Current Policies
Climate Only

Climate + Protection
Climate + Nature Future

Climate + Nature Now

160
140
120
100
80
60
40
20
0
-20
2020

22

24

26

28

30

32

34

36

38

40

42

44

46

Source: NatuRisk. Vivid Economics

In 2030, demand for sugar cane
cultivated in Africa could be 15 to36 percent higher in all climateand nature-action scenarios.

44

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

48

2050

Producers could capture competitive
advantages or capture new markets
The capacity to adapt and invest is a competitive
advantage in these disruptive scenarios. The
results above illustrate how actions to stem climatechange and nature loss introduce numerouschanges to markets in Africa. Businesses innature-intensive sectors will likely be adapting
to new public policies, an evolving competitive
landscape, and shifts in consumer preferences.
Meanwhile, they will encounter changing physicalrisks and dependencies that affect both them andthe markets in which they operate. The net effect isslower growth relative to the baseline, as depicted in
Exhibit 22.
The disruption will create opportunities forseveral players: agribusinesses that intensify
their agriculture activities, producers ofalternative proteins, and extractive companies
that can minimize their impacts on nature.
Agribusinesses that intensify their activities in areas

where land competition is stiff will likely outperformtheir peers who follow current practices and willsave costs over the long term. Upstream suppliers
selling inputs such as fertiliser and machinery
would benefit from this rise in investment. Similarly,
agribusinesses that not which meet new demand
for alternative proteins would enjoy rapid growth.
In extractives, firms may find that production in
non-forested areas becomes cost competitive overtime, as the costs associated with deforestation
outweigh the benefits from working in forest
areas with rich reserves. Firms that explore nonforested areas and develop extraction sites withlower nature impacts may gain an advantage
over competitors. Downstream players that seek
upstream suppliers with lower nature impacts will
also be exposed to lower levels of risk. This may
also incentivise increased vertical integration toensure transparency around nature impacts. For
financial institutions, this implies that investments or
lending to companies with lower nature impacts may
outperform sector averages and reduce portfoliolevel risk.

Exhibit 22

Profits in
toto
15 15-20
to 20 percent
Profits
in crops,
crops,gold,
gold andandcopper
coppercould
couldbebeupup
percentlower
lowerthan
than basebaselineby2050.
line by 2050.
Change in profits for selected sectors (percentage change relative to baseline)
Current Policies
Climate Only

Agriculture

Crops

Climate + Protection
Climate + Nature Future

Climate + Nature Now

36

44

40
20
0
-20
-40

Extractives

Gold

40
20
0
-20
-40

Copper

40
20
0
-20
-40
2020

22

24

26

28

30

32

34

38

40

42

46

48

2050

Note: ‘Agriculture’ only includes in-scope commodities – namely cotton; fruits, vegetables, and nuts; maize; palm oil; potatoes; pulses; rice;soybeans; sugar cane; temperate cereals; and tropical roots. We expect risk exposure in livestock to be of an equivalent or greater magnitude as for crop
production. As a result, impact on crop production can be taken as a reasonable estimate of impacts on the agriculture sector as a whole.
Source: Vivid Economics.

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

45

There is more significant variation in profit
impacts across subsectors for agriculture, thanthere is for extractives. Exhibit 23 and Exhibit 24
present a heatmap of profit impacts under Climate+ Nature Now across subsectors and countries in
2030 and 2050 respectively. Within each cell, thebottom-left hand triangle demonstrates the profit
impact in 2030 and the top right-hand triangle
demonstrates the importance of that subsector to
the aggregate sector (agriculture or extractives).
Across agriculture, we see a large variation of profit
impacts across subsectors. These reflect the threegroups of commodities discussed in Section 3:

slow-growth commodities associated with livestock
feed (soybean, temperate cereals, and tropicalroots); moderate-growth commodities impacted by
reduced food waste (fruits, nuts and vegetables);and high-growth commodities that benefit from dietshifts (alternative proteins). For extractives, impacts
for gold and copper are relatively similar, reflecting
the fact that the extraction of both minerals is
associated with a similar intensity of deforestation,that is, the amount of deforestation associated witha given level of extraction.

Exhibit 23

In 2030, there is more significant variation in profit impacts across subsectors

In 2030, there is more significant variation in profit impacts acrossthan across countries.
subsectors than across countries.

Scenario: Climate + Nature Now Year: 2030
Sector-country
profit changes

Subector-country profit changes: Low

Size ofsector-country

Size of the subsector-country:

Agriculture
Soybean¹
Côte d’Ivoire
Egypt
Ethiopia
Ghana
Kenya
Mauritius
Morocco
Niger
NigeriaSouth Africa

Tropical roots

Temperatecereals

-5%

25%

Neg.

2%

-1%

21%

10%

2%

-10%

6%

-4%

59%

Neg.

Neg.

Neg.

-4%

8%

Neg.

1%

0%

4%

-1%

28%

10%

-5%

3%

0%

11%

-4%

42%

Neg.

Neg.

Neg.

Neg.

Neg.

-1%

Neg.

Neg.

-5%

12%

Neg.

Neg.

-5%

3%

-5%

47%

Neg.

Neg.

6%

-5%

46%

-5%

4%

0%

4%

Neg.

0%

-5%

9%

-5%

46%

49%

-5%

-4%

5%

Neg.

Neg.

Neg.

Neg.

-4%

2%

Neg.

-4%

-5%

Alternative
proteins²

Fruits, veg., nuts Palm oil

Corn

Neg.

Neg.

7%

Neg.

Neg.

-5%

10%

-2%

1%

Neg.

Neg.

Neg.

Neg.

-4%

2%

-10%

1%

-6%

3%

-5%

Neg.

Neg.

-4%

1%

Neg.

Neg.

Neg.

Neg.

Neg.

Neg.

Neg.

Neg.

High

Extractives
Copper
-3%

Gold

203%

1%

1%

-1%

32%

Neg.

35%

3%

0%

2%

0%

25%

Neg.

163%

1%

Neg.

Neg.

-1%

93%

3%

Neg.

Neg.

Neg.

Neg.

-1%

41%

Neg.

Neg.

163%

3%

0%

4%

-1%

7%

17%

Neg.

Neg.

48%

79%

-1%

8%

-3%

1%

-5%

51%

Neg.

Neg.

Neg.

Neg.

0%

11%

0%

2%

-7%

41%

Neg.

Neg.

120%

1%

Neg.

Neg.

-1%

81%

-1%

31%

10%

2%

Neg.

Neg.

Neg.

Neg.

Neg.

Neg.

-15%

4%

Neg.

Neg.

Neg.

Neg.

-6%

5%

0%

22%

-1%

49%

Neg.

Neg.

204%

9%

0%

2%

1%

20%

Tunisia

Neg.

Neg.

Neg.

Neg.

Neg.

Neg.

-5%

11%

Neg.

Neg.

-4%

55%

Neg.

Neg.

Neg.

Neg.

0%

12%

Neg.

Neg.

Zambia

-15%

5%

-4%

1%

-4%

29%

-6%

2%

0%

19%

0%

14%

Neg.

Neg.

199%

11%

-1%

92%

1%

2%

Zimbabwe

Neg.

Neg.

Neg.

Neg.

Neg.

Neg.

-6%

3%

Neg.

Neg.

0%

10%

Neg.

Neg.

202%

38%

Neg.

Neg.

1%

41%

Note:
Source:

46

Rice

High

Low

1. Results in this column reflect soybean used for livestock feed and not as alternative proteins for human consumption, which is captured in aseperate column. 2. Crops relevant to alternative proteins include pulses, soybean, and sugarcane, which is used as an energy source in a single
cell protein production.
NatuRisk, Vivid Economics

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

There is generally less variation across countries
within a subsector. For most subsectors, financial
impacts across countries sit within a relatively tightrange. For example, impacts for tropical roots range
between -2 percent and -5 percent relative to baseline,
and impacts for temperate cereals range between-5 percent and -6 percent relative to baseline. For
agricultural commodities, variation across countries isoften driven by local levels of water stress, exposure
to deforestation pressures, the rate of expansionof protected areas, and the potential pace ofconsumer and policy action on nature. For extractive
commodities, variation across countries is driven bydifferences in national deforestation intensity,
as defined above. These differences in intensity
lead to quite significant differences in profit
impacts between countries in 2050. This is also
amplified by competitive dynamics: countries
that are more deforestation-intensive face higher
increases in production costs, making them lesscompetitive relative to companies operating incountries that are less deforestation-intensive.
This leads to losses in market share and as aresult, profits.

Exhibit 24

Profit impacts in 2050 follow a similar pattern across subsectors and countries

Profit impacts in 2050 follow a similar pattern across subsectors and countries
but are more severe.
but are more severe.

Scenario: Climate + Nature Now Year: 2030
Sector-country
profit changes

Subsector-country profit changes: Low

Size ofsector-country

Size of the subsector-country:

Agriculture
SoybeanCôte d’Ivoire
Egypt
Ethiopia
Ghana
Kenya
Mauritius
Morocco
Niger
NigeriaSouth Africa

Rice

Tropical roots

Temperatecereals

-46%

25%

Neg.

-8%

21%

-15%

2%

6%

-11%

59%

Neg.

Neg.

-13%

8%

Neg.

4%

-8%

28%

-15%

-47%

11%

-13%

42%

Neg.

Neg.

Neg.

-8%

-20%

12%

Neg.

Neg.

-50%

47%

Neg.

Neg.

4%

-47%

4%

Neg.

-47%

-20%

9%

-58%

-51%

46%

Neg.

49%

-50%

1%

-47%

-47%

5%

-51%

3%

Neg.

Neg.

Neg.

Neg.

Neg.

Neg.

2%

-46%

3%

-20%

6%

-46%

46%

-50%

Neg.

Neg.

-22%

7%

Neg.

Neg.

-22%

10%

-15%

1%

Neg.

Neg.

Neg.

Neg.

-47%

2%

-67%

1%

-20%

3%

-46%

Neg.

Neg.

-20%

1%

Neg.

Neg.

Neg.

Neg.

Neg.

Neg.

Neg.

Neg.

Neg.

-20%

Neg.

Neg.

2%

High

Extractives

Alternative
proteins

Fruits, veg., nuts Palm oil

Corn

High

Low

Copper
-38%

Gold

304%

1%

1%

-17%

32%

Neg.

64%

3%

0%

2%

6%

25%

Neg.

226%

1%

Neg.

Neg.

-17%

93%

3%

Neg.

Neg.

Neg.

Neg.

-17%

41%

Neg.

