By Arthur Chokhotho
The Reserve Bank of Malawi (RBM) has warned that climate change poses significant risks to the country’s financial system, urging financial institutions to strengthen measures to identify, manage and report climate-related risks.
Speaking at the 2026 Financial Market Dealers Association (FIMDA) conference in Mangochi, RBM Climate Change Centre Manager Franklyn Nkhoza said climate shocks, including floods, droughts, cyclones and extreme heat, can affect businesses, households and infrastructure, with potential consequences for banks and the wider economy.
The central bank has since established a climate change centre to help address climate-related challenges affecting the financial sector.
RBM also issued climate change guidelines for banks in 2025, which are being developed into environmental, social and governance (ESG) guidelines to strengthen the monitoring of how financial institutions manage climate-related risks.
According to Nkhoza, about 63 percent of gross loans could be exposed to sectors vulnerable to physical climate risks, including agriculture, forestry, fishing, manufacturing, trade, transport, construction and real estate.
He highlighted that climate-related disasters can increase credit, market, liquidity, insurance and operational risks, while contributing to inflation, slower economic growth, fiscal pressure and external imbalances.
RBM said its 2026 baseline survey of capital markets shows that although awareness of sustainable finance is widespread, implementation, measurement and pricing of climate-related risks remain areas requiring improvement.
To address these challenges, the central bank is advancing several initiatives, including the development of a Malawi Green Finance Taxonomy to define credible green economic activities and guide investment towards sustainable projects.
Other measures include implementing climate risk guidelines for banks and bank holding companies, developing ESG disclosure frameworks and templates, and preparing guidelines for the insurance and pension sectors.
The bank is also strengthening capacity building, research, data collection and climate scenario analysis to support financial stability, supervision and monetary policy decisions.
Nkhoza further said financial resilience and green finance should work together, with the former helping institutions manage climate-related risks and the latter creating opportunities for investment in sustainable and climate-resilient economic activities.
He has since encouraged Financial market players to assign clear responsibility for climate risk management at board and executive levels, assess their exposure across sectors and locations, integrate climate considerations into existing risk management systems, improve reporting and develop credible green financing products.
The initiatives are aimed at strengthening the resilience of Malawi’s financial system while laying the foundation for increased investment in sustainable and climate-resilient development.
