The South African Reserve Bank published a Working Paper assessing how climate risk and climate-related policy actions affect international capital flows in Southern African Development Community (SADC) economies, finding that higher climate risk and broader climate policy adoption are both linked to reduced cross-border capital movements. The reported effects apply to both capital inflows and outflows. Using annual data for 10 SADC countries over 2000 to 2022, the study proxies climate risk with the occurrence of major extreme weather and climatic events and examines aggregate flows as well as direct investment, portfolio investment and other investment. Climate risk is associated with lower aggregate inflows and outflows and with declines across all three flow components, with broadly consistent results across event types and alternative climate-risk definitions. The paper also finds that the extensiveness of climate policies, measured as the logarithm of the number of climate policies implemented, is negatively associated with both gross capital inflows and gross capital outflows. The paper is issued as part of the South African Reserve Bank’s Working Paper Series and is presented as preliminary research intended to elicit comments and stimulate debate.
South African Reserve Bank 2025-11-06
South African Reserve Bank working paper finds climate risk and more extensive climate policies are associated with lower capital flows in SADC
The South African Reserve Bank's Working Paper analyzes climate risk and policy impacts on international capital flows in Southern African Development Community economies. It finds increased climate risk and extensive policy adoption correlate with reduced cross-border capital movements, affecting inflows and outflows across direct, portfolio, and other investments. Using data from 2000 to 2022, the paper aims to provoke discussion and feedback.