![[South Africa] NCFA launches guide to empower banks assess natural capital risk](Images/2018/10/development bank of southern africa.jpg)
[South Africa] NCFA launches guide to empower banks assess natural capital risk
Natural Capital Finance Alliance, NCFA, has unveiled showcased the world’s first step-by-step guide in South Africa to help banks conduct a rapid natural capital risk assessment. The Natural Capital Finance Alliance engaged with PwC to produce the guide.
The guide has already been piloted by five banks, including FirstRand Group and the Development Bank of Southern Africa and promotes the use of the recently launched ENCORE tool, Exploring Natural Capital Opportunities, Risks and Exposure, which enables financial institutions to understand and assess their exposure to natural capital risks. For example, it highlights how sectors such as agriculture rely on pollination, or how metal processing depends on maintaining ground water provision.
The guide is part of the Advancing Environmental Risk Management (AERM) project, which aims to help financial institutions understand and integrate the risks they face because of environmental degradation in their risk assessment methods and decision-making tools.
Madeleine Ronquest, Head of Environmental and Social Risk, Climate Change at FirstRand Group said:
“The South African economy has a deep dependence on nature, and is particularly vulnerable to extreme climatic events which are becoming more frequent and intense. The severe challenges around the availability and supply of drinking water in Cape Town is just one example of this. The AERM project enabled us to look at our portfolio in a new way, looking at thresholds and exposure, especially in the case of water-related risk.”
Julie Clark, Environmental Analyst from the Development Bank of Southern Africa (DBSA) said: “Environmental risk management is a key part of DBSA’s work and it is important that we go beyond climate change to consider a wide range of potential risks among those we finance, including natural capital risk. AERM has helped us prioritise and plan ahead for those sectors most exposed to natural capital risk. It has highlighted, for example, the threat to our infrastructure portfolio from degraded flood protection or erosion control. “
Niki Mardas, Member of the NCFA steering committee and Executive Director at Global Canopy, added: “This timely report sends a powerful message to financial leaders that when they consider the environment they must consider not just greenhouse gases, but also how to build wider ecosystem resilience from rainforests to coral reefs.
Liliana de Sá Kirchknopf, Head of Private Sector Development Division, at the State Secretariat for Economic Affairs in Switzerland (SECO), who are a key funder of the project said:“The degradation of natural ecosystems poses a material threat to future economic growth. Until now, the financial community was not able to systematically assess and manage such risks. That is changing thanks to our collaboration with the NCFA to create a natural capital framework for financial institutions."