Neg.

226%

3%

-6%

4%

-17%

7%

17%

Neg.

Neg.

58%

79%

-10%

8%

-35%

1%

-11%

51%

Neg.

Neg.

Neg.

Neg.

0%

11%

0%

2%

-21%

41%

Neg.

Neg.

146%

1%

Neg.

Neg.

-17%

81%

-8%

31%

-15%

2%

Neg.

Neg.

Neg.

Neg.

Neg.

Neg.

-67%

4%

Neg.

Neg.

Neg.

Neg.

-51%

5%

-47%

22%

-8%

49%

Neg.

Neg.

300%

9%

0%

2%

13%

20%

Tunisia

Neg.

Neg.

Neg.

Neg.

Neg.

Neg.

-20%

11%

Neg.

Neg.

-11%

55%

Neg.

Neg.

Neg.

Neg.

0%

12%

Neg.

Neg.

Zambia

-67%

5%

-20%

1%

-47%

29%

-51%

2%

-47%

19%

-8%

14%

Neg.

Neg.

304%

11%

-19%

92%

18%

2%

Zimbabwe

Neg.

Neg.

Neg.

Neg.

Neg.

Neg.

-51%

3%

Neg.

Neg.

-8%

10%

Neg.

Neg.

241%

38%

Neg.

Neg.

13%

41%

Note:
Source:1. Results in this column reflect soybean used for livestock feed and not as alternative proteins for human consumption, which is captured in a
separate column. 2. Crops relevant to alternative proteins include pulses, soybean, and sugarcane, which is used as an energy source in single
cell protein production.
NatuRisk, Vivid Economics.

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

47

48

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

Practicalmanagement of
nature-related
opportunities
and risks

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

49

The risk and opportunity assessment undertakenin this study, as well as engagement withthe financial sector working group, havehelped to identify potential challenges for the
implementation of the TNFD framework in the
African financial sector. As mentioned in Section
2, the TNFD framework aims to be the globally
coordinating framework to manage nature-relatedrisks and opportunities, like those discussed in
the preceding section. The TNFD released its
beta framework in March 2022 to gather market
feedback, with several future iterations to bereleased over the next year.
The TNFD disclosure framework adapts thefour TCFD pillars – governance, strategy,
risk management, and metrics and targets(see Exhibit 25) – but with several importantdifferences. First, in contrast to TCFD, the TNFD
emphasises long-term risk and explicitly requires
disclosure on companies’ dependencies andimpacts on nature, in addition to financial risks andopportunities. Second, the TNFD intends to allow
the use of data from both corporate disclosuresand third-party data sources, which could include
financial ratings, geospatial data, and data andmetrics used for the United Nations’ CBD Post2020 Global Biodiversity Framework. Third, the
TNFD recognises that reporters will need to build
their understanding and capacity over time, andthus allows early disclosures to have a limited scope,such as a focus only on the most material impacts
and dependencies and those with sufficient data
availability. Fourth, the TNFD will provide guidanceon how to assess the acceptability of data and to
improve data availability over time. Fifth, the TNFD
framework will include specific guidance on how toapproach the interactions between climate change
and nature loss. The TNFD promotes the use of
integrated climate-nature scenarios as well as anintegrated approach to transition strategies.⁴¹

The TNFD disclosure pillars align with the TCFD.
Exhibit 25

The TNFD disclosure pillars align with the TCFD.

Recommended
disclosures

Governance

Strategy

Risk Management

Metrics andTargets

Disclose the organisation's
governance aroundnature-related risks andopportunities.

Disclose the actual and potential
impacts of nature-related risks
and opportunities on theorganisation's businesses,
strategy, and financial planningwhere such information ismaterial.

Disclose how theorganisation identifies.
assesses and manages
nature-related risks.

Disclose the metrics andtargets used to assess andmanage relevant naturerelated risks andopportunities where suchinformation is material.

A. Describe the board's
oversight ofnature-related risks andopportunities.

A. Describe the nature-relatedrisks and opportunities theorganisation has identified
over the short, medium, andlong term.

A. Describe the organisation's A. Disclose the metrics usedby the organisation toprocesses for identifying
assess and manage
and assessing
nature-related risks andnature-related risk.
opportunities in line with
its strategy and risk
B. Describe the organisation's
management process.
processes for managing
nature-related risk.
B. Disclose Scope 1, Scope
C. Describe how processes
2, and, if appropriate,
Scope 3 greenhouse-gas
for identifying assessing(GHG) emissions, and theand managing
related risks.*
nature-related risks areintegrated into the
C. Describe the targets usedorganisation’s overall riskby the organisation to
management.
manage nature-relatedrisks and opportunities
and performance against
targets.

B. Describe management’s
role in assessing andmanaging
nature-related risks andopportunities.

B. Describe the impact ofnature-related risks andopportunities on theorganisation's businesses.
strategy, and financial
planning.
C. Describe the resilience of theorganisation's strategy, taking
into consideration different
scenarios.
D. Describe the organisation's
interactions with low integrity
ecosystems, high importanceecosystems or areas of water
stress.

Note:
Source:4150*Adaption under consideration by TNFD
TNFD (Taskforce on Nature-related Financial Disclosures, 2021)(Taskforce on Nature-related Financial Disclosures, 2021). We expect FIs will need to develop views in line with similar scenarios to thesepresented here, or adopt something like the NGFS in their internal planning.

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

The beta framework presents an approach forfinancial institutions to assess nature-relatedrisks and opportunities (LEAP-FI), of which
the first three stages have been successfully
implemented in this study. The LEAP approachis voluntary guidance to support corporates andfinancial institutions in undertaking internal naturerelated risk and opportunity assessments. It has
four stages which encourage organiations to (i)'Locate' their interface with nature; (ii) 'Evaluate'
their dependencies and impacts; (iii) 'Assess'their risks and opportunities and (iv) 'Prepare' torespond to and report on nature-related risks
and opportunities. LEAP-FI is a version of the
LEAP approach specifically targeted at financial
institutions. It includes four initial guiding questions
that consider the type of financial institution, thetype of product or asset class under consideration,
what level of aggregation is most appropriate, andthe sectors in which the institution allocates capital,
as illustrated in Exhibit 26.

Exhibit 26

The
intends
to guide
financial
institutions
throughan an
TheLEAP-FI
LEAP-FIFramework
Framework
intends
to guide
financial
institutions
throughassessmentofnature-related
risks
and
opportunities.
assessment of nature-related risks and opportunities.
Scope of the assessment
F1 Type of institution
F2 Type of product / asset class
F3 level of aggregation

What is the nature of our business as a financial institution and how does that affect our interactions with nature?
What asset classes/financial products do we have and what are their potential interactions with nature?
What level of assessment is feasible/appropriate for our business, given the level of aggregation of financial products and services?
What is our potential exposure to nature-related risks and the potential for nature-related
opportunities, given the sectors and geographies in which we allocate capital?
Location based capital allocations

F4 Sector

Location-based capital allocations

Locate interface with nature
L1 Businessfootprint

L2 Natureinterface

Where are ourdirect assets andoperations andour related value(upstream anddownstream)
activities?

Which biomes andecosystems dothese activities
interface with?
What is the current
integrity andimportance of theecosystems ateach location

Evaluate dependencies andimpact
E1 ID ofrelevant
environmental
assets &ecosystem
services

E2 ID ofdependency
and impact

What are ourbusiness
processes andactivities at eachpriority location?
What
environmental
assets andecosystem
services do wehave adependency or
impact on at eachpriority location?

What are our
nature-related
dependencies
and Impacts
across ourbusiness at eachpriority location?

Assess material risks andopportunities
A1 Risk ID andassessment

What are thecorresponding
risks for ourorganisation?

A2 Existing risk What existing risk
mitigation and mitigation andmanagment
management
approaches are
we alreadyapplying?

A3 Additionalrisk mitigation
andmanagment

What is the sizeand scale of ourdependencies onnature in eachpriority location?

What is the sizeand scale of our
nature impacts ineach priority
location?

Prepare to respond and report
Strategy and resource
allocation
P1 Strategy
and resource
allocation

P2
How will we
Performance set targets andmeasurement define andmeasureprogress?

Disclosure action

At which locations
L3 Priority
is our organisation
location
identification interfacing withecosystems
assessed as being
low integrity, highbiodiversity
importance and/or
areas of water
stress?

E3 Dependency What is the size
analysisand scale of ourdependencies onnature in eachpriority location?

A4 Materiallyassessment

L4 Sector
What sectors,
identification business units,
value chains orasset classes areinterfacing withnature in thesepriority locations?

E4 Impact
analysis

A5 Opportunity WhatP4
identification nature-relaxed
Presentation
andopportunities does
assessment
this assessment
identify for ourbusiness?

What is the sizeand scale of our
nature impacts ineach priority
location?

Stakeholder engagement (in line with the TNFD Disclosure Recommendations)
Source:What strategy
and resource
allocation
decisionsshould be madeas a result of
this analysis?

P3 Reporting What will we
disclose in linewith the TNFD
disclosure
recommendations?

Where and how
do we present our
nature-related
disclosures?

Review and repeat(Taskforce on Nature-related Financial Disclosures, 2022).

