Company boards across Africa are being urged to put nature-related risks at the centre of corporate decision-making after a new legal analysis found that directors in Kenya, Nigeria and South Africa may already have a legal duty to consider how environmental degradation affects their businesses.
The report argues that biodiversity loss, water scarcity, land degradation and ecosystem decline have evolved from sustainability concerns into governance issues that boards cannot afford to ignore.
Published by the Commonwealth Climate and Law Initiative (CCLI), FSD Africa and the African Natural Capital Alliance (ANCA), the study concludes that directors’ existing fiduciary duties require them to identify and manage nature-related risks where they are financially material to the company.
The findings suggest boards that fail to assess such risks could face legal, financial and reputational consequences as environmental regulations tighten and courts increasingly examine corporate accountability.
The report comes amid growing recognition that Africa’s economic growth is closely tied to the health of its natural resources.
According to the study, 62 per cent of Africa’s Gross Domestic Product is moderately or highly dependent on nature, making businesses particularly vulnerable to biodiversity loss, declining ecosystems, water shortages and extreme weather.
Researchers also cite a 2024 stress test covering banking sectors in Morocco, Rwanda, Zambia, Ghana and Mauritius, which estimated that expected credit losses could increase by up to 21 per cent by 2050 if governments and businesses fail to adopt nature-positive measures.
In South Africa, where 35 per cent of corporate bank lending is concentrated in highly nature-dependent industries, environmental risks are increasingly being viewed as financial risks.
Dr James Mwangi, Group Chief Executive Officer of Equity Group Holdings and a member of the African Natural Capital Alliance Governing Council, said Africa’s natural capital remains the foundation of many economies.
“Across our continent, the extraordinary wealth of our natural world has long underpinned livelihoods and the commercial foundations of entire economies. Today, that natural wealth is under unprecedented pressure.”
The report says directors are operating in a rapidly changing landscape marked by stronger sustainability reporting requirements, new environmental regulations and a rise in climate-related litigation.
Among the developments reshaping corporate governance are the adoption of the Taskforce on Nature-related Financial Disclosures (TNFD), the International Financial Reporting Standards (IFRS) S1 and S2 sustainability standards and the European Union Deforestation Regulation (EUDR).
At the same time, companies operating in Africa are increasingly facing legal challenges over their environmental footprint, including cases involving Shell in Nigeria, TotalEnergies in South Africa and the East African Crude Oil Pipeline (EACOP).
Despite differences in legislation, the report finds that Kenya, Nigeria and South Africa have broadly aligned legal expectations for directors.
Nigeria’s Companies and Allied Matters Act expressly requires directors to consider environmental impacts. In Kenya, directors who ignore foreseeable and financially material nature-related risks may breach their obligations under the Companies Act, while South Africa’s legal framework reaches similar conclusions through company law, environmental legislation and the King IV Code on Corporate Governance.
Sammy Ndolo, Director at CDH Kenya, said many boards continue to treat environmental issues as compliance matters instead of recognising them as strategic risks.
“The report demonstrates that nature-related risks are not simply optional ESG considerations. They are increasingly central to directors’ existing legal obligations and to the long-term success of their companies.”
He also noted that courts are becoming more willing to examine whether companies have exercised sufficient environmental diligence, increasing the prospect of litigation against directors.
The report says businesses that integrate nature into governance stand to gain as well as reduce risk.
It points to the emergence of new financing mechanisms, including Ecobank’s Nature Bond and other nature-linked financial instruments, as evidence that investors are increasingly rewarding companies that demonstrate sound environmental governance.
Natalie Shippen, Executive Director of CCLI, said the study fills a significant gap in legal analysis by providing directors in Africa’s largest common law economies with clear guidance on their existing responsibilities.
Dorothy Maseke, Head of Secretariat at the African Natural Capital Alliance and Lead Nature Finance at FSD Africa, said the report offers boards and regulators a practical framework for embedding nature into governance while improving resilience and access to capital.
The report recommends that directors treat nature-related risks as a strategic boardroom issue, investors incorporate those risks into financing decisions and legal advisers ensure companies understand that nature-related governance is already embedded within existing directors’ duties.
