Climate change a silent threat to recovery and development

Rodney Ndamba – Research Expert – The Independent Newspaper – April 1-8, 2021

AFTER the prevailing Covid-19 pandemic, businesses and economies face climate change as the next frontier and hurdle to economic recovery and development. While many countries in Africa including Zimbabwe are hard pressed responding to Covid-19, climate change remains a silent economic threat. Some Southern African countries have started experiencing abnormal rainfalls, increased cyclones and tornadoes due to climate change. Further, global targets and actions being set by developed economies which may filter into trade agreements could affect developing economies (WTO-UNEP Report, 2009). With the United States returning to the Paris Agreement, climate is on the move again. However, this article is a call for inclusive and strategic climate actions and development in Zimbabwe. It is certain that there are gaps, challenges and opportunities in the climate change governmentality in Zimbabwe, which has potential impacts
on economic recovery and development.

National regulations, climate change

Zimbabwe has a set of laws and regulations relating to climate change but the Constitution (2013) is silent on climate change except environmental rights. The Environmental Management Act [20:27], National Climate Change Response Strategy, National Climate Policy [2017] and National Renewable Energy Policy make
the set of climate instruments. However, these instruments do not mandate climate reporting in company annual reports. Climate reporting requires companies to publicly disclose their climate mitigation strategies, water consumption, fuel and energy consumption (petrol, diesel, electricity, coal), Green House Gases (GHG) emissions and waste using sustainability reporting standards. The only available climate reporting option is contained in SI134 of 2019 Securities
and Exchange (Zimbabwe Stock Exchange Listing Requirements) Rules — Part XXI:“Sustainability Information and Disclosure”, but targets only listed companies.
It is evident that climate regulation in Zimbabwe needs some development. Consequently, there is no public policy or regulation by the Reserve Bank of Zimbabwe on Climate Change for the banking sector in Zimbabwe to drive Green Finance. Many countries have been migrating to Green National Budgets by incorporating environmental and climate dimensions in their fiscal systems (OECD, 2021). An analysis of tax revenues shows that Botswana, South Africa and Rwanda collect an average of 6% in environmental taxes, while the Zimbabwe Revenue Authority (Zimra) collects an average of 1% (2019 Data).

International Trade, climate change

The impact of climate change continues to dominate trade and economic conversations at the World Economic Forum (WEF), World Trade Organisation (WTO), World Bank and European Union (EU). According to the World Bank (2008), developed countries are increasingly factoring climate change trade-offs in trade agreements which could discriminate against poor countries. Recently, many international financial institutions have been abandoning high carbon emitting projects like coal. As such, it is vital that Zimbabwe starts strategically developing its climate change management position to benefit from climate related trade agreements which are increasingly becoming its trade risk. The US classified climate change as a national security issue, which makes it a non-negotiable in international trade, economic and development relations. As such, it is vital for Zimbabwe to improve its climate change governmentality. For example, addressing unplanned settlements and urban agriculture, which have polluted most urban wetlands with fertilisers, chemicals and sewage making the water unsuitable for manufacturing business by any investor wishing to consider Zimbabwe. Ability to provide clear water isvincreasingly becoming an investment hurdle that the country will need to urgently address.

Climate change, ESG investments

Global investors have been incorporating climate change in investment risk analysis and decisions. Recently, the large global investors like BlackRock, Vanguard, Fidelity, Zurich, HSBC, Standard Chartered Bank, Morgan Stanley and others made decisions to prioritise climate related investments which takes into account economic, environmental, social and governance (ESG) issues. Further, the United Nations — Principles on Responsible Investing (PRI) have incorporated climate change and ESG into investment principles for its members, who control over US$63 trillion global investment funds. As such, this will put countries like Zimbabwe in a difficult position in attracting sustainable investors. While President Emmerson Mnangagwa signed the “Investment Guidelines and Opportunities in Zimbabwe” in 2018, the newly established Zimbabwe Investment and Development Agency (Zida) needs to urgently develop a framework for evaluating new investment projects on their climate change impacts before approval. Section 1.8 (d): Maintain environmental and social standards of the guidelines state that, “The government commits to ensuring all labour, health, safety, and environmental regulations are adhered to by domestic and foreign investors” (Government of Zimbabwe, 2018). Therefore, economic regulators need to act on these existing guidelines.


Financial markets, climate change

Climate change has potential implications on financial and economic stability. Credit rating, liquidity and lending could be affected by climate impacts. Many capital markets have been developing climate related products and regulations which are still to be the case in the financial sector in Zimbabwe. In Asia, People’s Bank of China (PBOC) governor Yi Gang raised concern on potential impacts of climate change on financial stability and monetary policies (Samtani, M, 2021). Similarly, the US Securities and Exchange Commission recently announced measures for companies to include climate reporting in their annual filing with the
Registrar of Companies (SEC, 2021). Financial markets could be disrupted in Zimbabwe, unless the Ministry of Finance and Economic Development and the Reserve Bank of Zimbabwe develop green finance policies and regulations for the banking and financial sector in line with strides being taken by the Africa Development Bank (AfDB) on Green Banks. This action can unlock access to sustainable green finance for Zimbabwe and help manage climate related risks. Many global financial institutions like the Development Bank of Singapore (DBS) have been using the Taskforce on Climate Financial Related Disclosures (TCFD) issued by the Climate Standards Disclosure Board (CSDB). Private Sector and Climate Change The private sector in Zimbabwe has a critical role in national climate actions. The country committed to the Paris Agreement and Nationally Defined Contributions (NDC) toward low carbon emission. These commitments will not be fulfilled unless the country drives an inclusive climate action which brings on board both small and large companies. Green innovations and ransitioning to new technology, efficient transport systems and equipment could attract green investments that create green jobs. However, there is a lot to be done in the business sector outside current energy initiatives in responding to climate change. Private sector ability to measure and account for their climate impacts remains an issue for Zimbabwe. However, SMEs, accountancy and finance professionals seem not actively involved in national climate change initiatives, yet they are instrumental.

Climate disclosure, carbon trading

Climate reporting is relatively low in Zimbabwe. However, climate reporting by companies helps enhance national climate data. By making climate related disclosures, companies can control climate related costs and risks, thereby increasing profits. In developed economies, climate reporting was instrumental in setting up carbon trading markets by monetising and off-setting carbon emissions. Carbon Finance, which is an emerging concept relating to financing of activities which contribute to GHG reduction, has been growing (Kerste et al, 2011), resulting in significant climate change mitigations.

Conclusion

Finally, climate change will be a defining factor for economic recovery and development in Zimbabwe. The ability to mitigate the country’s climate risk profile will be crucial to attracting climate biased investors and participating in sustainable international trade. Countries like the US and China, and the EU region have been making strong strides in climate actions. As such, it is incumbent upon Zimbabwe to synchronise its climate related policies, develop climate regulations and sector specific policies on climate actions. Lastly, the accountancy profession through the Public Accountants and Auditors Board (PAAB) needs to come on board to drive climate reporting in company annual reports. Recent developments by the International Financial Reporting Standards (IFRS) Foundation
to set up a Sustainability Standards Board will soon drive sustainability and climate reporting along the International Financial Reporting Standards (IFRSs).

Ndamba is the chief executive/founder of the Institute for Sustainability Africa, an independent think-tank and research institute advancing sustainability initiatives for Africa. These weekly New Perspectives articles are co-ordinated by Lovemore Kadenge, immediate past president
of ZES. — kadenge.zes@gmail.com or mobile +263 772 382 852



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