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

51

Engagement with the banking, asset
management, and insurance industries acrossmultiple African countries has highlighted
key barriers that African financial institutions
will face in managing nature-related risks andopportunities. This also draws from the challenges
faced in the risk and opportunity assessment
undertaken in this study. The identified barriers
provide insight into how best to adjust the TNFD
framework to ensure successful implementation
across the continent. Priorities for considerationvary across different types of financial institutions.
Banks typically face tighter regulatory requirements,
work with shorter time horizons, and in the caseof Africa, have greater exposure to the agriculture
sector. Asset managers have shown greater interestin nature impact reporting and targets to date andare keen to understand how stewardship should
account for nature. Insurers have a greater focus
on how physical risks are likely to change theprobability of claims on different products andhence, the appropriate pricing mechanism.
To ease strain on limited capacities, financial
institutions prefer an integrated approach toclimate and nature. Four out of five financial
institutions in Africa are building their climate
risk capabilities and have little appetite forbuilding additional capacity to take on nature asa separate risk. Jurisdictions such as Kenya haverecently announced plans to make climate-related
disclosures mandatory, making climate riskreporting a compliance requirement and a priority.⁴²
Every financial institution that corresponded withthe authors of this report indicated that nature
would be tackled jointly with climate. This effort
includes extending climate-risk assessment
frameworks, counterparty and institutional risk
management processes, internal and externalreporting, sustainability-linked governance, andstrategy development processes to account for
nature-related risk drivers. An integrated approach
would reduce the administrative burden for clients
as well as staff. Thus, to facilitate adoption of the
TNFD, the institutions expect frameworks andprocesses for nature to be designed as extensionsof climate frameworks and processes. Finance

42
43

52

for Biodiversity’s (F4B) Integrated Transition
Framework for Climate and Nature shows how suchan integrated approach might look.⁴³
For lending to sectors with indirect exposure,guidance is needed. The loan books consideredin the case studies have significant exposure tosectors that not which are exposed to naturerelated risks and opportunities in indirect andcomplex ways. The ways in which these sectors
impact and depend on nature are not yet wellunderstood, and hence it is difficult to include themin risk and opportunity assessments. Examples
include financial services (which accounted for up to
20 percent in some case study portfolios), tourismrelated industries (up to 7 percent), and personal
lending (up to 30 percent). Assessing the exposureof these sectors will require data that is typically notavailable such as data on financial institution clients’portfolios, knowledge of supply chain relationships,
and understanding of how customer livelihoods are
exposed to nature-related risks and opportunities.
The latter is likely to be particularly important in
the context of Africa where a considerable shareof the population depend on agriculture for theirlivelihoods.
Financial institutions do not hold all the data
relevant to counterparties’ nature-related
risk and third-party data availability is limited.
Many of the data required for nature-related
assessments are not routinely collected fromcounterparties. In particular, information islacking on geolocated revenue, the location ofphysical assets, corporate sustainability policies,
and upstream and downstream supply chain
relationships. For example, one commercial bankcommented that, while company-level financial
data on revenue, costs, and profits are collectedfrom all clients, these data are rarely disaggregatedacross geographies and product lines. Some clientsprovide distributions at the country level, but many
do not. As most corporate lending clients are notpublicly listed, these data are not readily available
from third-party data providers that collect andstandardise company-level financial data.

(Central Bank of Kenya, 2021)(Finance for Biodiversity Initiative, 2022)

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

Finally, many financial institutions already request
additional data from clients to comply withconditions set by concessional finance programmes.
These institutions are reluctant to add to theburden of data collection. The adoption of climateand nature-related risk assessments could beaccelerated if methods were developed to define
and collect these data.
Financial institutions will need to attract new
talent with relevant skills. To adopt TNFD, financial
institutions will need to hire people with the skills
and experience to conduct nature-related oversight,
but the talent pool is small. Specific requirements
include proficiency in handling spatial data,
understanding of scientific physical processes,
and familiarity with voluntary reporting standards.
Staff will also need to work and coordinate across anumber of different departments to effectively build
risk management capacity. Framework-issuers andstandard-setters could guide financial institutions
on to build this capability.

Clear regulatory expectations and support
from regulators will make financial institutions
more likely to act. Most financial institutions will
not develop nature-related oversight capacity
without clear signals that it will become aregulatory requirement. Financial institutions saythat, if regulations are introduced, they would
welcome guidance from regulators on how toincorporate nature-related scenario analysis or the
integration of nature-related risks into stress tests.
Organisations noted a lack of examples showing
what constitutes effective action on nature. They
would like to see examples of corporations andfinancial institutions that have developed naturerelated strategies or risk management frameworks.

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

53

54

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

Options for action

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

55

Financial institutions, financial regulators,
framework issuers, standard-setters, and data
providers all have roles in enabling the private
sector to respond to and take responsibility for
impact, risks, and opportunities related to nature.
This section sets out some options that might enable
the financial system to address these matters.

Financial institutions

biodiversity loss, which is expected to launch
during summer 2022. Finally, the African Natural
Capital Alliance (ANCA), established by FSD
Africa with the support of UNECA and DEFRA, is acollaborative forum that not which brings togetherFIs, governmental organisations, intergovernmental
partners, and civil society representatives tomobilise the financial community’s response to therisk of nature loss in Africa.

Commercial financial institutions can prepare
Reporting frameworks and standards might
for nature-related financial disclosures in theenable African financial institutions to build
following ways:
the capacity for nature-related oversight.
Frameworks and standards are already developing• Assess investment and lending portfolios. As
in the form of voluntary requirements and best
outlined in Section 2, the results of our study
practices for financial institutions to discloseindicate that where and when ambitious action
nature-related risks and opportunities. Published in
is taken on nature, material changes may occur
2018, the Natural Capital Protocol (NCP) frameworkin the risk profile and value of asset portfolios.
guides organisations on how to identify, measure,
The risk-return character of some sectors
and value their direct and indirect impact andand commodities may change, high-growthdependencies on natural capital. In 2020, theopportunities may emerge, while other areas
Science Based Targets Network (SBTN) released
may decline in performance. Risk identification
an initial guide for businesses on how to assess theirand assessment processes can be updated to
impacts and dependencies and set nature-related
account for this.
targets. In 2021, the Climate Disclosure Standards
Board (CDSB) published guidance setting out
an approach for reporting biodiversity-related• Support customers. Financial clients andrisks in mainstream financial reports. Finally, theinvestees might need new services to navigate
Taskforce on Nature-related Financial Disclosures
the net-zero and nature-positive transition.
(TNFD) published its beta framework in March
Such services could include helping clients
2022, providing a risk management and disclosure
and investees deepen their understanding offramework for organisations to report and act onnature-related risks and opportunities, hownature-related risks.
those risks and opportunities might translate
into financial performance, and how thisknowledge might affect strategy and riskFinancial institutions could get started on nature
management governance.
by drawing from existing initiatives. Launched in
2019, the Partnership for Biodiversity Accounting
Financials (PFAB) is an industry-led partnership• Invest in capabilities. The assessment ofof financial institutions that work together to
impacts, opportunities, and risks is likely to
explore opportunities and challenges arising frombe complex and require staff with skills andthe assessment and disclosure of the biodiversity
expertise in spatial, natural science, economic,
impact of their loans and investments. The Financeand financial data. A dedicated effort might befor Biodiversity Pledge, introduced in 2020, has
needed to recruit or build talent, or to extend
several working groups of financial institutions thatand integrate capabilities gained from thefocus on assessing impact, setting and publicly
management of climate-related opportunities
reporting on biodiversity targets, and engaging
and risks.
with the policy community. In addition, the WorldBank has proposed Nature Action 100, a platform• Upgrade support systems. Data collection
to coordinate investor engagement on mitigating
could be critical to the robust assessment of

56

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

nature-related opportunities and risks. New
data infrastructure and services – including
services from third-party providers – might berequired. These data might span the sectoraland geographical distribution of investee
revenues, the location of investee operations,the state of local ecosystems on which they
depend, and the local public-policy transition
to address the impacts of local economic
activities on nature. Similar data might begathered on investees’ supply chains. Again,
financial institutions could integrate much of
the information required for both climate- andnature-related assessments.
•

Engage with the TNFD. An important aspectof preparing for the TNFD is engaging in
its development. By working together with
the TNFD, African financial institutions canimprove the fitness of the TNFD framework
for application in Africa. Drawing from thelessons learned from applying the TNFD
beta framework in this study, below are areas
where help from the TNFD might be especiallyvaluable:—

Guidance for specific asset classes.		
For example, the agriculture sector isstrongly linked to the performance of
personal loans, while tourism and other partsof the service sector depend on the health ofnatural ecosystems.

—

Accommodating variation in data
availability. The TNFD framework may
sometimes need to be applied in situations
where relevant, sufficient data are not widelyor readily available. Financial institutions
could benefit from guidance on how to assess
risks and opportunities in the absence ofcomprehensive data.

44—

Integration with climate frameworks andprocesses. With guidance, African financial
institutions could bypass their counterpartsin other jurisdictions by building integrated
climate- and nature-related oversight
simultaneously.

Financial regulators
Financial regulators in Africa might support
preparation by banks, asset owners, and asset
managers by detailing their plans to integrate
nature into regulations. The boards of financial
institutions might welcome clear guidance from
regulators on how they might integrate nature into
their supervisory activities. Advance communication
might describe how regulators plan to approach
nature over time. For example, regulators including
central banks and financial supervisors could
start by regularly publishing nature-related stresstests and, over time, move to micro-prudential
oversight, including risk management and capitalrequirements. As regulators undertake these
activities, they could regularly share the lessons
learned with the private sector.
Financial supervisors might consider adopting
recent studies’ proposals on integrating
nature into micro-prudential regulation, which
would broaden the scope of micro-prudential
supervision tools to include nature-related risks.
Nature’s Next Stewards, a report by the World
Wildlife Fund (WWF), explores how traditional
micro-prudential supervision frameworks canhelp to assess and mitigate nature-related risks
in the banking sector.⁴⁴ It suggests using andadapting part of the Basel III framework – a setof prudential banking regulations that establish
international standards for adequate bank capital,
stresstesting, and liquidity requirements – toimplement preventive measures and act on the most
exposed sectors of the economy. WWF proposes
including nature-related risk dimensions in BaselIII’s supervisory review process, establishingcommon principles and disclosure templates onnature-related risks, and adapting minimum capitalrequirements to integrate climate and biodiversity
considerations.

(World Wildlife Fund, 2021)

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

57

The broader ecosystem
Framework issuers and standard-setters –including but not limited to the TNFD – might
deploy consultative processes in each world
region. Emerging frameworks and standards
wouldbenefit from testing in all regions of the
globe with institutions of diverse types and sizes
and with different levels of data availability. This
process could result in a flexible approach thatsuits many situations. The pilot organisations mightact as ‘go see’ hubs for sharing best practices.
The climate space offers a replicable model:
global standardsetters have collaborated withlocal standardsetters to help translate the TCFD
framework into jurisdiction-specific standards thatreflect the practicalities of the local capital base.
Similar to regulators, policymakers mightclearly describe the future direction of naturerelated transitions. In many jurisdictions, there
is considerable uncertainty about the future
public-policy response to nature loss, which makes
accurate assessment of financial opportunities andrisks difficult. Policymakers can help resolve this58

by clearly indicating future potential pathways forpolicy action – perhaps underpinned by time-bound,legally binding targets – and coordinated plans for
sector transformations.
Finally, data providers might support
implementation of the TNFD framework byengaging with framework issuers and financial
institutions to better understand gaps in the data
market. Data providers can improve the financial
sector’s access to the data required for naturerelated risk assessments by developing productsthat process and present data in a format that isaccessible to mainstream financial institutions. This
step would also reduce the burden on financial
institutions to perform this analysis themselves. This
process should build from the learnings of early
TNFD pilot programmes.
African financial institutions have theopportunity to test, coordinate, and shape theemerging global architecture on nature. By
engaging with global initiatives such as the TNFD,
they can drive appropriate standardisation andultimately improve outcomes for investors and theenvironment.

