Sandra Villars, a partner at consulting firm Oliver Wyman in Johannesburg, has spent the past 25 years navigating the intersection of finance and development. Her journey, naturally, led to an increasing focus on sustainability, particularly within the African context.
“I have always been very interested in development finance and economics, and a natural consequence of that was to be interested in the linkages between development and sustainability. As a corporate treasurer in Africa, I was fortunate to be involved in driving an inaugural sustainability issuance by one of the large banks on the continent. All that has led me towards building a greater focus on sustainable financing on the continent,” she explains.
Sandra emphasises the potential for “unintended consequences” in the financial sector, where decisions can ripple further than initially anticipated.
This is especially true in Africa, where existing challenges like financial inclusion and transparency intersect with environmental concerns. For example, reforestation initiatives, intended to combat climate change, can inadvertently harm biodiversity through monoculture practices.
“There’s also huge complexity in dealing with indigenous people and local communities, who will be impacted by climate and nature projects. Some groups may be seen to benefit on key development impact metrics, only for us to find that others have been left worse off. So things are not always as simple as they seem, and we should aim to be clear about ultimate objectives from the initial stages,” she says.
To identify these potential pitfalls, Sandra advocates for innovative methodologies. One crucial step involves comprehensive risk assessments, incorporating independent technical expertise and stakeholder engagement. Frameworks like the Taskforce for Nature-Related Financial Disclosures (TNFD) and the Global Reporting Initiative (GRI) provide valuable tools in this process.
“Africa’s natural resources (both extractable and renewable) are likely to remain among its greatest economic assets for some time. Those assets need to be well-managed, and regulation forms an important part of that. Regulators increasingly need to be able to understand nature-related risks in a scientific way,” she notes.
To ensure the conservation of existing ecosystems and actively foster the emergence of new, resilient natural systems, Sandra advises the following:
- Proactive engagement: Regulators need to engage proactively with state ministries (such as finance and environment) as well as policy makers within government. This means that regulators are much more likely to get government backing for any proposed regulations. It also means that any interventions put in place by regulators are in line with the political context of the country, helping to ensure that everyone is working towards the same goal.
- Continuous assessment: Internally, regulators need to ensure that they have the capacity needed to respond to the call for nature-related disclosure transparency by integrating nature risks into financial sector regulation.
- Engage with voluntary networks: This gives regulators a voice in how emerging regulatory frameworks are conceptualised, so that they’re suited to African contexts from the start rather than having to be adapted later on. Such networks include th Sustainable Insurance Forum (SIF), the Network for Greening the Financial System (NGFS), And the African Natural Capital Alliance (ANCA).
Furthermore Sandra acknowledges the potential risks associated with overemphasising metrics in ESG and climate goals. While she supports the global push for enhanced reporting, particularly in high-emitting economies, she cautions against hasty implementation in the case of nature and biodiversity.
“I’m in favour of the global emphasis on reporting progress, particularly in high emitting economies. In the case of nature and biodiversity, we are still at the stage where we need to make sure people understand what the right metrics are and the best ways for them to get, or proxy, the information,” she says.
“Making reporting a requirement too soon can overwhelm and lead to greenwashing when the information simply isn’t accessible yet. Having said that, I do believe the data landscape will change quickly as more solution providers come to the table to address this issue,” she adds.
Sandra underscores the vital role of collaboration in addressing complex challenges like climate change and biodiversity loss.
She also emphasises the need for industry capacity-building through knowledge-sharing initiatives in the realm of academia and industry associations, including open-source databases and case studies.
“There is a lot of open sourcing that needs to happen to make this real for the financial services sector. It involves public sector institutions. Another interesting way to approach this is through public sector-led and blended finance transactions; these are likely to be large-scale projects that you can build shareable models and data off since stakeholders are trying to reach the same goals,” she concludes.
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