{"id":4865,"date":"2026-08-14T18:41:59","date_gmt":"2026-08-14T15:41:59","guid":{"rendered":"https:\/\/theledgerafrica.media\/?p=4865"},"modified":"2026-08-14T18:41:59","modified_gmt":"2026-08-14T15:41:59","slug":"africas-big-investors-can-no-longer-treat-climate-risk-as-someone-elses-problem","status":"publish","type":"post","link":"https:\/\/theledgerafrica.media\/?p=4865","title":{"rendered":"Africa\u2019s big investors can no longer treat climate risk as someone else\u2019s problem"},"content":{"rendered":"\n

The money is there. The harder question is where it goes.<\/strong><\/h3>\n\n\n\n

By Kirimi Mbogo<\/em><\/p>\n\n\n\n

For years, climate change was something African investors could discuss at conferences without allowing it too close to the portfolio. A drought belonged to agriculture. A flood belonged to disaster management. A failing road belonged to government.<\/p>\n\n\n\n

The balance-sheet consequences were somebody else\u2019s problem. <\/p>\n\n\n\n

That arrangement is becoming harder to sustain.<\/p>\n\n\n\n

Kenya\u2019s pension industry ended 2025 with KSh2.81trn ($21.7bn) under management, according to the Retirement Benefits Authority. More than 90% of those assets remain in conventional instruments, including government securities, equities and property. The sums are large enough to shape the economy; the question is whether they are being invested as though the climate were not changing. <\/p>\n\n\n\n

It is a question that extends well beyond Kenya.<\/p>\n\n\n\n

African institutional investors, including pension funds, insurers and sovereign wealth funds, control more than $1.8trn, according to the Global Center on Adaptation. Only a fraction is directed towards climate-resilient projects. <\/p>\n\n\n\n

That is not primarily a shortage of money.<\/p>\n\n\n\n

It is a shortage of investable opportunities, suitable regulation and, occasionally, imagination.<\/p>\n\n\n\n

The distinction matters. The continent requires enormous amounts of capital for power, transport, water, housing and digital infrastructure, much of which will have to survive a hotter and more volatile climate. The African Development Bank estimates that the continent needs $2.5trn in climate finance between 2020 and 2030, or about $250bn a year. <\/p>\n\n\n\n

Yet investors are often told that African climate projects are too risky.<\/p>\n\n\n\n

Some are.<\/p>\n\n\n\n

But risk has a habit of becoming an excuse when nobody has worked out how to price it.<\/p>\n\n\n\n

Africa’s pension funds are particularly interesting because their liabilities are long-dated. A retirement scheme buying a 20-year asset cannot sensibly pretend that rainfall, heat, flooding and energy security will remain roughly as they were when the investment committee approved the deal.<\/p>\n\n\n\n

The irony is that climate risk can attack both sides of the balance sheet. It can impair the assets pension funds own while weakening the economies from which future contributions are generated.<\/p>\n\n\n\n

As the African Pension Supervisors’ Association has put it, climate change is a threat to the value of pension assets. \u201cIn the interests of value preservation, they have to\u201d support climate resilience, the association argued. <\/p>\n\n\n\n

That is a more useful argument than the usual appeal to corporate virtue.<\/p>\n\n\n\n

A pension fund is not a charity. Its first obligation is to make money for retirees. Climate investment therefore needs to survive the same scrutiny as everything else: expected return, liquidity, duration, credit risk and governance.<\/p>\n\n\n\n

The good news is that climate resilience increasingly can.<\/p>\n\n\n\n

Kenya offers an instructive case. The government, the World Bank and pension-sector players began work in 2026 on a Green Investment Fund intended to mobilise large amounts of institutional capital. The Central Bank of Kenya Pension Fund and the Public Service Superannuation Fund, which together control more than half of Kenya’s pension assets, expressed interest in participating. <\/p>\n\n\n\n

The machinery is being assembled.<\/p>\n\n\n\n

Whether it produces good investments is another matter.<\/p>\n\n\n\n

A similar experiment is taking shape elsewhere. In Nigeria, FSD Africa Investments committed \u00a310m to ARM-Harith’s Climate and Transition Infrastructure Fund, designed partly to make infrastructure investments more palatable to local pension funds. The structure addresses one of the less glamorous reasons institutional money stays away from infrastructure: investors often need distributions before projects begin producing mature cash flows. <\/p>\n\n\n\n