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

Appendix 1: Approach toopportunity and risk assessment
To assess the nature-related risk exposure offinancial institutions, we follow a five-step approach.
First, we develop a narrative for future demand,technology, and policy pathways and translate these
into five nature scenarios. Second, the commoditylevel risk and opportunities are assessed based on
an integrated prediction of future demand, impliedland-use changes, and impacts on nature, as well as
the resulting costs from the loss of nature services
and penalties on nature impacts. Third, employing
a competition and supply chain model, we derivecompany-level cost shocks that not which accountfor the geographic sourcing of the company, thecharacteristics of the company’s selling market(market structure, demand sensitivity to price, andcompetitive behaviour), and the impact on thecompanies’ profits. Fourth, the cost shocks andprofit changes are transferred into changes insecurity values and aggregated on a portfolio level.
The assessment is conducted using the NatuRisk
Toolkit, as shown in Exhibit 27.

The risk assessment methodology follows a five-step approach.
Exhibit 27

The risk assessment methodology follows a five-step approach.
2

1

Pathway of key levers Sector-level risk assessment
Scenarios
Key outputs
1. Assumption on
future• Policy ambition• Technology
development• Consumer
demand
2. Set of credible
scenarios

Note:
Source:Bio-economic
model (MAgPIE)

Nature impact anddependency
framework

3

4

Company-level impacts

Portfolio-level impacts

Supply chain andfinancial risk model

Asset valuation
model and portfolio
aggregation

Competition model(FIMM)Key outputs
Key outputs
Key outputs
Key outputs
Key outputs
1. Production levels 1. Physical impacts of 1. Production-selling 1. Cost pass-through 1. Changes insecurities valuation
2. Market price
2. Productivity
relationships
land-use change
2. Change in default
3. Production costs 2. Policy stringency 2. Unadjusted cost 3. Production
probability
4. Land-use patterns 3. Regulation costand profit impact 4. Number of firms in
3. Loss in case of
the market
4. Physical anddefault
5. Adjusted cost andtransition risks
4. Aggegate portfolio
profit impact
impactSimplified linear representation of the modelling approach omits iterations within the computation process but was chosen for clarity.
Vivid Economics.

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

59

Scenarios
NatuRisk produces results for the five nature
scenarios to account for the uncertain future
demand, policy, and technology pathways. 		
Each scenario represents a credible storyline forthe evolution of key demand, policy, and technology
levers, resulting in a range of plausible physicaland transition risk outcomes. The purpose of the
scenario-based approach is to provide transparency
on the magnitude of the underlying risks and their
key drivers.
The five climate-nature scenarios build
on existing nature scenarios and expert
consultations, reflecting several levels of
ambition and coordination between climate
and nature action. The least ambitious scenario

describes the continuation of current policies, while
the most ambitious scenario assumes an immediate
and coordinated nature and climate action, which
would result in a rapid transformation with targeted
policy, fast-evolving demand, and the adaptationof new technologies. The intermediate scenarios
vary in terms of scale, timing, and coordination of
the climate and nature actions. Generally, scenarioswith too little, too late, or uncoordinated climate
or nature action tend to exhibit higher transition
risks and physical risks. Each of the scenarios
gives rise to a specific nature outcome that maps toplausible biodiversity and ecosystem pathways. The
scenarios have been calibrated to ensure that thebiodiversity and ecosystem outcomes match thoseprojected in peer-reviewed studies and expert input.
Exhibit 28 provides a more comprehensive overview
of all five scenarios.

We consider five scenarios of action on climate and/or nature and a baseline.

Exhibit 28

The nature scenarios adopted vary in level of ambition and coordination between
nature and climate action.
Low exposure
High exposure
Scenario

Description

Transition
risk

Physicalrisk

Baseline

No accounting of physical or transition risk.
All results are measured relative to baseline.

N/A

Current
policies

Continuation of accelerating biodiversity loss,
widescale depletion of natural capital and fallin the availability and quality of ecosystemservices.

Continuation of current nature policies andcommitments with no expected increase inambition for both nature and climate.

Climateonly

Ambitious action is taken on climate withlimited focus on, or coordination with, nature
action. Actions can benefit nature or drive
nature loss.

Any nature co-benefits from climate action
are largely ineffective at halting the overall
decline in nature. Accelerating nature loss
continues, but at a slightly reduced pace.

Climate +Protection

Climate action is coupled with substantial
expansion and protection of nature but withno further action.

Effective area-based conservation improves
nature integrity in key hotspots by 2030, but
significant decline continues in other areas of
the world.

Climate +NatureFutureAmbitious and coordinated nature action
works towards co-benefits for both climate
and nature goals. However, transformativechange is achieved late.

Trends of nature loss continue to accelerate
to 2030 and then decelerate, leading toeventual reversal (i.e., positive nature trend)by 2050.

Climate +NatureNow

Ambitious, holistic, and early nature action
is well coordinated with climate, maximisingco-benefits and minimising disruption.

Rapid transformation to halt and reverse
nature loss by 2030 with significant
biodiversity gains achieved by 2050.

Source: Vivid Economics.

60

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

Natural outcome

Each scenario is defined by a distinct pathwayof key levers that not which support the broader
policy, technology, and demand-change
narrative. The scenarios are built on 22 key levers,
which were identified as material in driving naturerelated physical and transition risk, as depicted in
Exhibit 29. We parameterise the levers to reflect
their relevance in a specific scenario. Broadly
speaking, the levers can be split into two categories:
1.

Reactions to nature loss – stricter nature
regulation related to protected areas ordeforestation regulation, or demand change
related to shifts in diets are examples – thatcreate transition risks for businesses,
depending on their current use of andsubsequent impact on nature.

2.

Actions that indirectly drive changes to thestate of nature through their impact on otherdrivers of ecosystem and biodiversity change,such as increased demand for biomass, andincreased demand for metals for electricvehicles. Such changes in turn create
physical risks for businesses, based on theirdependencies on nature.

The parameter values are set in alignment
with existing literature and scenarios. The
levers were defined after an extensive literature
review of current scenario projections and peerreviewed studies, as illustrated in Exhibit 30. Whenappropriate in relation to the narrative, lever values
in the most ambitious scenario, Climate + Nature
Now, were set equal to the maximum value of eachlever reported in the literature. Specifications forinterrelated levers are set collectively to achieve
credible related storylines of nature ambition. For
example, the selection of levers presented in Exhibit
30 consistently describe changes to land-usepressures on nature occurring alongside required
food system demand and technology changes
as nature ambition increases. An increase inprotected-area ambition occurs in conjunction witha greater dietary shift away from meat and dairy andan increased reduction in food waste.
To calibrate the model to the characteristics ofAfrica, the parametrisation of the policy levers
was adjusted country by country. Each scenario
includes a narrative describing how policies andregulations will on average evolve. For example, in
the Climate + Nature Now scenario, climate andExhibit 29
Risk levers defining the policy scenarios support the policy, demand change
Risklevers defining
the policy scenarios support the policy, demand change, andand technology
narratives.
technology narratives.
Thematic
categories
PolicyDemand-driven

Risk levers• Protected areas and deforestation regulations• Restoration• Pollution regulation• Water control measures• Spatial planning• Pesticides and fertiliser control• Removal of harmful agricultural subsidies• Corporate nature policy (e.g., shaping supply chain policy)• Globalization of agriculture supply chains• Direct carbon pricing (e.g., tax and ETS)

• Trade policy (e.g., nature/biodiversity import standards)• Bioenergy demand• Nature markets and certification• Oil and gas demand• Diet shift (plant-based)• EV demand projection/uptake (mineral demand)• Reduced waste (agricultural products, fibres,• Transport (i.e., new infrastructure in remote• areas)timber)Technology

Source:45• Agricultural innovation• Water efficiency• Carbon capture and storage (CCS)• Business model innovation

Vivid Economics.

Appendix 3 illustrates the indicators used to determine these three dimensions

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

61

nature policy adapt early and in a coordinated way,
but still vary across countries. We parameterise thepolicy levers depending on the current state of andpressures on nature (policy need); any subnational,
national, or regional nature or climate-related
targets; policies or commitments (policy ambition);and observed governance quality (policy
feasibility).⁴⁵ In contrast, we assume that demand
and technology levers are driven by global trends,
and hence we do not adjust these levers country
by country.

Exhibit 30

Risk levers
levers werescenario
Riskwere defined
defined after
afterananextensive
extensiveliteratureliteraturereview
reviewofofcurrent
current
projections
and peer-reviewed
studies. studies.
scenario
projections
and peer-reviewed
Level of ambition assumed for levers

Lever

Current policies

Climate only

Climate + Nature Climate + Nature
Now
FutureClimate +Protection

Bioenergy
demand (2nd gen)
EJ in 2050

Current
2 EJ

Ambitious climate action
84 EJ

Integrated policy
46 EJ

Earlyintegrated
policy26 EJNGFS scenarios

NDC; 3 EJ

Net Zero; 58 EJ

Below 2°C; 22EJ

Approximate
warming and RCP
scenario

Delayed Net Zero;
45 EJ-4oC; RCP 6+

Protected areas% land area in
2030, 2050
Literature
benchmarks

Diet shift% shift frommeat/dairy< 2°C; RCP 2.6

Current areas
3%, 3%

Climatestabilisation
20%, 20%

CBD aligned
30%, 30%

Beyond delayed
30%, 40%

Beyond40%, 40%

Current WDPA
categories I & II
land area
Jung et al. (2021)

20% protection for
full climate stabilisation Dinerstein etal. (2020)

30% by 2030
Global Biodiversity
Framework Target 3

GBF Target
increased to 40%,
max. feasible
Leclere et al. (2020)

Max. feasible landarea protection(40%) Leclere et al.
(2020)

None0%

Medium
33%

High
50%

Literature benchmarks

Current WDPA
categories I & II landarea Jung et al.
(2021)

33% difference between SSP2 (middle of
the road, no marked shift) & SSP1 (sustainability) Fricko et al. (201 7)

50% shift (meat only and low meat-eating
regions excluded) Leclere et al. (2020)

Food waste% reduction in
waste

None
0%

Medium
25%

High
50%

Literature benchmarks

Source:62

Vivid Economics.

