Pillar: Adaptation and Resilience

Nature depletion threat to Kenya’s economic stability – lobby

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In Summary

  • According to ANCA Economic activity is depleting nature with nearly 75 percent of land surface significantly altered.
  • The dependence of Africa’s economy on natural capital exceeds the global average, with over 70% of people in sub-Saharan Africa depending on forests and woodlands for their livelihoods.

The lack of proper data, legal and regulatory structure to fund nature-related risks has seen investors shy off from pumping resources into the sector.

This has further exposed the sector, despite being a key anchor of Kenya and a majority of the African economies.

FSD Africa and African Natural Capital Alliance Lead, Dorothy Maseke says that going forward, regulators will need to identify nature-related risk concentrations for regulated entities and assess whether they are being managed effectively.

According to Maseke, this will streamline the sector and prevent the loss of $195 billion (Sh27.7 trillion) in annual natural capital in Africa.

“Enhanced transparency of nature-related risks is fundamental to managing them effectively. This is the case for individual financial institutions, which need visibility of the nature-related risks in their lending, underwriting, and investment portfolios,” said Maseke.

In Kenya currently, green financing has been concentrated in areas such as lending to renewable energy projects and providing credit lines for energy efficiency projects such as solar installations.

Speaking during the release of a report on “Improving the transparency of nature-related risks in Africa”, the lead said that if not addressed, risk assessments show that five percent of Africa’s banks risk portfolio could experience losses up to 2023.

The report outlines how financial sector stakeholders, including regulators, are increasingly recognising that the depletion of nature poses risks to financial and economic stability.

In February this year, Kenya announced a plan to set up an investment bank to increase commercial lending to environmentally friendly projects by absorbing part of the risks associated with such ventures.

Treasury in its draft National Green Fiscal Incentives Policy Framework, noted that the planned bank is part of efforts to steer Kenya’s economy onto a low-carbon climate-resilient green development pathway.

The green bank—to be referred to as Kenya Green Investment Bank (KeGIB) —will incentivise private sector investments in green projects.

According to ANCA, economic activity is depleting nature with nearly 75 percent of land surface significantly altered and over 85 percent of wetlands having been lost, threatening economies and businesses that depend on nature.

African economies are highly exposed to nature-related risks because they are especially dependent on nature and quickly losing natural capital.

Africa is home to 65 percent of the world’s arable land, and 20 percent of the global tropical rainforest area .

These natural endowments offer large natural-capital opportunities

The dependence of Africa’s economy on natural capital exceeds the global average, with over 70 percent of people living in sub-Saharan Africa depending on forests and woodlands for their livelihoods.

This is compared to about half of the worldʼs total GDP generated in industries that depend on nature.

Africa’s loss of natural capital also exceeds the global average, having seen a decline in its Biodiversity Intactness Index (BII) score of 4.2 percent between 1970 and 2014, considerably higher than the global BII score decline of 2.7 percent over the same period.

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FSD Africa, NAICOM strengthens partnership with Risk-Based Capital training, others

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In its quest to foster growth and innovation in the Nigerian insurance industry, the Managing Director of Financial Sector Deepening Africa (FSD Africa), Mr Mark Napier, led his management team on a visit to the Commissioner for Insurance Nigeria, Mr Olorundare Sunday Thomas, recently in Abuja.

A statement received from the Commission affirmed that the visit was another step towards strengthening the partnership that has existed between the two organisations to enhance the Commission’s capabilities and sustainability.

The high point of the partnership was the implementation of a Risk-Based Capital (RBC) training program, offered by FSD Africa to 70 staff members of NAICOM, aimed at boosting their capacities.

According to the statement, the two weeks training facilitated by Mr Elias Omondi, Principal in charge of innovation at FSD Africa, was beneficial to NAICOM in the following ways: Development of Risk-Based Capital framework and toolkit, Incorporation of Economic, Social and Governance (ESG) Principles into NAICOM’s operations and Development of Innovative portrait which would facilitate innovation for the regulator and insurance operators amongst others.

Stakeholders (including policyholders) in the insurance value chain are thirstily waiting to see a positive change that would follow. As a mentally fortified and knowledgeable regulator for responsible and innovative practices, the future of the Nigerian insurance landscape appears auspicious, poised to offer better protection and services to Nigerians.

