Boards of companies across Africa are being put on notice that ignoring nature-related risks could expose directors to legal liability, as a new report concludes that environmental stewardship has become part of directors’ existing fiduciary responsibilities in some of the continent’s largest economies.
The report, Directors’ Duties and Nature-Related Risk in Africa, says company directors in Kenya, South Africa and Nigeria have a legal obligation to factor nature-related risks—including biodiversity loss, water scarcity, deforestation and land degradation—into corporate strategy and governance.
The legal analysis, released by the Commonwealth Climate and Law Initiative (CCLI), FSD Africa and the African Natural Capital Alliance (ANCA), argues that directors who fail to identify and manage these risks could be in breach of their duty of care and their obligation to promote the long-term success of their companies.
The warning comes as investors, regulators and lenders worldwide demand greater transparency on environmental risks, while courts increasingly hold companies accountable for the impact of their operations on natural ecosystems.
For Africa, the stakes are particularly high.
The report estimates that 62 per cent of Africa’s economic output depends moderately or heavily on nature, making the continent more vulnerable than many regions to environmental degradation and climate-related shocks.
A separate 2024 stress test covering banking sectors in Morocco, Rwanda, Zambia, Ghana and Mauritius found that expected credit losses could rise by as much as 21 per cent by 2050 if governments and businesses fail to invest in nature-positive solutions.
In South Africa alone, the report says, more than a third of corporate bank lending is concentrated in industries that rely heavily on natural ecosystems, exposing financial institutions to growing environmental risks.
The study concludes that nature-related risks should now be treated alongside traditional financial, operational and regulatory risks in boardroom decision-making.
Dr James Mwangi, Group Chief Executive Officer of Equity Group Holdings and a member of the African Natural Capital Alliance Governing Council, said Africa’s economic future depends on how companies respond to mounting pressure on natural resources.
“The extraordinary wealth of our natural world has long underpinned the livelihoods of hundreds of millions of people and the commercial foundations of entire economies. Today, that natural wealth is under unprecedented pressure.”
According to the report, directors face an increasingly complex regulatory environment shaped by international sustainability reporting standards, including the Taskforce on Nature-related Financial Disclosures (TNFD) and the International Financial Reporting Standards (IFRS) S1 and S2.
Companies exporting to Europe must also navigate the European Union Deforestation Regulation (EUDR), while environmental litigation continues to expand across the continent.
The report points to court cases involving Shell in Nigeria, TotalEnergies in South Africa and the East African Crude Oil Pipeline (EACOP) as evidence that environmental governance is becoming a growing source of legal and financial risk for businesses.
Although Kenya, Nigeria and South Africa have different legal systems, the researchers found a common principle emerging across all three jurisdictions: directors are expected to consider environmental impacts where they present foreseeable and financially material risks to their businesses.
Nigeria’s Companies and Allied Matters Act expressly requires directors to consider environmental impacts, while Kenya’s Companies Act and South Africa’s Companies Act, environmental legislation and corporate governance framework create similar obligations.
Sammy Ndolo, Director at CDH Kenya, said many corporate boards still regard environmental matters primarily as compliance requirements instead of business risks capable of affecting profitability and long-term value.
“The report removes the perception that nature-related risks are simply an optional ESG issue. It demonstrates that these matters are central to directors’ legal responsibilities and business decision-making.”
He added that directors should expect greater judicial scrutiny as environmental disputes become more common.
Legal experts behind the report say its findings have implications beyond the three countries studied because many African jurisdictions share legal principles derived from English common law.
Natalie Shippen, Executive Director of CCLI, said the research fills an important gap by examining directors’ legal obligations in economies where businesses are highly dependent on natural capital.
She said boards that begin integrating nature-related risks into governance now will be better prepared for future regulatory changes while positioning themselves to seize emerging financing opportunities.
The report highlights a growing market for nature finance, pointing to instruments such as Ecobank’s Nature Bond and water performance bonds as examples of how businesses incorporating environmental considerations into governance may improve access to investment.
Dorothy Maseke, Head of Secretariat at the African Natural Capital Alliance and Lead Nature Finance at FSD Africa, said the findings offer practical guidance for boards seeking to strengthen governance while attracting sustainable finance.
The report urges directors to embed nature-related risks into corporate strategy, investors to include nature considerations in lending and investment decisions, and legal advisers to help clients understand that environmental risk management is increasingly part of directors’ existing legal obligations rather than a future regulatory requirement.
