Climate change already hitting our companies, say African executives 

81% of Africa-focused executives polled in a business survey said that climate change is already impacting their organisation. 

The survey of senior executives working across British International Investment’s (BII) portfolio of companies and funds in Africa, Asia, and the Caribbean – which included 70 respondents operating in Africa – found that the vast majority of executives across Africa’s regions were already noting the effects of a changing climate. 

Executives in Southern Africa (88%), Eastern Africa (87%), Central Africa (85%), Western Africa (81%) and Northern Africa (79%) all confirmed that their enterprises were affected.  

Businesses operating in Africa identified drought as the top physical climate risk at present, followed by flooding and extreme temperatures. This pattern remained consistent for the five-year outlook. Looking ahead to the ten-year horizon, drought and extreme temperatures became the joint top risks, followed by flooding.

In Africa, more than 110 million people were directly affected by weather, climate and water related disasters in 2022, according to the UN, causing more than $8.5bn in economic damages.

“The impacts of climate are happening probably faster than we thought several years ago. We always knew that Africa is particularly vulnerable given a combination of factors. One of the key issues here is the reliance on the use of natural resources in many parts of Africa, obviously agriculture being key. When you’re so reliant on the climate your population and markets are particularly vulnerable,” says Amal-Lee Amin, managing director, head of climate, diversity and advisory at BII, the development finance institution of the UK government.

“On the other hand there is also an entrepreneurial community that are addressing this – Kenya and Nigeria are particular examples. We probably need to see how other markets can foster innovative solutions.” 

Global financial impact

At a global level, 25% of executives said that climate change was affecting their operations, 25% said it was impacting investment, 13% said it was disrupting supply chains and 11% said it was having an impact on the workforce.  Within operations, the top physical risk was flooding. Half of respondents who quantified the financial impact to operations had costs of over $200,000. 

Within investments globally, the top physical risk was also flooding, closely followed by drought. 36% of those who quantified financial impact on investments revealed that the costs totalled more than $1m.

When asked if climate change will affect the viability and growth of respondents’ firms over the coming years, 61% agreed it would over the next five years, and 76% agreed it would over the next ten years.

A total of 65% have adapted their business strategy and 47% have adapted their financial planning in response to climate change

The most common strategic approach is to exclude investments in products and services that have a negative impact on the planet. Of those who are adapting their strategies, 62% are excluding these investments, a similar figure to the 66% that responded in this way last year. 

Fund managers across Africa are considering new funds in climate solutions that both improve energy security and reduce carbon emissions across the grid through renewable investments.

The second most common approach is offering green or climate-friendly products and services that have less impact on the climate. Of those who are adapting their strategies, 55% are offering these products.

Of those who responded that climate change was affecting their financial planning, 46% said climate change had affected their access to capital.