Company directors in Kenya, South Africa and Nigeria could be failing in their legal responsibilities if they do not adequately identify and manage nature-related risks. This is according to a new legal report that argues environmental considerations have become a core governance issue rather than an optional environmental, social and governance (ESG) concern.
The report, Directors’ Duties and Nature-Related Risk in Africa, published by the Commonwealth Climate and Law Initiative (CCLI), FSD Africa and the African Natural Capital Alliance (ANCA), concludes that directors have an existing legal duty to consider risks arising from biodiversity loss, water scarcity, land degradation and other nature-related challenges as part of their fiduciary responsibilities.
The analysis examined legal and corporate governance frameworks in Kenya, South Africa and Nigeria, finding that directors who fail to address foreseeable and financially material nature-related risks could expose both their companies and themselves to legal, financial and reputational consequences.
According to the report, integrating nature into corporate governance is no longer simply a sustainability exercise but a business imperative that can strengthen long-term resilience and unlock new investment opportunities.
The findings are particularly significant because the legal systems of the three countries are based on or heavily influenced by English common law, suggesting the conclusions may also be relevant to other African jurisdictions such as Uganda and Zimbabwe.
The report highlights Africa’s high dependence on nature, noting that approximately 62 per cent of the continent’s Gross Domestic Product (GDP) is moderately or highly dependent on natural ecosystems.
It also cites a 2024 nature stress test across banking systems in Morocco, Rwanda, Zambia, Ghana and Mauritius, which found cumulative expected credit losses could increase by as much as 21 per cent by 2050 if nature-positive measures are not adopted. In South Africa, it notes, 35 per cent of corporate bank lending is concentrated in sectors that rely heavily on nature.
These findings, the report says, demonstrate that risks such as water scarcity, ecosystem degradation and extreme weather events are becoming financially material for businesses across the continent.
Dr James Mwangi, Group Chief Executive Officer of Equity Group Holdings and a member of the ANCA Governing Council, said Africa’s natural resources remain central to both livelihoods and economic growth.
“Africa stands at a defining moment. Across our continent, 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,” he said.
He added that company boards must now ask whether they are governing their organisations in a way that reflects this new reality.
The report also points to a rapidly evolving regulatory landscape, with companies facing growing expectations to disclose nature-related risks under global frameworks such as the Taskforce on Nature-related Financial Disclosures (TNFD) and the International Financial Reporting Standards (IFRS) S1 and S2 sustainability reporting standards.
It further notes the emergence of new regulations, including the European Union Deforestation Regulation (EUDR), alongside increasing environmental litigation involving companies such as Shell in Nigeria, TotalEnergies in South Africa and the East African Crude Oil Pipeline (EACOP).
According to the report, these developments are increasing scrutiny of whether company directors have adequately identified and managed nature-related risks.
Although corporate governance laws differ across the three countries, the report identifies a strong convergence in directors’ legal obligations.
In Nigeria, the Companies and Allied Matters Act 2020 explicitly requires directors to consider environmental impacts. In Kenya, directors who fail to manage foreseeable and financially material nature-related risks could breach their duties under the Companies Act 2015.
South African directors face similar obligations under the Companies Act, the National Environmental Management Act, the Bill of Rights and the King IV Report on Corporate Governance.
Speaking during a webinar discussing the report’s findings, Sammy Ndolo, Director at CDH Kenya, said many company boards still view environmental issues mainly through a compliance lens.
“In advising boards and Kenyan directors, you get the feeling that they understand the environment in a more narrow compliance approach, looking at environmental impact assessment licences or regulatory requirements. Few have really internalised what it means to promote the success of the company under the Companies Act,” he said.
Ndolo argued that the report demonstrates existing legal frameworks already require directors to take nature-related risks seriously, rather than treating them as peripheral ESG issues.
He also warned that courts are increasingly scrutinising environmental approvals and due diligence, adding that directors may face greater personal liability as environmental litigation grows.
“It is indeed true that personal liability can attach to directors at some point in time. We are likely to begin to see much more litigation, even as we go forward, just like we’re seeing in Europe and other parts of the world,” he said.
Natalie Shippen, Executive Director of CCLI, said Africa had largely been absent from previous legal analysis on directors’ responsibilities regarding nature-related risks despite its economies’ heavy dependence on natural capital.
“This report brings that work into view. Directors in Kenya, South Africa and Nigeria now have a clear, jurisdiction-specific account of what their existing duties require, and boards that take this seriously at an early stage will be better placed to navigate the risks and make the most of the opportunities ahead,” she said.
Beyond highlighting legal risks, the report argues that integrating nature into corporate governance can also improve access to finance.
It cites recent innovations, including Ecobank’s 2026 Nature Bond and emerging financing instruments such as water performance bonds, as examples of how businesses can attract investment by embedding nature considerations into governance and strategy.
Dorothy Maseke, Head of Secretariat at the African Natural Capital Alliance and Lead Nature Finance at FSD Africa, said the report provides practical guidance for boards and regulators.
“This report provides a practical roadmap for boards and regulators to integrate nature into governance—and to do so in a way that manages and mitigates risk while supporting growth and access to capital,” she said.
The report calls on directors to treat nature-related risks as a central governance and strategic issue, urges investors to incorporate nature-related risks into lending and investment decisions, and encourages legal advisers to ensure clients understand that managing these risks forms part of directors’ existing legal obligations.
Its findings were presented during a pan-African webinar held on July 22, bringing together leaders from the business, finance and legal sectors to discuss implementation across the continent.
