Climate risk is reshaping long-term investment decisions

How is climate risk reshaping long-term investment decisions—especially for pension funds?

What happens when floods, droughts, and extreme heat begin to threaten the very infrastructure these funds invest in?

Are governments and planners doing enough to factor climate risk into infrastructure that is meant to last 30 to 50 years?

And with over 600 billion dollars in pension assets across Africa—what will it take to unlock that capital for resilient, future-proof projects?

Are current regulations too restrictive—or simply too cautious?

And what kind of policy reforms or de-risking tools—like guarantees against political or regulatory uncertainty—are needed to give investors confidence?

Mr. Nyananso Ekanem joins us to answer these questions 

Transcript

SPEAKER_02 0:06

Climate risk is now an investment risk. And quality bridge the gap between protecting pension savings and financing Africa's resilient future from over 2,300 cities and 138 countries who bring you the Good Morning Africa podcast. Good morning Africa. Welcome aboard your fast on everything business in Africa. I am Mr. Dong. For more, follow us on Twitter at the K Financial News and you can find me at Mr. Dong. How is climate risk reshaping long-term investment decisions, especially for pension funds? What happens when floods, drops, and extreme heat begin to threaten the very infrastructure these funds invest in? Our governments and planets doing not to factor climate risks into infrastructure that is meant to last 30 to 50 years. And with over$600 billion in pension assets across Africa, what will it take to unlock that capital for resilient future-proof projects? Are current regulations too restrictive or simply too cautious? Mr. Nyananso Ekanem joins us to answer these questions.

SPEAKER_01 1:06

How is climate risk influencing long-term investment thinking within financial and pension systems globally?

SPEAKER_00 1:15

Climate change is real, and we see that with respect to the level of flooding, the level of droughts, and the level of heat experienced across the world. And so the risk of climate to infrastructure is also real. Because with heavy flooding, infrastructure assets are giving way because we're not prepared or designed to withstand such a level of flooding or such level of heat in the society. And so it's important that climate risk is considered critically when designing our planning infrastructure. With respect to preparing climate resilient infrastructure, it's important to look at the type of impact of climate change we are having across the world, and particularly for Africa, where we are bearing the brunt of the negative impact of climate change from the flooding we are having across Africa and also the heat waves we are also having across the continent, we must prepare better for infrastructure. And that's why climate resilient infrastructure is very critical for Africa. Climate resilient infrastructure also allows us to think long-term, meaning within the return period of heat waves or flooding, infrastructure assets must be built and be prepared for those return periods. For instance, um in 2020, um across Africa, there were serious floods. And so those kinds of levels of flooding will have to be considered when designing and planning infrastructure for long-term. And since infrastructure assets are long-term assets, um, 30, 40, 50-year assets, we must consider climate change and climate risk when designing, planning, and also financing infrastructure. Pension funds and even other funds are critical about climate resilience infrastructure. And so climate risk considerations are now being um reviewed differently, uh, you know, with detailed uh due diligence to ensure that all designs and all planning for infrastructure have considered climate risk um possibilities. Thank you.

SPEAKER_02 3:42

Thank you, Mr. Ekanem. We're also looking at what institutional regulatory improvements uh would help unlock more pension capital for productive sectors. From your perspective, what do those uh improvements look like?

SPEAKER_00 3:56

Regulation for pension funds um are very important because pension funds are people's money, and so there has to be a regulatory framework to ensure that um administrators lose people's money. However, regulation must consider um feasibility and readiness of the market as well. In terms of feasibility, are projects really ready for investment? Can there be other frameworks that can support and de-risk projects? Regulators must consider that pension funds that have been building over the years. In Africa, right now we have about 600 um you know billion dollars of pension funds available, over 600 billion dollars and growing. And it's important that we can unlock these funds to build infrastructure that can provide the value and quality of life we need in Africa. We need to unlock these funds to provide value for Africans. And how best do we do this? Regulations must align with the realities on the ground. Can there be instruments that can protect and de risk pension funds? That way you don't lose people's money. And so regulations must ensure that over time, um, you know, these limitations or restrictions can be reduced to allow pension fund administrators to invest more in infrastructure. Now, presently, regulations are restricting um um managers to invest in infrastructure because of the risk and the you know, you know, the perceived uh risk as well and the fear uh the regulators have in terms of losing people's money. And so regulation regulators and the regulations must look at other ways and other frameworks that can allow pension funds to be invested safely over a long period of time. For example, you can look at um you know instruments that can guarantee you know in terms of political risk or uh other possible risk that can come in the market. For instance, um, you know, um regulatory risk, you know, you know, policy risk in terms of you know change of policies or regulations in the environment. Or you can look at you know civil you know disobedience risk. For instance, in some climes you see where you have uh civil legal disobedience or you know, civil unrest and projects are at risk. And pension funds that invest in this kind of projects are also really concerned about this kind of um risk. It can be uh you know um mitigation or guarantee instruments that can guarantee this kind of risk and can give pension funds the confidence to be able to invest in long-term infrastructure. Thank you.

SPEAKER_02 7:16

And a quick review of the market. South African brand rose to its 17 per US dollar, recovering from four-month lows of 13.2 per US dollar hit on March 30th, supported by a softer US dollar and rising prices of precious metals. Still, the currency depreciated almost 7% against the Greenback this month in the wake of the Middle East conflict as investors floored to safe heaven assets amid rising global uncertainty. The South African Reserve Bank, in its latest quarterly bulletin, said that rising oil prices are likely to push domestic fuel costs higher, clouding the outlook for the economy. The central bank held its benchmark policy rate steady at 6.75%, citing Courton due to persistent inflation and fragile GDP growth dynamics, and warned that a prolonged Persian Gulf conflict may lead to future rate increases. Meanwhile, Finance Minister Enokogonduan Godon Gwana announced that the government will reduce a tax imposed on fuel for one month to offset the impact of surging oil prices on domestic gasoline. Latest data from the capital importation report by the National Bureau of Statistics shows that the banking sector remained the largest destination for foreign capital, accounting for 58.26% of total inflows in 2025 compared to 56.81% in 2024, highlighting its dominance in Nigeria's capital importation landscape. A breakdown of the data shows sustained growth across all quotas, reflecting consistent foreign investor participation. In quarter one of 2025, banking inflows did at 3.12 billion up from 2.07 billion in quarter one of 2024. The price accelerated in quarter two where inflows climbed to$3.41 billion compared to$1.12 billion a year earlier. In quarter three, 2025, inflows rated$3.14 billion, significantly higher than the$579.48 million recorded in quarter three of 2024, while quarter four 2025 saw inflows rise up to$3.85 billion, up from the$3.25 billion in the corresponding period of 2024. The pattern suggests that capital raising was not concentrated in a single window but sustained throughout the year, aligning with the bank's phase of capitalization strategies. Global logistics highway. DHL is making serious moves to expand its footprint in South Africa with a set of local acquisitions now moving closer to final approval. The competition commission has given the green lines to DHL to acquire three companies linked to Vital Group, namely VITO distribution, vital feet, and staffing logistics. The deal still needs to still need to find an order from the competition tribunal before it can be fully implemented. According to the Commission, the transaction was not expected to disrupt competitions in the local logistics market, nor does it raise any public interest content. That effectively is the biggest regulatory huddle for the deal. The three companies bring a different strength to the table. Vital distribution focuses on transport by housing and distribution across key sectors like retail and manufacturing. Vita fleet runs a range of vehicles from light duty delivery to heavy long-haul tracks, while staffing logistics provides non-part solutions across a wide national footprint. Thank you for always waking up with us.