Under assignment with the UNDP, Verdurous assisted the Bank of Zambia (BoZ), the countryโs central bank, in addressing the climate-related physical and transitional risks by operationalising the BoZ Green Finance Framework and Green Loans Guidelines. The assignment focused on developing a Green Loan Supervisory Manual and a Guidance Note on reporting climate and nature-related financial risks faced by the intermediaries in Zambia.
Verdurous undertook statistical analyses of the evolution in climate parameters and links to the variability in output generated by economic activity in the country across sectors and provinces. In the second stage of the risk assessment, the study assessed post hoc correlations between evolution in value generated by economic activity across sectors (province- and sector-specific GDP) and the non-performing loans (NPL) reported by the banking system. The team identified patterns in risk transmission and the lagged financial impacts of climate-related risks. The Guidance Note was developed to form a foundational framework for regulated entities to incorporate climate-related financial risks into their overall risk management processes, supporting more informed business decisions and enhancing institutional resilience to climate impacts.
The team then identified and recommended green finance instruments that enabled the BoZ to formulate schemes and modes of financing and issuing credit to operationalise the existing green finance framework and green loan guidelines in Zambia and to help respond to the countryโs mitigation and adaptation needs.