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NAICOM hosts Financial Sector Deeping Africa, forges partnership deal

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The Managing Director Financial Sector Deepening Africa Mr. Mark Napier(left) along with his Management Team paid a courtesy visit on the Commissioner for Insurance Nigeria Mr. Olorundare Sunday Thomas (Right). Sequel to the partnership entered into by the National Insurance Commission (NAICOM) with FSD Africa, Atwo week Risk Based Capital (RBC) training for 70 staff of NAICOM had been held and was facilitated by Mr. Elias Omondi Principal in charge of innovation at FSD Africa.

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FSD Africa prepares NAICOM staff for risk based capital

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The Managing Director Financial Sector Deepening Africa Mark Napier, along with his Management Team paid a courtesy visit on the Commissioner for Insurance Nigeria Olorundare Sunday Thomas.

Sequel to the partnership entered into by the National Insurance Commission (NAICOM) with FSD Africa, A Risk Based Capital (RBC) training for 70 staff of NAICOM has been on for two weeks and ends on Friday 28 July, 2023 and is being facilitated by Elias Omondi Principal in charge of innovation at FSD Africa.

Other benefits of the partnership for the Nigerian Insurance Industry include:

Development of Risk Based Capital framework and toolkit; incorporation of Economic, Social and Governance (ESG) Principles into our operations and development of Innovation portrait which would facilitate innovation for the regulator and insurance operators amongst others.

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New Report Reveals Growing Focus On Biodiversity Crisis Among Financial Players

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NAIROBI, Kenya, July 25 – Finance firms in Africa are beginning to recognize the risk that the sector faces from environmental degradation.

This is revealed in a new report dubbed ‘Improving the transparency of nature-related risks in Africa’ by the African Natural Capital Alliance (ANCA).

ANCA was founded by leading banks and insurers in Kenya, South Africa, and Nigeria to tackle the biodiversity crisis as well as how to benefit from it.

According to the report, the alliance underscored the growing importance of African regulators responses to nature-related risks in line with their mandate of maintaining financial viability.

“Enhanced transparency of nature-related risks is fundamental to managing them effectively,” Nature Lead at FSD Africa and ANCA Dorothy Maseke said.

“This is the case for individual financial institutions, which need visibility of the nature-related risks in their lending, underwriting, and investment portfolios.”

The alliance observes that the Global Biodiversity Framework (GBF), which was adopted in December 2022 by 188 governments across the world, aims to address biodiversity loss, restore ecosystems, and protect indigenous rights.

“This landmark agreement prompts governments to introduce policies to manage nature loss, which will lead to regulators having to act, and highlights the opportunities for regulators to do so proactively,” says Oliver Wyman’s Sandra Villars.

ANCA opines that African regulators could thus benefit from engaging with this new agenda early and being at the forefront of integrating nature into their regulatory regimes.

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Africa: New Report Reveals Growing Focus on Biodiversity Crisis Among Financial Players

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Nairobi — Finance firms in Africa are beginning to recognize the risk that the sector faces from environmental degradation.

This is revealed in a new report dubbed ‘Improving the transparency of nature-related risks in Africa’ by the African Natural Capital Alliance (ANCA).

ANCA was founded by leading banks and insurers in Kenya, South Africa, and Nigeria to tackle the biodiversity crisis as well as how to benefit from it.

According to the report, the alliance underscored the growing importance of African regulators responses to nature-related risks in line with their mandate of maintaining financial viability.

“Enhanced transparency of nature-related risks is fundamental to managing them effectively,” Nature Lead at FSD Africa and ANCA Dorothy Maseke said.

“This is the case for individual financial institutions, which need visibility of the nature-related risks in their lending, underwriting, and investment portfolios.”

The alliance observes that the Global Biodiversity Framework (GBF), which was adopted in December 2022 by 188 governments across the world, aims to address biodiversity loss, restore ecosystems, and protect indigenous rights.

“This landmark agreement prompts governments to introduce policies to manage nature loss, which will lead to regulators having to act, and highlights the opportunities for regulators to do so proactively,” says ANCA’s Sandra Villars.

ANCA opines that African regulators could thus benefit from engaging with this new agenda early and being at the forefront of integrating nature into their regulatory regimes.

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New report lays out urgent actions, that regulators can take to safeguard the new agenda for nature – key to Africa’s financial future

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Nairobi, 25 July 2023: A new report from the collaborative forum of African financial institutions the African Natural Capital Alliance (ANCA) and management consulting firm Oliver Wyman has underlined the growing importance of African regulators acting on nature-related risks in line with their mandate of maintaining financial stability.