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

SDG Target 12.3.1b, Leclere et al. (2020)

Sector-level risk assessment
Within the model framework, nature-relatedrisks and opportunities arise from, first, sectorlevel dependency and, second, impacts onnature that not which may be constrained or
may be associated with liabilities in the future.
The model first assesses the dependency of the
production of a certain commodity on nature aswell as its impact on nature. The commodity- or
sub-sector-level impacts are then attributed tocompanies and translated into impacts on thecompanies’ profits. By modelling what are known inclimate risk assessment as physical and transition
risks arising from nature dependency and impacts,
the model builds on existing frameworks on how tocomprehensively assess the risk and opportunities
related to the environment.

While businesses have a wide set of nature
impacts and dependencies, to manage theeffort of implementing this first-of-its-kindassessment, the scope focuses on selected
impacts and dependencies. Starting from a long
list of the ways in which businesses depend on
and impact nature, a shorter list was developedby ranking each impact and dependency in termsof its materiality to the sectors and the feasibilityof modelling given limited data availability. The
assessment focuses on the dependency ofagriculture productivity on pollinators and impactsof agriculture and forestry production on pollinators,
forest cover, water quality, and air quality. The set ofin-scope impacts and dependencies map onto eightrisk channels, as described in Exhibit 31.

The assessment considers eight risk channels.

Exhibit 31

The assessment considers eight risk channels.
Agriculture

Physicalrisk

Secondarysectors

Risk channel Industries covered Description

Direct financial risks

Pollination

Loss of animal pollinators due to changes in land
use

Reduced productivity of crops relying on animal
pollinators. Investment cost to intensify per hectare
productivity

Water
availability

Reduced availability of fresh, high-quality water
as a result of increased water stress

Investment cost to adopt irrigation or productivity
impacts due to curtailment of water supply

Soil quality

Reduced soil productivity as a result of
increased soil salinity

Reduced yields for some crops in localised areas

GHG or non-GHG pollution (e.g., NOx, PMP 2.5)

Introduction of a cost per unit of emission
representing policy or investment costs

Water pollution

Freshwater pollution due to nitrogen andphosphorus runoff (linked to artificial fertilizer)

Investment cost to adopt mandated sustainable
technologies – e.g., more advanced irrigation
systems

Deforestation

Forest cover lost due to land-use change

Introduction of a cost per hectare of deforestation
investment cost to intensify per hectare
productivity

Protected areas

Expansion of areas under protection which
permit only specific types of activities to beundertaken

Investment cost to adopt mandated sustainable
technologies

Demand shifts

Changes in global or regional commodity
demand (e.g., reduction of meat consumption)

Decrease or increase in revenue for businesses

Transition Air pollution
risk

Source:Extractives

Vivid Economics.

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

63

The nature risks and opportunities that occur inthe future are estimated by predicting demandchanges, land-use changes, and the resultant
pressure on nature. To assess future dependency
and impacts for the commodities and countries inscope, we predict future global demand for thesecommodities, the geographic distribution of the
production, the implied intensification of production,international trade, and land-use changes. These
predictions consider the scenario levers describedearlier and their impact on demand for commodities
in the future. The predictions were generated by
the land-use change model MAgPIE and the global
vegetation and hydrology model LPJmL.
The outputs of the land-use change model aresubsequently translated into cost shocks:

64•

Deforestation: Costs are based on the forest
area converted into cropland combined withan estimation of expenses associated with
deforestation deterrents.

•

Protected areas: The adoption of mandatory
standards and technologies to maintain theright to produce in areas that have come underprotection increases fixed costs.

•

Pollinator loss: The impact of land-use
changes on animal pollinator populations isconverted into changes in crop yields.

•

Air and water pollution: This is based on
expected water and air pollution from on-farmactivities and corresponding penalties from
regulators.

•

Water availability: We combine local water
stress projections with the costs associatedwith irrigation technologies and production
curtailments to measure the economic impact
of water dependency.

•

Soil quality: Changes in yields arising fromchanges in soil salinity, due to water stress,
represent a unit cost increase.

Finally, the cost drivers are aggregated bycommodity and translated into average unit cost
increases, which feed into the company-level impact
assessment.

Company-level impacts
The company-level impacts are determinedby the supply chain geographic footprint andthe competitive landscape. First, we identify
company-level cost shocks by combining companylevel revenue data with data on trade patterns
and identifying the sourcing markets of eachcompany. This allows us to derive a weighted
average cost shock for each company, depending
on its geographic footprint. In addition, we
deploy a competition model which considers thecompany’s competitiveness and the characteristicsof the market in which it operates to estimate thecompany’s ability to pass through the cost shockand the impact on its volume of sales. The net result
is the impact on profit. Second, the price change
for primary goods is translated into cost shocks
for secondary sectors using sector-level inputoutput mapping, again considering the geographic
pattern of the supply chain. Again, after running thecompetition model, we arrive at estimates for thecompany’s profit change.
For non-publicly listed (private) companies, a
sector-representative cost and geographic
profile is constructed to compensate formissing data. Many financial institutions provide
a significant share of their lending to privatecompanies. Unfortunately, relevant data on thesecompanies are scarce. To overcome this challenge,
we construct a typical private company profile
based on cost and supply chain data from publiccompanies as well as expert interviews. This enables
us to estimate the nature-related risk exposure offinancial institutions more comprehensively.

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

Portfolio-level impacts
Portfolio-level impacts are derived by firsttranslating profit impacts into asset valuation
changes and then aggregating those at theportfolio level. To translate profit impacts into
portfolio-level impacts, we first employ an asset
valuation model which provides value changes forbonds, stocks, and other securities as well as thedefault likelihood and the loss in case of default.
The changes in equity value are directly calculated

by assessing the change in the discounted sum of
future profits. The estimation of the loan book valuechange is slightly more complex. The estimation
follows a five-step approach illustrated in Exhibit 32.
Finally, changes in security values are aggregatedat the portfolio level. For financial institutions andsystems for which we only have commodity- or
sector-level data, the portfolio-level impact isassessed based on a synthetic portfolio – that
is, a hypothetical but representative selection ofcompanies.

Expected losses are calculated through a five-step approach.
Exhibit 32

Expected losses are calculated through a five-step approach.
Approach for calculating the change in
expected losses and loan book value

Illustration: Loan book value under 2% in-year
expected losses

1. Estimate change in credit rating and probability ofdefault (PD) based on changes in profits

100.0

2. Estimate change in loss given default (LGD) basedon change in PD
3. Estimate change in annual expected losses (EL) fromchange in PD and LGD for each year and scenario
4. Compute difference of EL compared to EL under thebaseline scenario
5. Apply in-year “excess” expected losses to loan bookvalue (2020 = 100%)

99.5
99.0
98.5
98.0

100.00
-2%

98.00

97.5
97.0
96.5

-2%

96.04

0

Source:Vivid Economics.

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

65

Appendix 2: Context and coveragefor top-priority countries
This section provides additional backgroundon the coverage and national context of fivecountries that are highlighted throughout theanalysis: Egypt, Ghana, Kenya, Mauritius, andSouth Africa. First, for the agriculture sector, thissection describes the share of the national crop
mix covered by the commodities included in the risk
assessment. Second, it presents the national data
points that were used to assess the potential future
stringency of policy and regulatory action on naturefor different countries under our different scenarios.
•

66

National crop mix: Each of the five countries
has a diverse crop composition (Exhibit34), which was mapped to the value of crop
production (based on data from the Foodand Agriculture Organization, or FAO) to
understand the assessment’s coverage ofthe national agricultural sector. Across Africa,
the scope of the risk assessment covers 87
percent of agriculture in terms of value. The
broadest coverage achieved is in Mauritius,where modelled commodities cover over 99
percent of actual output. Ghana, South Africa,
and Egypt also exhibit high coverage, withrespective shares of 98 percent, 97 percent,and 93 percent. The share of commodities inscope is slightly lower in Kenya, at 71 percent.
Beyond coverage, Exhibit 34 also illustrates
the composition of crops in Africa and the fiveprioritised countries. The most prevalent cropsin Africa are mixed fruits and vegetables andtropical roots, which respectively represent
35 percent and 21 percent of total agricultural
production value. Each of the five countries has
a different crop mix. In Egypt and South Africa,
mixed fruits and vegetables are the primarycrop by value, covering 49 percent and 56
percent of crops respectively. Similarly, mixed
fruits and vegetables constitute the largest
crop by value in Ghana and Kenya, averaging
25 percent of overall value. Ghana produces
mostly tropical roots, which represent as muchas 60 percent of total crop production. Kenya,on the other hand, has the most diversified crop
output of the five countries; mixed fruits andvegetables and corn are the largest Kenyan
crops by value, accounting for, respectively,
25 percent and 16 percent of total production.
Finally, in Mauritius, sugar cane represents 90
percent of crop value.
•

Policy stringency inputs: As outlined in
the methodology section, overall policy
stringency is based on three factors: policy
need, policy ambition, and policy feasibility.
The country fact sheets presented in Exhibit
35 summarise the key observed indicators
underlying our methodology. Biodiversity
intactness, forest cover, deforestation, andsigns of air and water pollution indicate how
rapidly nature is degrading and hence theneed for nature-related policies to reverse thistrend. Observed climate commitments andpolicies like the COP26 Global Forest Finance
Pledge, the submission of enhanced NDCs
(nationally determined contributions), or the
implementation of a carbon price typicallysignal policy ambition, which might indicate
countries that are likely to be early movers.
The average of the world governance index is
considered as a proxy for policy feasibility –that is, the likelihood that nature policies will beenacted and enforced consistently over time.

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

Africa hosts a variety of terrestrial eco-regions (2019)
Exhibit 33

Africa hosts a variety of terrestrial eco-regions (2019).
Deserts and xeric shrublands
Tropical and subtropical moist broadleaf forests
Tropical and subtropical grasslands, savannas, and shrublands
Flooded grasslands and savannas
Montane grasslands and shrublands
Mediterranean forests, woodlands, and scrub
Temperate conifer forests
Mangroves
Tropical and subtropical dry broadleaf forests

African countries have a diverse crop composition (distribution of 2018
agriculture production value by crop).

Source: Resource Watch (The Nature Conservancy,2019)

Exhibit 34

African countries have a diverse crop composition (distribution of 2018
agriculture production value by crop).

18%
8%
6%

6%

6%
7%

16%

16%

22%

5%
6%

25%

8%
9%

35%

90%
10%

49%
60%

56%

7%

5%
21%

6%
6%
7%

Note:
Source:

29%
8%

5%

13%

CerealCorn
CottonPalm
Soybean
Sugarcane
Mixed fruit and vegetables
PotatoPulsesRice
Tropical roots
Other

Values on top indicate the share of agriculture production; grey sector is the aggregate production share of all out-of-scope crops
Based on data from the Food and Agriculture Organization of the United Nations, 2018.

