Context and approach

Africa’s economy and the livelihoods of its people are deeply intertwined with the vitality of its natural ecosystems. Approximately 62 per cent of African GDP is moderately or highly dependent on the services that nature provides, and 70 per cent of communities in sub-Saharan Africa depend on forests and woodlands for their livelihoods. Despite this, ecosystem health is declining rapidly; for instance, 3 per cent of Africa’s GDP is lost annually due to soil and nutrient depletion of croplands. In response, this report presents the findings of a nature stress test conducted on the banking systems of Ghana, Mauritius, Morocco, Rwanda, and Zambia. These five countries represent a spectrum of economic structures and natural landscapes, allowing the insights to be extrapolated to much of the continent.

The analysis utilises McKinsey’s NatuRisk toolkit to quantify exposure to nature-related risks across three scenarios: current policies, a disorderly Global Biodiversity Framework (GBF)-aligned transition, and an orderly GBF-aligned transition. The exercise focuses on corporate lending, assuming the distribution of current loans across sectors remains constant. It assesses risks driven by 11 impacts and dependencies—such as deforestation, pollution, and water scarcity—across a selection of sectors expected to be at high nature-related risk, including agriculture, mining, and manufacturing. The findings are particularly relevant for financial regulators and private financial institutions whose portfolios are likely to be exposed to similar risk levels.

Real economy risks and opportunities

Across all scenarios, financial risks are lowest under an ‘orderly transition’ aligned with the goals of the GBF. Under current policies, physical risks could be substantial; for example, declining pollinator populations and soil quality could decrease the net present value (NPV) of profits in Ghana’s agricultural sector by more than 50 per cent. Morocco faces equivalent losses of 15 per cent in food, beverage, and fertiliser manufacturing due to water shortages. After weighting by credit exposure, the highest NPV profit losses from physical risks are in Morocco at 7.7 per cent, while other systems experience exposure-weighted losses between 0.5 and 3.0 per cent.

A disorderly GBF-aligned transition would mitigate most physical risks but create significant transition-related costs for businesses that do not adapt. In this scenario, exposure-weighted NPV profit losses are highest in Zambia (6.7 per cent) and Ghana (4.7 per cent). Risks are heavily concentrated in seven sectors, with agriculture and forestry featuring as a high-risk priority for all five banking systems. However, if businesses take action to reduce their impacts, an orderly transition could mitigate 27 to 78 per cent of these losses. Mitigation strategies include adopting sustainable farming practices to reduce deforestation or ensuring mining operations are located outside protected areas.

Credit risk

Profit impacts due to nature-related risks directly affect business creditworthiness and, consequently, the stability of lending institutions. Under the disorderly GBF-aligned scenario, nature-related risks could increase exposure-weighted cumulative expected credit losses by up to 9 per cent by 2030, and by up to 21 per cent by 2050. Zambia and Ghana see the largest potential impacts, with cumulative losses reaching 21 and 11 per cent respectively relative to the baseline. These impacts are amplified in countries with lower credit ratings.

Portfolio-level estimates can misrepresent the magnitude of expected credit losses in priority sectors, which could reach as high as 75 per cent by 2050. In agriculture and forestry, unweighted cumulative expected credit losses reach at least 40 per cent by 2050 for almost all systems examined. Significant increases are also feasible over shorter durations; a five-year loan to an agricultural producer in Ghana issued in 2030 could see projected losses as high as 39 per cent. Conversely, coordinated business action under an orderly transition could lead to a substantial decline in credit risk, with the largest reductions seen in Zambia and Ghana.

Macroeconomic risks and opportunities

Nature-related risks have significant implications for central banks’ mandates to control inflation and maintain financial stability. Increased production costs for agricultural commodities could drive food price inflation, with prices for staple goods potentially rising by up to 20 per cent by 2030 in Ghana and Zambia. Furthermore, since agriculture supports a large share of employment (39 to 59 per cent in Ghana, Rwanda, and Zambia), financial stress in the sector could lead to widespread job losses and reduced consumer spending, dampening economic growth.

Export-heavy economies are also vulnerable. In Zambia, copper and gold account for 77 per cent of export revenues; nature-related cost increases could undermining international competitiveness and place downward pressure on exchange rates. This risk could increase the cost of servicing foreign-currency debt. However, a nature-positive transition brings opportunities, including new revenue streams from biodiversity credits and new financial instruments like debt-for-nature swaps. Productivity gains from improved natural capital, such as higher quality soil increasing crop yields, also offer long-term economic benefits.

Enabling environment

A right enabling environment is required to support action across the commercial financial sector. Institutions need a clear business case demonstrating the materiality of nature-related risks, which can be achieved through stress tests similar to the one presented in this report. Upskilling teams, including relationship managers and risk practitioners, is essential to help them engage with clients on nature-related issues. Market infrastructure, such as the inclusion of nature in green taxonomies and the standardisation of disclosure requirements through frameworks like the Taskforce on Nature-related Financial Disclosures (TNFD), could help channel finance toward nature-positive activities.

Appendix: NatuRisk toolkit

The NatuRisk toolkit is a methodological solution that allows financial institutions to quantify nature-related risks at the company, sector, and portfolio level. The framework follows six steps: defining scenario narratives, translating them into quantitative variables, identifying transmission channels for cost and sales shocks, value chain mapping, modelling market competition, and calculating risk outputs. This process enables the assessment of both physical risks driven by dependencies and transition risks driven by impacts, providing a robust evidence base for managing nature-related financial exposure.