That is the sort of financial engineering Africa needs more of.<\/p>\n\n\n\n

Not green bonds for the sake of green bonds. Not sustainability reports that nobody reads. Instruments that take a real investment obstacle and remove it.<\/p>\n\n\n\n

The prize is considerable.<\/p>\n\n\n\n

Africa’s institutional capital is increasingly large enough to finance a meaningful share of its own development. At the African Development Bank’s annual meetings in 2025, officials and investors pointed to more than $165bn of readily available domestic capital. <\/p>\n\n\n\n

But much of the money remains concentrated in government debt and other traditional assets.<\/p>\n\n\n\n

There are reasons for that. Government securities are familiar. They are liquid. Regulators understand them. Fund managers know how to explain them to trustees. A solar farm in Turkana is harder to underwrite.<\/p>\n\n\n\n

Yet the supposedly safer option may not remain safe.<\/p>\n\n\n\n

A portfolio heavily exposed to sovereign debt is exposed to the fiscal consequences of climate shocks. A bank holding mortgages in flood-prone areas carries physical risk. An insurer underwriting agricultural assets carries drought risk. A property fund owning commercial buildings in cities with unreliable water supplies has a problem that does not disappear because the valuation model uses Excel.<\/p>\n\n\n\n

Climate risk is increasingly financial risk.<\/p>\n\n\n\n

The African Development Bank has also challenged the crude assumption that the continent is inherently uninvestable. Its president, Akinwumi Adesina, said in 2025: \u201cAfrica\u2019s risk is not different from any part of the world.\u201d He cited Moody’s Analytics data showing that infrastructure projects in Africa had a lower historical default rate than those in several other regions. <\/p>\n\n\n\n

That does not make Africa risk-free. Nothing does.<\/p>\n\n\n\n

It does suggest that investors may sometimes be paying too much attention to perception and too little to evidence.<\/p>\n\n\n\n

The climate case strengthens that argument in an unexpected way. Infrastructure designed for a harsher climate can be a better asset even before the next flood arrives.<\/p>\n\n\n\n

A power plant with resilient transmission. A port protected against rising seas. A road engineered for extreme rainfall. A city with drainage that works. A data centre that does not depend on a fragile electricity supply.<\/p>\n\n\n\n

These are not philanthropic expenditures. They are productive assets.<\/p>\n\n\n\n

The financing problem is that the benefits often accrue over decades while the risks arrive immediately. A pension fund can understand the duration. A commercial bank may struggle with it. A government may have neither the fiscal space nor the political patience.<\/p>\n\n\n\n

This is where guarantees and development finance have a role.<\/p>\n\n\n\n

In 2025 the European Investment Bank committed $52.48m to the Africa Finance Corporation’s $750m Infrastructure Climate Resilient Fund. The Green Climate Fund had already committed $253m, while the Nigeria Sovereign Investment Authority and two African pension funds joined as investors. <\/p>\n\n\n\n

The model is straightforward enough: use public or concessional capital to absorb some early risk, then attract private money that would otherwise remain on the sidelines.<\/p>\n\n\n\n

That is not subsidy for its own sake. Done properly, it is market-making.<\/p>\n\n\n\n

The larger challenge is political.<\/p>\n\n\n\n

Governments cannot simultaneously complain that domestic capital is trapped in government securities and then offer investors a thin pipeline of credible private projects. Nor can regulators demand that pension funds invest more at home while leaving them exposed to opaque procurement, weak project preparation and currency risk.<\/p>\n\n\n\n

Investors, for their part, cannot claim fiduciary duty while treating climate exposure as a footnote.<\/p>\n\n\n\n

There is an uncomfortable symmetry here.<\/p>\n\n\n\n

Governments want patient capital. Pension funds want investable assets. Africa needs resilient infrastructure. Climate change is making old infrastructure less reliable.<\/p>\n\n\n\n

The capital and the need are sitting remarkably close together.<\/p>\n\n\n\n

What is missing is the bridge.<\/p>\n\n\n\n

Building it will require better data, credible project pipelines, sensible regulation and financial structures that make long-term African assets worth owning. It will also require investors to ask a rather unfashionable question before approving the next conventional bond: what happens to this asset when the climate assumptions behind its valuation stop holding?<\/p>\n\n\n\n

That is not an ESG question.<\/p>\n\n\n\n

It is an investment question.<\/p>\n\n\n\n

And increasingly, it is the only one that matters.<\/p>\n","protected":false},"excerpt":{"rendered":"

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