Africa losing up to 15% of GDP growth due to climate change

September 20, 2022|Written by Graham Caswell|African Development Bank, World Bank, International Monetary Fund, Bundesbank, De Nederlandsche Bank

Africa losing up to 15% of GDP growth to climate change, drought contributing to global food price inflation, Bundesbank calls for urgent transition and more from this week in green central banking.

GDP growth in Africa hit by climate crisis

Africa has lost 5-15% of its per capita GDP growth because of climate change and its related impacts. The growth slowdown was reported by the African Development Bank’s vice president and chief economist during a panel discussion at the Egypt International Cooperation Forum.

“Climate change affects Africa severely, while the continent contributes to only 3% of global emissions,” Kevin Urama told the meeting. He added that Africa had great potential in terms of green private sector investment opportunities.

Africa will need about US$1.6tn between 2022 and 2030 to meet its Paris Agreement targets, Urama said, although African countries received only US$18.3bn in climate finance between 2016 and 2019. A 2009 commitment from developed nations to provide US$100bn in climate financing to the developing world has only been partially met and is due to expire in 2025.

Drought adds to food price inflation

Climate-related droughts around the world have put further pressure on food prices, leading to growing inflation and food insecurity for millions.

The food component of year-on-year US inflation rose by 11.4% in August, the fastest rate increase since April 1979, as drought and a worsening fertiliser crisis reduced supply. In Europe, food prices contributed significantly more than energy to overall inflation in the western Balkan countries, according to IMF analysis, while the Bundesbank has pointed to a sharp rise in food prices as a major contributor to Germany’s inflation figures for July.

In real terms, food price inflation exceeded overall inflation in 79% of countries, according to the World Bank food security update, with over 200 million people expected to experience food crises. Drivers of the increasing cost of food include higher fossil fuel and fertiliser prices associated with the war in Ukraine, and droughts and other extreme weather events associated with climate change.

Bundesbank’s Mauderer calls for urgent transition

“There is simply no time left to hesitate or delay,” Bundesbank executive board member Sabine Mauderer told financial policymakers and industry executives in a powerful plea for urgent and radical action to reduce emissions. Speaking at the Eurofi Financial Forum, Mauderer pointed to the ongoing European drought and other extreme weather events and warned that “the situation might even worsen in a non-linear way” as climatic tipping points are passed.

Enhancing market transparency to combat greenwashing is vital, she said, and reviewed efforts by the Network for Greening the Financial System, the International Sustainability Standards Board and the EU to improve the quality and comparability of climate-related data. Mauderer also called for transition plans, saying that they are at the heart of work to decarbonise financial institutions.

Marauder’s remarks follow an intervention from Bundesbank vice president Claudia Buch, who told the Irving Fisher Committee conference that “new ways of gathering, compiling, and disseminating data” are needed and called for “more agility so that we can make progress sufficiently fast”.

“We are in the midst of a global process of structural change,” Buch said, adding that central banks have to act on the information already available.

The invisible hand is not green, says DNB president

The human species has fundamentally altered the physical, chemical and biological systems of the planet, De Nederlandsche Bank president Klaas Knot told students at the One Planet science and culture museum in The Hague.

In a personal and passionate address, Knot said the indiscriminate use of natural resources has resulted in global warming, huge carbon dioxide and nitrogen emissions, deforestation, wildlife extinction and other systemic changes. “Adam Smith’s invisible hand is not necessarily a green hand,” Knot added, calling for better choices for our future and for generations to follow.

Every business, every household, every person can make sustainable choices, Knot told the audience. “What we need is an open mind and a sense of urgency,” he said, outlining the need for a “green enlightenment”. We need to enter an age of green reason and green choices, he said. “We cannot leave that to the power of the invisible hand.”

This page was last updated September 22, 2022

Share this article