All respondents who see climate change more in terms of market opportunities have private equity investments in Africa.
Almost all investors see potential in the energy sector vis-a-vis climate change, according to a recent survey. The survey — carried out by the sustainability committee of pan-African industry body, African Private Equity and Venture Capital Association (AVCA) — was part of an investigation into the approach that investors take to tackle climate change in Africa.
Agriculture and water management interested 62 per cent and 44 per cent respectively. Sectors apart, the survey pointed out, investors were waking up to the reality of climate change.
Three-fourth of them felt the need for a responsible investment policy, covering climate action, according to the survey of 45 business entities.
Forty-five per cent of the respondents said they made changes to their investment strategies, while 54 per cent did not implement measures to address climate risk that faced the companies they had invested in, according to the survey.
More than a third (75 per cent), however, felt a responsible investment policy covering climate action was needed.
Overall, the investors were more proactive in managing the carbon footprint of their investments, with 55 per cent of them having taken measures to deal with this.
Sixty per cent of the respondents signed up for or were rolling out the Taskforce on Climate-related Financial Disclosures (TCFD) into their portfolios.
The TCFD develops voluntary climate-related financial risk disclosures that companies can use to provide information to stakeholders, their investors, lenders or insurers.
Sixty-three per cent of the respondents, however, were not aware of any climate-related initiatives that could impact their investment.
Sixty-seven per cent of the respondents said they sometimes discussed climate change issues with their investors or fund managers, adding that they did not change their investment strategies or decision-making based on their climate risk assessments.
Shift to climate-informed development needed
Africa stands to be one of the worst-affected by the climate crisis.
It is, thus, important for the continent to shift towards climate-informed development to ensure new projects were adaptable to climate conditions and to reduce people’s vulnerability to the impact of climate change.
African private equity players are well-positioned for such a shift to take place, according to the survey.
The challenge for private capital, however, is to continue to finance and encourage enterprises of innovation that utilise existing and emerging technologies, not just to reduce development’s carbon footprint, but also to protect African populations and industries from the worst impacts of climate change.