Company directors in Kenya, Nigeria and South Africa who fail to account for nature-related risks in corporate decision-making could be exposing themselves to legal action, according to a new report that says existing company laws already require boards to consider environmental impacts that threaten business performance.
The report, Directors’ Duties and Nature-Related Risk in Africa, argues that directors’ fiduciary duties extend beyond financial oversight to include managing material risks arising from biodiversity loss, water scarcity, ecosystem degradation and land use change.
Released by the Commonwealth Climate and Law Initiative (CCLI), FSD Africa and the African Natural Capital Alliance (ANCA), the report concludes that nature-related risks should no longer be treated as voluntary environmental, social and governance (ESG) considerations but as core governance issues that can influence a company’s long-term success.
The report says directors who ignore foreseeable environmental risks may face legal, financial and reputational consequences as governments tighten regulations, investors demand stronger sustainability disclosures and courts increasingly scrutinise corporate environmental performance.
Its findings come at a time when African economies are facing mounting pressure from climate change and declining natural ecosystems.
According to the report, 62 per cent of Africa’s Gross Domestic Product depends moderately or highly on nature, making sectors such as agriculture, mining, manufacturing, tourism and financial services particularly vulnerable to environmental degradation.
Researchers also point to a 2024 stress test covering banking sectors in Morocco, Rwanda, Zambia, Ghana and Mauritius, which found expected credit losses could rise by up to 21 per cent by 2050 in the absence of nature-positive investments. In South Africa, about 35 per cent of corporate lending is concentrated in industries that depend heavily on natural ecosystems.
Dr James Mwangi, Group Chief Executive Officer of Equity Group Holdings and a member of the ANCA Governing Council, said protecting nature had become a business and governance priority rather than solely an environmental concern.
“Africa stands at a defining moment. The continent’s natural wealth has long supported livelihoods and economic growth, but that foundation is under increasing pressure, making it essential for boards to recognise nature-related risks in their governance decisions.”
The report says directors are operating in a rapidly changing 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 are also adjusting to regulations such as the European Union Deforestation Regulation (EUDR), while environmental litigation is becoming more common.
Among the cases cited are legal actions involving Shell in Nigeria, TotalEnergies in South Africa and the East African Crude Oil Pipeline (EACOP), illustrating growing judicial scrutiny of corporate environmental impacts.
Although the legal frameworks in Kenya, Nigeria and South Africa differ, the report finds a common expectation that directors must consider environmental risks where they are likely to affect company performance.
Nigeria’s Companies and Allied Matters Act explicitly requires directors to consider environmental impacts. In Kenya, the Companies Act provides that directors who fail to manage foreseeable and financially material nature-related risks could be found to have breached their duties. South Africa reaches similar outcomes through company law, environmental legislation and the King IV Code on Corporate Governance.
Sammy Ndolo, Director at CDH Kenya, said many boards continue to focus on environmental compliance rather than recognising nature-related risks as strategic business issues.
“Many directors still approach environmental matters as regulatory requirements. The report demonstrates that nature-related risks are already part of directors’ legal responsibilities and should be integrated into business strategy and governance.”
He said increasing judicial scrutiny of environmental approvals suggests directors could face greater personal accountability in future litigation.
Natalie Shippen, Executive Director of CCLI, said the report fills an important gap by providing jurisdiction-specific legal guidance for directors operating in Africa’s largest common law economies.
She said boards that act early to integrate nature-related risks into governance would be better positioned to manage future regulatory changes and capital market expectations.
Beyond legal compliance, the report argues that nature-positive governance can improve access to finance.
It highlights emerging financing mechanisms—including Ecobank’s Nature Bond and water performance bonds—as examples of how companies that integrate environmental considerations into governance may attract new sources of investment.
The report recommends that company boards embed nature-related risks into strategic planning, investors incorporate those risks into financing decisions and legal advisers help directors understand that environmental risk management is already part of their fiduciary responsibilities.
The findings were unveiled during a pan-African webinar that brought together business leaders, lawyers, investors and policymakers to discuss how African companies can strengthen governance while safeguarding long-term economic resilience.
