Thursday, July 11, 2024

This is how firms can generate wealth and save the habitat


The highest likelihood risks over the next 10 years are extreme weather, failure of climate action and human-led environmental damage.

This is according to the 2021 global risks perceptions. What this means is that climate change will continue to pose enormous financial risks to businesses in the coming years.

Firms across Africa are still lagging the assessment. This jeorpardises measuring, disclosure and mitigation of these risks. Many c-suites are still not comprehending the risks ahead when it comes to doing business.

Last week, the United Nations under the Intergovernmental Panel on Climate Change (IPCC) report declared climate change to be at Code Red status, and yet a few people are aligning their business models with the Paris Agreement as well as other frameworks.

Climate change is not only a threat to businesses, but also creates numerous opportunities for the innovative minds. Take an example of banking; Banks that will embrace climate finance and develop the knowledge and tools for climate financing will outperform their competitors.

Extreme weather events, changes in precipitation patterns, rising sea levels and the potential for demographic, health and economic instability will affect businesses in incalculable ways in the near future.

Unfortunately, these effects are likely to impact African countries more as they are the most vulnerable, even though the wealthier regions and societies hold the highest responsibility for climate change.

Even with the commitments negotiated at the 21st Conference of the Parties of the UNFCCC in Paris in December 2015 and later updated in December 2020, there is still a long way to go in order to resolve the challenge.

In my view, the solution lies within the private sector realising the potential presented by climate change as an opportunity but at the same time helping in the mitigation and adaptation to climate change. This is in contrast with the informal pledges being made with the aim to achieve “net zero” human-caused carbon dioxide emissions sometime around mid-century by over 100 countries and which will form part of the negotiations in Scotland at COP 26.

The solution lies in making a business case for climate change to the private sector, which will act as driver for solutions to the current challenge. This calls for special skills in businesses to enable them tap the opportunities.

There has been a bit of progress when it comes to mitigation efforts with bulk of financing from the private sector going into this space. Adaptation is, however, still struggling, and more companies need to rethink their strategies in order to to come up with adaptation projects.

Climate impacts will undoubtedly worsen and there is a clear moral and economic imperative to protect the lives and livelihoods of those on the front lines of the climate crisis. This can be handled by engaging in adaptation and resilience solution including finance.

Finance for adaptation should be seen as an attractive solution and banks and other financial institutions ought not to neglect it considering it takes up half of the climate equation. In Kenya for instance, only 12 percent of climate support from the private and public sector is directed towards adaptation. There is a need for banks to build capacity and knowledge to understand adaptation projects which would result to even better returns and more impacts for the banks.

The annual cost of adaptation will be between $200-400 billion by 2030, which can be looked as an available opportunity for financial institutions to engage with adaptation as these funds will not be available from the public sector.

There is, therefore, a need for private businesses and the public sector to work together to make policy planning and development around climate change. This will help in the promotion of strategies and plans that will maximise the co-benefits between mitigation, adaptation and sustainable development in any particular country.

The second element is for the private sector is to consider climate innovations which will mean investing in new technologies, business models and practices to establish a proof of concept which can then be scaled.

This article was first published on Business Daily

Dr. Edward Mungai
Dr. Edward Mungai
The writer, Dr. Edward Mungai, is a global sustainability expert. He is the Lead Consultant and Partner at Impact Africa Consulting Ltd (IACL), a leading sustainability and strategy advisory in Africa. He is also the Chief Editor at Africa Sustainability Matters. He can be contacted via

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