Nature Is Africa’s Infrastructure — Credit Decisions Must Treat It As Such

By Rachael A.O. Antwi, Group Head of Sustainability, Sustainable Finance & Environmental and Social Risk Management, Ecobank Group

Nature finance will only be credible when environmental and social risk changes financing decisions — who receives capital, on what terms, and what happens when standards are not met. In a continent where land, water, forests and biodiversity underpin agriculture, trade and jobs, nature is not a side issue to the economy; it is the economy’s foundation. 

When a bridge collapses, nobody questions whether it is an economic event. Businesses lose access to markets, supply chains are disrupted and investment becomes more expensive. Yet when fertile soil is washed away or a watershed deteriorates, the damage is treated as environmental, not economic. The effects are much the same: lower production, more volatile incomes, higher costs and greater credit risk.

The Coalition for Disaster Resilient Infrastructure estimates that disasters cause an average of $12.7bn in damage to infrastructure and buildings across Africa each year, with floods accounting for about 70 per cent. But the deeper loss is often long term: a flood may damage a road in a day and weaken the surrounding land for years.

An agricultural loan is not sustainable simply because agriculture depends on land and water. What matters is whether environmental and social considerations change how that loan is assessed, structured and managed.

Banks should ask four questions of every such loan. What risks are assessed before approval? What obligations are written into the agreement? What is monitored during the life of the loan? And what happens if standards are no longer met? Without clear answers, a sustainable-finance label shows only where capital has gone — not the environmental impact it has delivered.

These four questions are the work of environmental and social risk assessment. Too often it is treated as a compliance gate to clear before approval. Without a credible assessment of how a business depends on and affects land, water and ecosystems, sustainability is a label with nothing behind it. 

Understood this way, environmental and social risk does more than change a financing decision: it enhances it. It shapes the cost of capital, so that lower risk earns better terms and the market itself steers money towards sounder practice. Pointed forward, it moves financing from preventing harm to producing measurable nature-positive outcomes — regeneration, restoration, avoided deforestation — that a borrower is rewarded for delivering. 

The same assessment that manages risk also surfaces opportunities for the borrower — in how a farm is worked, what goes into the soil, how land and water are stewarded — that make it more sustainable and more. A farmer helped to farm well builds a stronger business, and stronger businesses, multiplied across a continent, are how sustainable growth and economic development take hold. Done well, nature-positive and commercially positive outcomes are not in tension: each produces the other.

Applying these standards in Africa is not always straightforward. Agricultural supply chains can involve thousands of farmers, and land-use records, traceability systems and location data may be incomplete. But incomplete data is a reason to implement more intelligently, not to lower the bar.

Nature-related requirements — assessments, certification, traceability — cost money. If that burden falls on a small cooperative, it may simply forgo finance altogether. 

Where a borrower has the intention and capacity to improve, financing can be tied to a timetable, enforceable conditions and technical support. Development institutions can help fund better data and verification systems, while banks make agreed improvements part of the lending relationship.

Standards without consequences lack credibility. Standards without a realistic route to compliance become another barrier to capital.

This thinking shaped Ecobank’s $450m Sustainable Agriculture and Natural Capital Bond — the world’s first ICMA-designated Nature Bond from a commercial bank — which links capital-markets funding to eligible sustainable agriculture, processing, water and sanitation lending across 24 African markets. 

Under the framework, eligible lending is screened for environmental and social risks such as deforestation, land conversion and community impact, monitored after approval and held to those conditions through the life of the loan, an approach built to tighten as data improves. 

Moody’s assigned the framework its highest Sustainability Quality Score, SQS1, while noting that some agricultural-processing activities can create wastewater, emissions and energy-related risks. That qualification matters, because nature finance should not pretend complex value chains do no harm. It should identify material risks, prevent damage where possible, reduce it where it cannot yet be eliminated, and report honestly on progress.

Issuing a bond does not prove that environmental outcomes have been achieved. The evidence has to follow, through credible allocation, honest reporting and independent review.

The wider market is shifting the same way. The Network of Central Banks and Supervisors for Greening the Financial System has begun equipping supervisors to treat nature as a source of financial risk, and the International Sustainability Standards Board is bringing nature-related disclosure into formal standard-setting. The trend is unmistakable: nature is becoming a matter of financial oversight, not corporate goodwill.

Commercial banks have a distinctive role, because they finance the businesses making daily decisions about land, water and natural resources. Their influence lies not only in where they allocate capital, but in the conditions they attach to it.

The next test for nature finance will not be how many bonds are issued. It will be whether finance changes decisions across the real economy. Africa should not have to choose between protecting nature and financing development: productive land, reliable water and resilient ecosystems are development assets, as surely as any road or bridge. We maintain our built infrastructure because we cannot afford its collapse. Nature is Africa’s infrastructure — and in banking, we account for it at the credit decision.