The report “Improving the transparency of nature-related risks in Africa: the emerging regulatory agenda”, outlines how financial sector stakeholders, including regulators, are increasingly recognising that the depletion of nature poses risks to financial and economic stability.

The report makes clear that the issue is a particularly urgent one for sub-Saharan Africa as its economies are disproportionately dependent on nature. For instance, over 70% of people living in the region are dependent on forests and woodlands for their livelihoods, compared to about half of the total world’s GDP generated in industries that depend on nature. The rate at which nature in Africa is being lost also exceeds the global average. For example, Africa’s Biodiversity Intactness Index (BII) score – which measures the number and abundance of species on land – declined by 4.2% between 1970 and 2014, considerably higher than the global BII score decline of 2.7% over the same period.

In East Africa alone, failure to protect natural capital as a whole (including its stocks of soil, air, water, and all living things, which underpin the region’s economy and human well-being) would result in an economic loss of more than $11.3 billion a year, according to an assessment commissioned in 2021 by USAid.

Dorothy Maseke, the Nature Lead at FSD Africa and ANCA, says: “Enhanced transparency of nature-related risks is fundamental to managing them effectively. This is the case for individual financial institutions, which need visibility of the nature-related risks in their lending, underwriting, and investment portfolios. And it is also the case for regulators, so that they can identify nature-related risk concentrations for regulated entities and assess whether they are being managed effectively.”

African regulators embracing this complexity is so important, she adds, because the continent is disproportionately exposed to nature-related risks.

Sandra Villars, senior advisor at Oliver Wyman, says: “The Global Biodiversity Framework (GBF), which was adopted in December 2022 by 188 governments across the world, aims to address biodiversity loss, restore ecosystems, and protect indigenous rights. This landmark agreement prompts governments to introduce policies to manage nature loss, which will lead to regulators having to act, and highlights the opportunities for regulators to do so proactively.

African regulators could thus benefit from engaging with this new agenda early and being at the forefront of integrating nature into their regulatory regimes.”

As summarised in the report, there are four simple steps regulators can take as part of a nature-related disclosure roadmap while policy frameworks are being finalised in their jurisdictions:

  1. Engage with finance and environment ministries to align their regulatory approach with
  2. government’s policy agenda on nature
  3.  Assess internal capacity and act on gaps
  4.  Assess the capacity for action among regulated entities
  5.  Engage in voluntary nature networks such as the Sustainable Insurance Forum (SIF), the Network for Greening the Financial System (NGFS), the African Natural Capital Alliance (ANCA), and the Task Force on Nature-Related Financial Disclosures (TNFD)

Ethiopia Needs Greater Innovation, Market Dev’t to Broaden Insurance Uptake: NBE Deputy Governor

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Addis Ababa July 14/2023 (ENA) There is a need for greater innovation and market development to broaden insurance uptake in Ethiopia, Deputy Governor of National Bank of Ethiopia (NBE) Solomon Desta said.

Opening the conference held in Addis Ababa today with the theme ” Innovation for Resilience – Shaping the Future of Insurtech in Africa” Solomon said “We recognize the importance of innovation in addressing the challenges faced by the insurance industry.”

“In Ethiopia, there is a need for greater innovation and market development to broaden insurance uptake. Despite the recent history of financial sector liberalization and reform, the insurance industry in Ethiopia remains relatively underdeveloped.”

In light of Ethiopia’s significantly low insurance penetration, a new approach to insurance and market development is needed to catalyze greater uptake by consumers and to enable the formal market to tap into latent demand, he further elaborated.

The NBE is working towards setting up an independent insurance regulatory body, focusing on encouraging the insurance industry, he further pointed out.

Through this event, he said we aim to encourage collaboration, knowledge sharing and the adoption of innovative practices that will deliver the sustainable growth and expand access to insurance services for all Ethiopians.

Similarly, CEO of FSD Ethiopia, Ermias Eshetu said that the event presents an opportunity to showcase Ethiopia’s insurance sector and contribute to the advancement of the broader African insurance landscape.

By embracing innovation, fostering strategic partnerships, and creating an enabling regulatory environment, we can collectively drive positive change and enhance societal resilience, he noted.

FSD Ethiopia is dedicated to the achievement of accessible inclusive and sustainable financial markets that support Ethiopia’s long-term development goals, it was indicated.