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

67

Exhibit
35 fact sheets include key observed indicators underlying ourCountryCountryfact sheets include key observed indicators underlying our methodology.
methodology
Ghana
Pressure on nature
Biodiversity Intactness Index
In
2014

Relative to
1970

0.57

-21%

Rank: 178

Governance and policy ambition
Forest coverMn. hain 2000

Relative tototal area

6.96

19.2%

Cumulativeloss in 2020
-19%

Rank: 63

Av. World Governance Index (WGI):0.05
WGI rank:
78
Joined COP26 forest pledge:
Yes
Climate ambition:
Low

Water & air pollution
NutrientbudgetWater
stressVery low

Low

Phosphorus andnitrogen pollution

Air Quality
Index

Moderate

High

South Africa
Pressure on nature
Biodiversity Intactness Index
In
2014

Relative to
1970

0.61

-2%

Governance and policy ambition
Forest coverMn. hain 2000

Relative tototal area

5.98

4.9%

Cumulativeloss in 2020
-25%

Rank: 64

Rank: 165

Av. World Governance Index (WGI):0.20
WGI rank:
69
Joined COP26 forest pledge:
No
Climate ambition:
Moderate

Water & air pollution
NutrientbudgetWater
stressModerate

High

Phosphorus andnitrogen pollution

Air Quality
Index

High

High

Mauritius
Pressure on nature
Biodiversity Intactness Index
In
2014

Relative to1970

Governance and policy ambition
Forest coverMn. hain 2000

Relative tototal area

Cumulativeloss in 2020

Av. World Governance Index (WGI):-0.61
WGI rank:
129
Joined COP26 forest pledge:
Yes
Climate ambition:
Low

Water & air pollution
Water
stressNutrientbudgetHigh

High

Phosphorus andnitrogen pollution

Air Quality
Index

Country fact sheets include key observed indicators underlying our
Rank: 189
Rank: 152
methodology
–
0.51

0%

0.07

37.3%

-4%

High

Kenya
Pressure on nature
Biodiversity Intactness Index
In
2014

Relative to
1970

0.71

-9%

Rank: 118

Governance and policy ambition
Forest coverMn. hain 2000

Relative tototal area

3.32

5.7%

Cumulativeloss in 2020-11%

Rank: 80

Av. World Governance Index (WGI):-0.61
WGI rank:
129
Joined COP26 forest pledge:
Yes
Climate ambition:
Low

Water & air pollution
NutrientbudgetWater
stressLow

High

Phosphorus andnitrogen pollution

Air Quality
Index

High

High

Egypt
Pressure on nature
Biodiversity Intactness Index
In
2014
1
Rank: 1

68

Relative to1970
0%Governance and policy ambition
Forest coverMn. hain 2000

Relative tototal area

Cumulativeloss in 2020

6.96

0.2%

-1%

Rank: 63

Av. World Governance Index (WGI):-0.84
WGI rank:
155
Joined COP26 forest pledge:
No
Climate ambition:
Very low

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

Water & air pollution
NutrientbudgetWater
stressVery highVery highPhosphorus andnitrogen pollution

Air Quality
Index

Very highLowAppendix 3: Risk definitions andtaxonomy
This appendix discusses in more detail the typesof risks and opportunities that are assessed
within the analysis. First, this section provides adefinition of nature and ecosystem services anddescribes how they relate to business activity.
Second, it presents a taxonomy of nature-relatedrisks and opportunities aligned with the TNFD beta
framework. Third, it discusses how risks in the real
economy translate to risks for financial institutions.
Fourth, it discusses the interactions between
climate- and nature-related risks and opportunities.

Nature, ecosystem services, and theireconomic value
Nature is undoubtedly in decline, but its
economic impact is not always obvious or easy toquantify. Human activity has significantly altered 75
percent of land surface, 40 percent of invertebrate
pollinators face extinction, and 32 million hectaresof primary or recovering forest were lost between
2010 and 2015.⁴⁶ A key challenge in quantifying the
economic impact of nature decline is linking nature
to economic activities and assessing the materialityof the link. This section introduces nature and its
associated risks and opportunities.

46
47

Nature, ecosystem services, and natural capitalare closely related but different concepts. Natureencompasses the living things, minerals, and wateron our planet, as well the Earth’s features, forces,
and processes, such as the weather. Biodiversity
is a core component of these features. Natural
ecosystems provide critical ecosystem services
that benefit humans, such as providing food andwater, supporting the cycling of nutrients, regulatingclimate and floods, and providing recreational andspiritual benefits (details in Box 1).⁴⁷ Natural capitalis the combined stock of nature and ecosystemservices globally. While this report mostly employs
the terms ‘nature’ and ‘ecosystem services’, otherpublications on nature risk management might
use the term ‘natural capital’. This term effectively
reframes nature as an asset class which can bequantified, tracked against common targets, andeven valued in monetary terms. Natural capital istypically used in the context of asset management.
The terms ‘nature’ and ‘ecosystem services’ aremore common in the context of setting preservation
targets or defining new regulations and disclosure
standards.

(IPBES, 2019) and (IPBES, 2016)
While this report mainly uses the terms ‘nature’ and ‘natural services’, these terms could in many instances be interchanged with the term
‘natural capital’, which describes the stock of nature assets and related nature services

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

69

Box 1: Definition of nature, natural resources, and nature services.
•

Nature—Encompassing all animals, plants, rocks, water, etc., in the world, thus making
biodiversity a core element—

Encompassing all the features, forces, and processes that happen or exist
independently of people, such as the weather, the sea, mountains, the production ofyoung animals or plants, and growth—

Typically emphasized by: Market-shaping ambitions (e.g., nature-positive strategies),
regulation, market disclosures, and consumers•

Natural capital—

Takes an asset-management angle, focusing on the stock of nature assets and theirrelated ecosystem services—

Typically expressed in quantifiable and comparable metrics, not exclusively limited
to economic value—

Typically emphasised by: Business management with a focus on impact anddependencies•

Natural services—

Are the benefits people obtain from ecosystems (also referred to as ecosystemservices) which include:
1. Provisioning services such as food, water, timber, and fibre
2. Regulating services that affect climate, floods, disease, wastes, and water quality
3. Cultural services that provide recreational, aesthetic, and spiritual benefits
4. Supporting services such as soil formation, photosynthesis, and nutrient cycling.

Source: (Cambridge University Press, n.d); (Fatheuer, Fuhr, & Unmüßig, 2016); (Millennium Ecosystem Assessment, 2005)70

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

A large share of economic activities directly
depends on nature and its services. To make thismore tangible, consider the following figure: US $8
billion of gross value-add is generated by the threelargest sectors that directly depend on nature’s
resources or services: construction, agriculture, andfood and beverages.⁴⁸ Businesses often depend on
ecosystem services such as:
1. Direct inputs (provisioning services). Natureprovides fibres for agricultural production,
wood for construction, biomass for energy
production, and genetic material for drug
development. For instance, about 75 percent
of anti-tumour drugs that not which havebeen approved in the past 70 years are nonsynthetic, and 49 percent of anti-tumour drugs
are natural products or directly derived fromnatural products.⁴⁹ . Moreover, nature maintains
critical waterflow for agriculture and manyindustrial production processes.

3. Protection from disasters (regulating
services). Mangroves, coral reefs, andwetlands offer effective protection by
dissipating energy and moving water fromstorm surges and floods. Mangroves inparticular are estimated to annually offer
protection worth USD $65 billion.⁵¹ In addition,
vegetation can reduce the risk of landslides(and soil erosion) during extreme precipitation
events.⁵² Nature helps to protect businessactivities as well, including the production
and transport of goods. Beyond that, naturesignificantly contributes to global climate
regulation by sequestering roughly 60 percent
of global anthropogenic greenhouse-gas
emissions and therefore indirectly helps tomitigate climate change.⁵³ More detail on the
climate nexus is provided later in this section.

Even businesses that not which do not directly
depend on nature can be indirectly dependent
through their supply chain. Supply chain
dependence occurs when a sector purchases inputs
2. Enablement of production (supportingthat not which directly depend on nature. Prominent
services). Nature supports agriculture
examples of such downstream dependency are theproduction through services like animal
food processing, apparel, and cosmetics sectors,
pollination, pest control, and nutrient cycling.
which heavily rely on nature-based inputs from theAn estimated 75 percent of food crops depend
agriculture sector (for example, rice, grains, shea
at least somewhat on animal pollination, andwild pollinators cannot be replaced by managed, butter, and cotton). For six purchasing industries –
chemicals and materials; aviation, travel and tourism;
man-made alternatives.⁵⁰Mining and chemical
real estate; mining and metals; supply chain andcompanies rely on nature’s capacity to absorb
transport; and retail, consumer goods, and lifestyle
their emissions and recycle their wastewater.
– more than 50 percent of their supply chains’ gross
Other companies more generally depend onvalue-added (GVA) moderately or highly depends
natural waterways for transporting their goods.
on nature.⁵⁴

48(World Economic Forum, 2020)(Newman & Cragg, 2012)(IPBES, The assessment report of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services on pollinators,
pollination and food production, 2016)
51(Menéndez, Losada, Torres-Ortega, Narayan, & Beck, 2020)
52(Renaud, Sudmeier-Rieux, & Estrella, 2013)
53(IPBES, Global assessment report on biodiversity and ecosystem services of the Intergovernmental Science-Policy Platform on Biodiversity
and Ecosystem Services, 2019)54(World Economic Forum, 2020)
49

