SARB: climate risk tools must cover water and shorter horizons, not an ESG label

Victoria Shinder13 October 2026, 06:542 min read

Fundi Tshazibana, Deputy Governor of the South African Reserve Bank, spoke at a Bloomberg sustainable finance event in Johannesburg on 30 September 2026. The address, published by the BIS, sets out where climate and nature risk fit in a central bank's mandate — and where they do not.

The boundary. Tshazibana says central banks "are not environmental policymakers" and do not use monetary policy or credit allocation to pursue climate objectives at the cost of inflation, financial losses or credibility. Their concern is where climate and nature risks transmit into price and financial stability.

Three takeaways. Climate risk is part of nature risk, so tools should capture material nature drivers, especially water. Assessments need shorter horizons alongside long-term pathways, showing how climate shocks interact with business cycles, inflation, interest rates and financial conditions. And the task "is not to attach an ESG label to existing activity" but to identify material risks and give decision-makers credible information.

How shocks transmit — her examples. The 2022 floods in KwaZulu-Natal and the Eastern Cape cut manufacturing production by 6%, with losses estimated at about 1.8% of Durban's GDP, and the largest flood losses in 105 years for South Africa's biggest general insurer. Floods in Limpopo and Mpumalanga in late 2025 and early 2026 cost an estimated R4 billion. In Zambia, the 2023/24 drought caused blackouts of up to 21 hours a day in a hydropower-dependent system and fed inflation where food and beverages make up 54% of the CPI basket; the Bank of Zambia set up a 5 billion kwacha stabilisation facility.

What the SARB is doing. Its first climate risk stress test in 2025 applied three long-term scenarios and, unlike many global exercises, included retail exposures because of African banks' large retail books; it revealed significant data gaps. The Prudential Authority's guidance for banks and insurers sets minimum requirements for governance, strategy and risks. The SARB is assessing water risk, including critical water infrastructure, and working on insurance protection gaps, starting with property and flooding. Over the next year it will integrate climate data into regulatory data and build a climate risk dashboard of macro- and firm-level indicators.

Financing. South Africa's climate finance flows are less than half the annual requirement, and Africa receives 23% of what is needed. Her answer for the central bank is its core mandate — low and stable inflation, credible institutions, predictable regulation — to support deeper capital markets.

Source: South African Reserve Bank, address by Fundi Tshazibana, published by the BIS — https://www.bis.org/speeches/20261008-sustainable-finance-and-shifting-risk-landscape