Climate risk in financial statements: A wake-up call for Nigerian businesses

We are seeing more clearly than ever: climate risk is not just environmental; it is financial. If your business is still waiting for 2027 to start factoring climate risks into economic decisions, now is the time to reconsider.

Climate change is no longer a distant threat; it is a pressing reality. From floods disrupting operations and supply chains to rising costs of energy access and shifts in regulations across jurisdictions, climate-related risks are already impacting cash flows, asset values, and access to finance.

Under IFRS S2, companies are required to disclose how climate risks affect their strategy, business model, and financial performance. These disclosures are not just for large companies; they are becoming standard practice for any business seeking capital, credibility, or long-term relevance.

For Nigerian businesses, this moment presents a strategic opportunity because investors, lenders, and regulators are increasingly asking:

• "How exposed are you to climate risks?"
• "What are your plans to manage them?"

Let's consider a few examples:

• Logistics companies: Businesses that rely heavily on diesel-powered fleets should incorporate the effects of carbon taxes into their scenario planning. Will their cost structure survive?
• Cement manufacturers: With high emissions and energy use, they may face penalties or be required to invest in cleaner technologies as climate policies evolve.
• Banks financing fossil-heavy projects: These institutions may face reputational and regulatory risks, particularly when their portfolios are carbon-intensive and lack decarbonization plans.
• Real estate developers: Building in flood-prone areas without climate resilience planning could lead to asset devaluation and insurance challenges.

Contrary to what many perceive, these climate-related developments also present opportunities for strategic transformation. Businesses that act now can turn climate risk into a competitive advantage. By integrating climate considerations into governance, financial planning, and risk management, you signal foresight, responsibility, and readiness.

At Forvis Mazars Nigeria, we support businesses as they navigate this shift, not just for compliance, but for transforming how they do business. Whether you're preparing for IFRS S1/S2 disclosures, assessing climate-related financial impacts, or building a sustainability strategy, we're here to support your journey.

Climate risk is financial risk. The question is: are you ready to disclose it?

Author 

Rukayat Bello, Senior Consultant, Sustainability Services