Greening the financial sector in Malawi

UNEP Copenhagen Climate Centre has supported the Reserve Bank of Malawi throughout 2024 in exploring how the Bank can help the greening of the financial sector in Malawi.

Malawi is highly vulnerable to climate change and its financial sector is expected to face increased climate-related financial risks in the near term.

The Malawian economy and population are increasingly vulnerable to climate-related disasters, including floods, droughts and cyclones, which can severely damage infrastructure and devastate businesses and livelihoods, resulting in substantial financial shocks for the broader economy. At the same time, the global transition to a low-carbon economy poses long-term transition risks to Malawi’s financial sector. In response to the climate and environment crises, international trade and financing bodies are increasingly adopting green standards, while global investors increasingly prioritise Environmental, Social, and Governance (ESG) criteria. Countries that do not adapt to this shifting landscape risk marginalization from major financial markets and trading partners and losing out on foreign investment.

Due to these developments, there is a growing recognition that climate-related risks threaten price and financial stability, thus affecting the mandate of the Reserve Bank of Malawi.

Greening the financial sector describes the process of integrating environmental considerations – particularly those related to climate change and sustainability – into financial institutions’ practices, policies, and strategies. The goal is to reduce environmental and climate-related financial risks and accelerate the transition to a low-carbon economy.

With support from the NDC Partnership, UNEP Copenhagen Climate Centre has worked with the Reserve Bank of Malawi to develop a feasibility study that outlines a range of near-, medium, and long-term actions to support the greening of the Malawian financial sector. The study guides the Reserve Bank of Malawi and other partners in Malawi as they take steps to address environmental and climate-related financial risks that endanger systemic financial stability.