- Says climate change creates opportunities for innovative ways of addressing climate-related risks
While the fundamental aspect of climate change is addressing threats to human existence and livelihoods, related environmental, social, and governance considerations ultimately shape product and service demand, investment choices, trade arrangements, and industry relationships.
In its recently released 2022 annual report, the Bank of Botswana (BoB) says if strategically prepared, Botswana could benefit from these structural shifts, which entail economic activity. BoB stresss that as the country manages climate risks, it also needs to harness the economic value addition from the decarbonisation of the economy to the acclimatisation of a green economy to induce inclusive economic growth.
According to the report, climate change does not only present risks to the business environment but also creates opportunities for innovative ways of addressing climate-related risks and ensuring sustainability. “Notably, climate change adaptation and transition businesses and, broadly, economic and environmental solutions globally could potentially reshape the industrialisation agenda.
In the process, the industrialisation and economic diversification opportunities could help accelerate the achievement of the SDGs, as well as country-specific objectives, such as Vision 2036 and the transition of Botswana to a high-income status,” the central bank notes. Potential climate change business opportunities availed by the climate change mitigation and transition agenda in Botswana cut across different sectors of the economy, including energy, transport, water, waste management and land use.
Electricity and water
Highlighting some of the aspects, BoB says prospects in infrastructure and utilities include electricity and water, in terms of increased harnessing of solar power and wind energy, water recycling and preservation systems, as well as eco-friendly mass transit public transport infrastructure and systems. “At the same time, this provides funding opportunities by the financial sector, considering climate change risks,” says the report.
BoB emphasises that climate change adaptation and transition resonates with the knowledge-based economy and export-led growth aspects, noting that changing consumer perspectives and preferences, as well as those of producer corporates aligned to the greening agenda, provide opportunities for research, innovation, and development of conforming products for the new market. “In other areas, there is potential for changes in production methods, for example, for agriculture that can contribute to improvements in productivity, yields, and healthier products, including harnessing the comparative advantage in organic production,” it says.
The digitalisation and services sector are also highlighted in the report as inherent in climate change mitigation attributes that are growth-enhancing and should therefore be harnessed by the local industry and institutions. “These include enablers for a reduced need for physical presence and travel, financial services and transfers involving faster and quick settlement of transactions (positive impact on business cash flow and viability), remote processing and service delivery (for example, government, education, health, and agricultural services), and data management, among others,” the report says.
In the financial sector, the report points out that some domestic banks have accelerated their attention on climate change by integrating ESG aspects into their business models through supporting and funding climate-friendly investments. “Banks are also encouraging customers to use platforms and channels, as well as adoption of business strategies and practices aligned with climate sustainability,” it says.
Customer value propositions
“In addition, banks are developing and/or enhancing credit and insurance risk models to assess the impact of climate change risk, as well as frameworks to assess the suitability and strategic alignment of products and customer value propositions with changing socio-economic and environmental factors and the impact on the risk profiles. “Furthermore, there is a focus on the financial inclusivity of customers, including ongoing support of small to medium enterprises that would be key to research and innovation for climate adaptation and transition products and services.”
While there are ongoing initiatives for green financing globally, BoB notes that the green market is still in its infancy, with most frameworks still under development. For itself, BoB highlights four areas that can be identified in consideration of climate change mitigation and transition implications. These are financial sector regulation and financial stability, promotion of money and capital markets, monetary policy, and foreign exchange reserves.
According to Botswana’s central bank, the country needs to accelerate technological innovations and adaption, including forging public-private partnerships (PPPs) in climate-related investment or infrastructure and closing skills gaps through partnerships with tertiary educational institutions. The report recommends exploring new financing channels, such as green bonds and global climate funds, with a clear programme of action and policy focus on areas such as enhancing solar power capacity.