50

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

71Nature-related physical risks and opportunities
Businesses activities can also negatively andare driven by dependencies and can be chronic or
positively impact nature’s health and vitality
acute. Physical risk comes from two sources. First,– and hence its ability to provide ecosystem
the loss of natural inputs and nature services that
services. The IPBES has identified five key drivers
enable production physically hinders companies
of nature loss: changes in land and sea use, direct
exploitation of organisms, climate change, pollution, from producing or buying primary inputs forand invasion of alien species. All five of these drivers production. Since these nature services only
deteriorate because of long-term ecosystem shifts,
are linked to various economic activities. Land-use
the implied risk is chronic and materialises over time.
change arguably has had the most negative impact:
Second, the loss of natural protection can cause
in 2019, 75 percent of land surface globally had
already been significantly altered, and 66 percent of material damages to companies’ physical assets,
ocean areas are experiencing increasing, cumulative critical infrastructure, and supply chains. The
implied risk is acute, depending on the occurrence
impacts. Between 2001 and 2020, 10 percent ofof natural disasters. For both sources of physicalglobal tree cover has been lost; roughly 30 percent
risk, a company’s exposure is proportional to itsof this loss has been driven by commodity demanddependency – that is, the share of production(such as, palm oil, logging, mining) and is expected
depending on certain natural commodities, or the
to be permanent.⁵⁵ . The degradation of nature
share of production facilities located in coastal
predominantly affects the availability of supporting,areas that are historically protected by coastal
regulating nature services. Habitat destruction
vegetation.
and overuse of pesticides and herbicides havehelped to bring 40 percent of insects under threatof extinction, which in turn threatens the availability
Nature-related transition risks and opportunitiesof pollination services.⁵⁶ Moreover, worldwide, 20
are driven by impacts and aspects of thepercent of cropland, 16 percent of forest land, 19transition to a nature-positive economy.
percent of grassland, and 27 percent of rangeland
Essentially, three key drivers prompt transition
show a decline in productivity due to water
risk: new policies and regulation, innovation, andwithdrawal and soil contamination, degradation,
consumer shifts.
and erosion, which puts agriculture productivity at
risk.⁵⁷ The clearing of mangroves for agriculture• Nature policies and regulation. As the
production and in particular aquaculture and thedeterioration of nature advances, policymakers
loss of coral reefs due to anthropogenic climate
and regulators are expected to implementchange have reduced protection from hurricanes
new measures to support a shift towards more
and floods, putting 100 million to 200 million people
nature-positive outcomes. Nature-focusedat higher risk of experiencing severe impacts frommeasures could potentially include thehurricanes and floods.⁵⁸
expansion of protected areas, the introductionof taxes on land- or pollution-intensive goods,
or mandatory disclosure of a company’s nature
Nature-related risks and opportunities
impacts. Such interventions will likely increase
companies’ cost of production and thus
Nature-related risks and opportunities arise
reduce their profitability. In extreme scenarios,
from the dependency and impact of businesscompanies might lose their license to operate.
activities on nature. More specifically, nature
However, these shifts also create significant
dependencies expose businesses to physicalopportunities for businesses whose activities
risks and opportunities, while nature impacts
support nature.
expose business activities to transition risks andopportunities.

55(Global Forest Watch, 2022)(Sánchez-Bayo & Wyckhuys, 2019)57(UNCCD, 2017)
58(IPBES, Global assessment report on biodiversity and ecosystem services of the Intergovernmental Science-Policy Platform on Biodiversity
and Ecosystem Services, 2019)56

72

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

Disruptive innovations. Companies will
try to develop and deploy new, innovativetechnologies or business models that not which
reduce their dependency or impact on nature.
Successful innovations will create opportunities
for disruptors, while other companies may beleft behind.
Consumer shifts. Demand for natureneutral or nature-positive products will growas nature loss intensifies and awareness ofnature’s critical role in solving the climate
crisis increases. Companies that harm nature
may face reputational risk and lose market
share, while those that can demonstrate thatthey are profitable but not harmful will havea competitive edge. These latter companies
will be able to access high-growth markets forsustainable products.

Value of nature-related risk
management for financial institutions
and systems
Financial institutions can create value byeffectively managing nature-related risk andopportunities in four ways: improving portfolio
management, preparing for new policies andregulations, effectively managing their reputation,
and adapting their commercial strategy. Exhibit
36 presents a transmission mechanism showing
how a business’s impacts and dependencies onnature can create financial risks and opportunities,
and how these can then create financial risks andopportunities for financial institutions that lend to
those businesses.

Counterparties’
impacts and dependencies on nature can be translated to
Exhibit36

financial risks andopportunities
through on
a transmission
Counterparties’
impacts
and dependencies
nature can bemechanism
translated tofinancial risks and opportunities through a transmission mechanism.
Nature-related risks
Counterparty dependency on nature
Direct inputs (e.g.,cotton)Services whichenable productivity

Counterparty impact on nature

Disaster protection

Extraction ofnaturalresources

Land-usechangePhysical risks
Acute

A change inproductivity-enabling
ecosystem services

A change in theprotective capacity ofnatural assets

Changes in Changes innature policy other natureor regulation related policy

Changes infinancial
regulation

Asset quality risk (risk-in)
Income statements
Revenues

Land, soil, andair pollution

Physical risks

Chronic
A change in theavailability of direct
inputsClimate change(GHG emissions)Innovation,
includingchanges intechnology

Changes in
consumerpreferences

Portolio risk (risk-out)

Cash flow

Balance sheets

Financed nature impacts

Assets and liabilities Capital and financing

Expenditure

Financial institution risk
Credit risk
Source:Operational risk

Market risk

Liquidity risk

Liability risk

Reputational risk

Strategic risk

Vivid Economics.

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

73

First, at the portfolio level, nature-related risk
management can enable financial institutions
to de-risk their portfolios. Independent of
whether a financial institution generates revenues
from financial investment, corporate lending, or
insurance underwriting, the failure to sufficiently
recognise counterparties’ nature-related risk
exposure will result in overvaluation. Investments
will underperform, corporates will be more likely todefault on their debt, and insurance premiums will
be too low compared to actual claims. Moreover,financial institutions may face litigation risk fromfinancing illicit harm to nature or insufficiently
disclosing known nature-related risks, as
they are beginning to experience with climate
action.⁵⁹’⁶⁰ Financial institutions can mitigate credit,
operational, liquidity, and litigation risks by building
up nature-related risk assessment capabilities andincorporating these into their investment, lending,and underwriting processes.
Second, financial institutions can minimise
compliance costs and disruptions by preparing
for regulatory requirements ahead of time.
Financial regulators are paying more attention tonature-related risks. For example, the Dutch andFrench central banks have conducted their firstnature stress tests, and the Network for Greening
the Financial System (NGFS) is expected to soon
develop nature-related scenarios. Drawing fromthis experience with climate action, it is reasonable
to expect that nature-related risk assessments,
disclosures, and stress-testing may become
mandatory in the future. Getting ahead and building
the relevant capabilities are essential to prepare forthese emerging requirements and to avoid future
operational disruptions.
Third, financial institutions should act on nature
to mitigate the reputational risk that could result
from client and shareholder pressure. As they
did after the Paris Agreement, both shareholders
and customers are increasingly pressuring financial
institutions to align their operations with clear

nature targets. Financial institutions that fail to act
on their shareholders’ and customers’ expectations
may incur less favourable terms of finance and lossof market share. Financial institutions that act early– by committing to meet established nature targets,for example – will have a better chance of avoiding
reputational risk and may also build a strong, trusted
brand profile that lends them a competitive edge.
Fourth, by aligning their activities with naturepositive impacts and offering products that caterto clients who are concerned about nature loss,
financial institutions can seize new commercial
opportunities. In the next few years, demand fromretail and institutional investors for investment
products with a positive impact on nature could
increase substantially, as they did for HSBC Bankand its climate-related products. Banks and asset
managers could grow their business by developing
new and innovative nature-focused investment
products. Some financial institutions have alreadydeveloped nature-positive products such as the
HSBC Pollination Fund and Mirova Natural Capitalfunds.
Nature-related risk management can also help
support financial system stability. Because
nature-related risks are systemic, crossing
sectors and extending along supply chains, severe
nature loss and nature-focused regulations could
drive economic losses simultaneously in several
sectors. Shocks to the real economy can spillover to the financial sector and create financial
instability. This connection between nature-related
risk and financial stability has been recognizedby 66 members of Network for Greening the
Financial System (NGFS), which emphasises thatnature-related risks are ‘therefore within the
mandates of central banks and supervisors’.⁶¹ Thus,
financial supervisors and regulators can support
financial stability by promoting nature-related risk
management among financial institutions within
their financial system and by incorporating naturerelated risks into the micro- and macro-prudential
oversight frameworks.

59

In the latter case, financial institutions are typically protected by limited liability, and in some legal systems lenders are already restrictedfrom financing projects that not which cause harm – as with the rules and precedents created by Brazil’s National Environmental Policy Law,for example, together with jurisprudence from the Superior Court of Justice and the higher courts of the Brazilian states
60(Network for Greening the Financial System, 2021)
61(Network for Greening the Financial System, 2019)
62(Network for Greening the Financial System, 2019)74

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

The climate-nature nexus
The planet’s climate and nature systems are
deeply interconnected, causing climate change
and nature loss to reinforce and exacerbate
one another. Climate change is a key driver of•nature loss. For example, coral reefs, which areparticularly vulnerable to increases in temperature,are projected to decline to 10 to 30 percent offormer cover at 1.5°C warming and to less than 1
percent at 2°C warming.⁶² At the same time, naturesignificantly contributes to global climate regulation.
Marine and terrestrial ecosystems support climate
regulation by sequestering roughly 60 percent of
global anthropogenic greenhouse-gas emissions.⁶³
Thus, as global warming accelerates, nature loss will,
too, which in turn will further contribute to climatechange.
An integrated approach to climate and nature
will lead to more accurate estimations of risk
exposure and allow businesses to develop a
consistent net-zero carbon and nature-positivetransition strategy that captures synergies
between climate and nature. An integrated
framework has two key features:•

64

Compounding climate- and nature-relatedrisks. Some nature- and climate-relatedrisks overlap and are not simply additive.
For instance, climate change increases thelikelihood of coastal flooding, while natureloss decreases the availability of naturalprotection from flooding. Both effects jointly
compound the risk exposure of coastal areas
to flooding. The same applies to transition
risks. For example, climate change contributes
to the dieback of forest – independent of
human-induced deforestation – which further
accelerates climate change. Taken together,
these two effects intensify the need for forest
protection measures and therefore compoundtransition risk exposure related to nature-protection regulation. More broadly, when
considering climate change and nature loss
together, environmental degradation will occur
at a quicker pace. This implies that we will alsoneed a quicker transition.
Uncertainty about climate and nature
pathways. The future pathways of climate
and nature are highly uncertain and depend
on various external conditions – such as the
speed of change in climate dynamics, theadaption of new technologies, and regulation.
Scenario analysis is used to account for these
uncertainties, with each scenario describing aplausible future pathway based on consistentassumptions about external drivers. Given theinterconnection between climate and nature,
it is both practical and necessary to integrate
potential nature loss and potential nature
policies into climate scenarios. Integrated
scenarios can help ensure consistency
between climate- and nature-related risk
assessments.

