The South African Reserve Bank published a working paper assessing climate-related transition risks in the financial sectors of Botswana, Namibia, Mozambique and South Africa, focusing on banks’ exposure to carbon-intensive industries and how transition shocks transmit to macrofinancial outcomes. Using sectoral loan allocation data combined with greenhouse gas emissions, the paper applies the Climate Policy Relevant Sectors taxonomy, loan carbon intensity measures and a transition risk index, and estimates country-specific Bayesian vector autoregression models for 2010–2022. The results show heterogeneous effects across countries: transition shocks are associated with current account deterioration in Namibia and South Africa, while trade volumes appear resilient or expanding, particularly in Botswana. Credit supply and non-performing loans respond only modestly, with financial sector effects described as limited and sensitive to identification strategies. The analysis highlights electricity and other emissions-intensive sectors as key drivers of exposure and argues for integrating transition risk into supervisory frameworks, including stronger climate-related risk disclosure, stress testing and prudential treatment of high-carbon exposures, alongside alignment with international climate finance standards.
South African Reserve Bank 2025-08-14
South African Reserve Bank working paper analyses climate transition risk exposure in Southern African banks
The South African Reserve Bank released a working paper on climate-related transition risks in the financial sectors of Botswana, Namibia, Mozambique, and South Africa, focusing on banks' exposure to carbon-intensive industries. Transition shocks lead to current account deterioration in Namibia and South Africa, while trade volumes remain stable or grow in Botswana. It recommends integrating transition risk into supervisory frameworks, enhancing climate-related risk disclosure, stress testing, and aligning with international climate finance standards.