"Banks in Africa face environmental risk through their lending to environmentally sensitive sectors, but also because of vulnerabilities that arise due to the large concentration of government bonds," reads a report released Monday night.
Exposure to environmental factors is one of the issues rating agencies look at when deciding their opinion on a country's sovereign credit quality, with Moody's anticipating that "environmental factors will lead to a deterioration in banks' credit quality and profitability over the long term if they do not take steps to manage environmental and environment-related risks."
Major African industries, such as oil and gas, minerals and transportation, "face elevated environmental risks given their inherent exposure to the energy transition and risks over climate," the report points out.
"The risks are exacerbated by the huge exposure to sovereign debt securities, particularly for Angolan and Nigerian banks," the document points out, saying that the average exposure of the 49 Angolan banks analyzed is 15 to 35 percent of total assets, while in advanced economies this figure does not reach 10 percent.
