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The African Financial Alliance on Climate Change (AFAC) has launched a report on Africa’s state of climate risk regulation in the financial industry
As per the report, getting Africa’s financial sector ready to cope with climate risk is vital for a smooth transition to net-zero emissions and resilience.
The report was published by three global institutions and was launched on 10 November, by the AFAC at the COP26 climate conference. Titled “Climate risk regulation in Africa’s financial industry and related private sector initiatives”, it is a joint publication by the African Development Bank (AfDB), the Global Center on Adaptation, and the UN Environment Finance Initiative. It proposes action areas that will enable Africa’s financial industry to implement global best practices on environmental, social and governance integration, climate-risk disclosure and green finance.
The study assesses the state of climate risk integration in prudential, financial, regulatory, and supervisory frameworks. It also identifies potential levers to stimulate deeper outreach and adoption of climate risk regulations in the financial system, especially in countries that are in the early stages of the process of integrating climate risk regulations in the financial sector.
The panel agreed that the local financial industry must deliver solutions that fit African needs, learn from global best practices and increase collaboration among peers. They also noted that African Nationally Determined Contributions under the Paris Agreement are often disconnected from financial sector development plans. For that reason, regulators must pay closer attention to ensure that the industry aligns with the global landscape for climate action in order to create policy environments that can attract climate finance at scale.
To support this mission, the Financial Sector Development Department of the AfDB is developing the Africa Financial Sector Corporate Governance initiative to provide technical assistance to banks and regulators in building their capacity to identify, assess and manage climate risks.
The AfDB will deploy resources within the framework of its ten-year Climate Change and Green Growth Strategy (2021-2030) to position Africa’s financial industry at the forefront of the low-carbon and climate-resilient transition.