Finance in Africa 2024 - Chapter 6: Climate finance and investment in sub-Saharan Africa

Africa is one of the regions most exposed to physical climate risk, and 88% of respondents in the European Investment Bank Climate Survey 2022 say climate is already affecting their everyday lives. Paradoxically, only 6% of banks report damage to physical infrastructure due to climate, presumably due to the more chronic nature of physical climate risk in Africa – linked to extreme temperatures, drought, agricultural losses etc., rather than severe storms. More surprising is the finding that 69% of banks report limited asset quality impact due to climate. This is likely due to low exposure of banking systems to agriculture, the sector most affected by physical climate risk. Nonetheless, a considerable share of banks are planning to reduce their exposure to sectors that are vulnerable to climate risk, particularly physical climate risk.

In the survey, banks were asked to relate their perceptions of climate change, and were categorised into four groups, ranging from cautious (do not acknowledge climate as significant risk) to leaders (climate is central to policies and operations). These climate-related perceptions greatly influence banks’ operations, with those that are more engaged more likely to offer green products to customers and less likely to identify internal constraints to green lending.