It’s the economy, stupid: why climate risk is economic risk

  • 2 August 2025
  • Posted by: Greg Coleman
  • Category: energy excellence
No Comments
why climate risk is economic risk
How drought and climate shocks are already reshaping food security, markets and governance in Africa and beyond

In 1992, Bill Clinton’s campaign strategist famously coined the phrase, “It’s the economy, stupid”, a reminder to keep the focus on what really matters to people’s lives.

In 2025, we might just need to reframe that: economy = environment.

From global food markets to local governance, climate-related disruption is no longer theoretical. It is here, it is now and it is fundamentally economic.

Share our blog
Drought is disrupting Africa's food systems and supply chains

This year, drought conditions are significantly impacting food production around the world—particularly in already vulnerable regions like Africa, and in key agricultural exporters such as Ukraine and Russia. This climate-driven disruption is triggering a cascade of consequences:

  • West Africa, which produces more than 60% of the world’s cocoa, is facing severe drought. As a result, cocoa prices have more than doubled, squeezing manufacturers and pushing up consumer prices.
  • East Africa continues to suffer from prolonged drought. Countries like Kenya, Ethiopia and Somalia are experiencing reduced harvests, livestock loss and acute food insecurity.
  • In Morocco, grain production is falling due to poor rainfall. As the country imports large quantities of wheat from Russia and Ukraine, this makes it highly vulnerable to both local and global supply disruptions.
  • The Nile River Basin, a vital resource for Egypt, Sudan and Ethiopia, is under increasing pressure due to both climate change and competing development interests. Reduced river flows and more frequent heatwaves are raising serious concerns about future food, water and energy resilience.
  • Rising food and commodity prices across the continent are making basic staples less affordable, exacerbating poverty, inequality and political instability.
Climate shocks are now market shocks

This is no longer just an environmental issue. Climate risk is now market risk.

Food price volatility, reduced crop yields and supply chain stress are affecting corporate bottom lines as well as human wellbeing. Major global manufacturers—including those in food and beverage—are already adjusting their profit forecasts in response to climate-driven commodity price hikes.

This has huge implications for governance and strategic planning, particularly in regions where economies are tightly linked to agriculture and commodity trade.

Boards must act: climate is a governance issue

With the climate crisis now influencing everything from grain prices to geopolitical stability, governance frameworks must evolve. This means:

  • Boards and executive teams must develop a deeper understanding of climate-related risk exposure across their operations, markets and supply chains.
  • Risk and audit committees should prioritise scenario planning, supply chain resilience and price volatility assessments.
  • ESG strategies must move beyond compliance and disclosure to include adaptation, resilience and forward-looking planning.

Africa, in particular, faces a stark challenge: its climate vulnerability is high, while its economic buffers are limited. The time for resilience planning is now.

Environment and economy cannot be separated

The events of 2025 show us what scientists and civil society have been warning for decades: the climate crisis is an economic and geopolitical risk multiplier.

  • Food insecurity and water scarcity fuel instability and migration.
  • Market volatility caused by extreme weather is creating new investment risks.
  • The cost of inaction is now visibly and materially higher than the cost of adaptation and transition.
Summary

The climate crisis is not tomorrow’s problem. It is already reshaping our food systems, our economies and our governance priorities, especially in climate-vulnerable regions like Africa.

It’s time for business leaders, policymakers and investors to treat climate risk as the core economic challenge of our time.

The path forward lies in embedding resilience, foresight and climate intelligence into decision-making—before the next drought, the next price shock, or the next tipping point.

Why ESG still matters

At Future Energy Partners, we work with companies navigating the complex transition from hydrocarbons to cleaner energy solutions. We see firsthand that ESG is not simply a set of environmental metrics—it’s a strategic framework for resilience, relevance and long-term competitiveness.​

While fossil fuels remain part of the near-term reality, ESG enables companies and countries alike to future-proof against shocks—whether they be geopolitical, environmental, or economic

Contact us

Sources