Accordingly, the conference aimed to foster growth, facilitate strategic partnerships, and establish an enabling regulatory environment that supports the advancement of the insurance sector in Africa.

Financial Inclusion Specialist from FSD Africa Elias Omondi said for his part that FSD Africa works to catalyze innovation within the market.

“As FSD Africa, what we do is to catalyze innovation within the market, we want to see the insurance penetration in Ethiopia grow beyond 0.5 percent, we want to see those particular women that have no insurance get access to insurance, and the smallholder farmers get access to affordable solutions.”

Africa which is the most exposed continent is arguably the least protected in terms of insurance and that basically indicates there is a lot of work that we need to do as a continent, he noted.

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Framework for a national nature strategy: Facilitating the development of national nature strategies that are aligned with the Convention on Biological Diversity

Executive summary

The economies of African countries, like those of countries in other global regions, are heavily reliant on natural resources. Nature loss and degradation pose signifi-cant risks for economic development and well-being. Investments to protect and restore natural environments can help safeguard African and other global regions from risks associated with environmental degradation and unlock new economic opportunities.

A national nature strategy can facilitate countries’ efforts to navigate an increasing-ly complicated normative landscape characterized by numerous compliance obli-gations and commitments, including those stemming from the Kunming-Montre-al Global Biodiversity Framework, national biodiversity strategies and action plans, and countries’ nationally determined contributions. National nature strategies can help countries respond to nature-related risks and opportunities, align policies with international, regional and market priorities, and make implementation and reporting more efficient. National nature strategies can also help countries im-prove climate-related outcomes at the many points where nature interacts with the climate.

In this report, the authors present a framework that can facilitate efforts by Afri-can and other countries to draw up and implement national nature strategies. The framework provides start-to-finish guidance and covers the implementation of nature assessments, the establishment of a national vision and related targets, the development of a strategy to deliver on those targets, strategy implementation, the exploitation of nature-related opportunities, the management of nature-relat-ed risks, and compliance with international obligations, such as those stemming from the Kunming Montreal Global Biodiversity Framework and from national bio-diversity strategies and action plans. The strategy was developed in collaboration with a wide range of stakeholders, including policymakers, nature experts and representatives of non-governmental and multilateral organizations.

The framework comprises four components, namely: (I) Baseline and ambition: rea-sons for a national nature strategy and outcomes to aim for; (II) Initiatives: actions to take in order to achieve the aforementioned outcomes; (III) Instruments: incentiviz-ing action to achieve desired outcomes; and (IV) Governance and implementation: planning and implementing the strategy and assigning responsibilities.

Advocating for Nature and Climate

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In this edition of the African Business podcast we speak to Elizabeth Maruma Mrema about her role as co-chair at the Taskforce for Nature-related Financial Disclosures. Maruma Mrema is also the United Nations Assistant Secretary General and the Deputy Director of the United Nations Environment Programme. She is one of Time magazine’s Most Influential People for 2023 – having been a key figure at the Nature COP 15 in Montreal spearheading a groundbreaking agreement on biodiversity protection.

In this episode she tells us how the Taskforce on Nature-related Financial Disclosures (TNFD) was established to develop a risk management and disclosure framework for organisations, aiming to shift global financial flows towards nature-positive outcomes.

As climate change and nature are interconnected, an integrated approach has become necessary to effectively address these challenges. Maruma Mrema tells us about the significance of integrating nature-related disclosures within climate-related reporting and the role of corporate disclosures in promoting transparency and accountability.

The TNFD also complements the Task Force on Climate-related Financial Disclosures (TCFD). By integrating nature-related information into financial decision-making processes, businesses can mitigate risks, identify sustainable opportunities, and contribute to nature conservation. The TNFD has closely aligned its recommendations with the TCFD to promote consistency and facilitate the adoption of an integrated climate-nature disclosure framework.

We also look ahead to the launch of the TNFD framework in September in New York and to Cop28 in December in the UAE.

Read an excerpt from the interview in IC Intelligence Insights 09: Nature and Climte Redux 

Credits

Host and executive producer: Dr Desné Masie

Co-producer: Peter Doerrie

Digital Editor: Charles Dietz

Design: Jason Venkatasamy

Music: Corporate Uplifting Chill by MusicLFiles

Licence: http://creativecommons.org/licenses/by/4.0/

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