Financial institutions and supervisors candeploy an integrated framework to assess andmanage climate- and nature-related risks andopportunities. A joint framework allows climate
and nature strategies to be aligned, climate andnature interactions to be effectively accounted for,and impacts to be assessed in aggregate. With an
integrated framework, financial institutions andsupervisors can leverage synergies and ensure thealignment of both assessments. The risk typologies(for example, physical, transition, and systemicrisks) for climate and nature are similar, allowing
for a smooth integration. A detailed proposal for an
integrated framework can be found in a report by
the Finance for Biodiversity (F4B) initiative, Towards
an Integrated Transition Framework.⁶⁴(Finance for Biodiversity Initiative, 2022)

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

75

Appendix 4: Evolving regulatory
ecosystem
Following the example of TCFD, the Taskforce
on Nature-related Financial Disclosures (TNFD)
was formed in 2020 to develop a framework forassessing and acting on nature-related risks.
After the 2008 financial crisis, banks were asked
to disclose more fully their exposure to certain
types of risks, and scenario-based stress-testing
was introduced. As awareness of the materiality ofclimate-related risk grew, the TCFD was establishedin 2015 to ‘help identify the information needed
by investors, lenders, and insurance underwriters
to appropriately assess and price climate-relatedrisks and opportunities’, as well as to provide areporting framework for financial and non-financial
institutions for climate-related disclosures.⁶⁵ Overtime, the discourse about nature loss, its connection
to climate change, and its impact on the global
economy broadened. As a result, the TNFD wasestablished to identify the information needed forfinancial institutions and companies to understandtheir dependency and impact on nature, as well as
how nature loss will affect their short- and longterm financial performance. The scope of the TNFD
includes living nature and elements related to living
nature, such as air, soil, and water.
In the first quarter of 2022, the TNFD publishedits first ‘beta’ framework for reporting on
nature-related risks. The TNFD will follow an openinnovation approach, moving quickly to engage themarket with an outline of the proposed frameworkand then learning through feedback from, anditeration with, market participants. The beta
framework includes:

65

76

•

An overview of the vision and aims of		the framework•

TNFD’s principles for a risk management andreporting framework•

Definitions and taxonomies relating to naturerelated impacts, dependencies, and risks•Core recommendations on what should be
disclosed by reporting entities•

Guidance that takes the user on a ‘howto’ journey from nature-related impacts
and dependencies to risk and opportunity
identification, with links to relevant third-party
tools, guidance, and processes•

An overview of the framework’s future
development

According to the TNFD’s workplan, the final
nature-related disclosure framework can be
expected in 2023. Following the recent publicationof the TNFD beta framework, the TNFD will
engage with financial institutions and corporations
across geographies to promote the testing of theframework. Based on the insights received fromthe TNFD pilots, the framework will be updated. The
testing phase will be followed by a shorter periodof stakeholder consultations to gather further
feedback and to ensure that the TNFD frameworkbuilds on recommended tools, measurement
systems, and reporting protocols.

(Taskforce on Climate-related Financial Disclosures, 2017)

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

Exhibit 37

TheTNFDTNFDtimeline
timeline
aims
towardsa finaldisclosure
framework
publication
in
The
aims
towardsa finaldisclosure
framework
publication
in
2023
2023.
Context and action plan
TNFD is following the path of the TCFD to allow financial institutions and companies to incorporate nature-related risks and opportunities into
decision-making processes
Phase 0: Prepare

Phase 1: Build

July 2020: Declarationof the initiative to bring
together a TNFD

January 2021: TNFD
endorsed by President
MacronSeptember 2020:
Launch of 75-member
informal Working GroupTNFD endorsed byUnited Nations
Secretary General
Guterres

June 2021: TNFD
launched and co-chairsannounced

Source:Phase 2: Test

Beta framework
published in early 2022
Testing the frameworkacross emerging anddeveloped markets
Revision of framework

Taskforce members
announced
Knowledge partners
announced
Building the TNFD
framework begins

Phase 3: Consult

Phase 4: Disseminate

Phase 5: Adopt

Consultations with arange of financial
regulators, datapreparers, and data
users in 20 emerging
economies, plus
developed markets

Launch of the framework Continued guidance
via key events andto facilitate uptake of
specific communications the framework

Taskforce on Nature-related
Financial Disclosures
In 2023, the TNFD will deliver a framework fororganisations to report and act on evolving
nature-related risks, in order to support a shift in global
financial flows away from nature-negative outcomes andtoward nature-positive outcomes

TNFD (Taskforce on Nature-related Financial Disclosures, 2021)

Like the TCFD framework, the TNFD framework
is expected to be translated into standards andeventually embedded into regulations. The TNFD
framework is the first step, providing initial guidanceon how to identify and assess nature-related risks
and opportunities and outline the information thatshould be disclosed so that investors and regulators
can make more informed choices. Over time, the
TNFD framework is expected to be translated into
standards with practical, concrete, and granulardetails that can be verified by auditors. The beta
framework already aligns with guidance from the
IFRS International Sustainability Standards Board(ISSB). As has been the case for climate, emerging
global standards for nature-related risk disclosure
are expected to be adopted by local regulators andadapted for mandatory regulations.
While it is difficult to predict the exact timing,
the TNFD framework is likely to be integrated
into standards and regulations more quickly
than the TCFD. Seven years passed between
the inauguration of the TCFD in 2015 and the firstnational mandate for climate-related financial
disclosure in the UK, as well as the first climate
stress-test exercise by the European Central
Bank. Given the interconnections between climate
and nature and the fact that the TNFD, global

standardsetters, and regulators can build on theexperience gained from the TCFD process, it
is reasonable to expect a considerably shorter
timeline between the development of the TNFD
framework and the first nature-related disclosuremandates.
Standard-setters and financial supervisors
have already started their work on naturerelated risks and opportunities. For example,
The Global Reporting Initiative (GRI) published its
first biodiversity standard (GRI 304) in 2016 and is
expected to publish a revised version in 2022. The
IFRS ISSB is expected to work on a global nature
standard starting in 2023. The Climate DisclosureStandards Board (now part of the IRFS ISSB)
launched guidance on how to assess and disclosebiodiversity and water-related risks, including a listof impact drivers and example metrics. Moreover,
the Science Based Target Network (SBTN) isrevising its initial guidance for businesses on how
to set nature targets. As mentioned above, some
central banks are moving at a similar fast pace anddeveloping nature-related stress-test capabilities.
The Dutch and French central banks, for example,
have highlighted the materiality of nature-relatedrisks in their first stress-tests. The NGFS has
also convened a study group to consider the links
between nature loss and financial stability.

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

77

List of exhibits

78

Exhibit 1. We consider five scenarios of action on climate and/or nature and a baseline.

20

Exhibit 2. Exposure to agriculture and extractives together ranges from 2 percent to 20 percent of
total portfolio value.

21

Exhibit 3. By 2030, total equity value could fall by up to 5 percent under Climate + Nature Now.

22

Exhibit 4. By 2030, total loan book values could change by +0.3 percent to -0.6 percent under
Climate + Nature Now.

23

Exhibit 5. By 2030, total loan book values could fall by up to -0.4 percent under Climate + Protection.

24

Exhibit 6. Nature-related risks could roughly double expected losses from agriculture by 2030
for some portfolios.

25

Exhibit 7. Nature-related risks in deforestation-linked extraction and crop production are of acomparable scale to climate-related risks in manufacturing, chemicals, and extractives.

26

Exhibit 8. By 2030, the equity value of agriculture producers could increase and decline
between +55.5 percent and -22.0 percent under Climate + Nature Now.

27

Exhibit 9. By 2030, lending to agriculture could see gains and losses between +5.4 percent and -3.2
percent under Climate + Nature Now.

28

Exhibit 10. By 2030, equity value of extractives companies could increase and decline up to +1
and -3.7 percent under Climate + Nature Now.

29

Exhibit 11. By 2030, lending to extractives could see losses up to 2.6 percent under Climate + Nature
Now.

29

Exhibit 12. Changes in loan book and equity value are estimated based on firm-level profitchanges.

31

Exhibit 13. Water stress significantly raises production costs.

35

Exhibit 14. Tourists are attracted by species richness, making tourism vulnerable to habitat andspecies loss.

35

Exhibit 15. Limited land availability could significantly increase agricultural production costs by
2030.

37

Exhibit 16. Deforestation could quickly become a market access risk for gold and copper
exported from Africa.

39

Exhibit 17. Agricultural producers pass a high proportion of costs onto consumers.

40

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

Exhibit 18. Under ambitious action, some commodities see significantly slower demand growth,
while others see little change.

41

Exhibit 19. Under all scenarios, agriculture profits increase substantially over time.

42

Exhibit 20. Costs associated with limited land availability are higher under Climate Only relative to
Climate + Nature Now.

43

Exhibit 21. A big shift to alternative proteins would bring big growth opportunities for agribusiness.

44

Exhibit 22. Profits in crops, gold and copper could be up to 15-20 percent lower than baseline by
2050.

45

Exhibit 23. In 2030, there is more significant variation in profit impacts across subsectors thanacross countries.

46

Exhibit 24. Profit impacts in 2050 follow a similar pattern across subsectors and countries but are
more severe.

47

Exhibit 25. The TNFD disclosure pillars align with the TCFD.

50

Exhibit 26. The LEAP-FI Framework intends to guide financial institutions through an assessmentof nature-related risks and opportunities.

51

Exhibit 27. The risk assessment methodology follows a five-step approach.

59

Exhibit 28. The nature scenarios adopted vary in level of ambition and coordination between
nature and climate action.

60

Exhibit 29. Risk levers defining the policy scenarios support the policy, demand change andtechnology narratives.

61

Exhibit 30. Risk levers were defined after an extensive literature review of current scenario
projections and peer-reviewed studies.

62

Exhibit 31. The assessment considers eight risk channels.

63

Exhibit 32. Expected losses are calculated through a five-step approach.

65

Exhibit 33. Africa hosts a variety of terrestrial eco-regions (2019).

67

Exhibit 34. African countries have a diverse crop composition (distribution of 2018 agriculture
production value by crop).

67

Exhibit 35. Country fact sheets include key observed indicators underlying our methodology.

68

Exhibit 36. Counterparties’ impacts and dependencies on nature can be translated to financial
risks and opportunities through a transmission mechanism.

73

Exhibit 37. The TNFD timeline aims towards a final disclosure framework publication in 2023.

77

Box 1: Definition of nature, natural resources, and nature services.

70

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

79

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