Despite producing only 4 per cent of the planet’s emissions, Africa is under extreme threat from climate change: it is home to 30 out of 40 of the world’s most climate-vulnerable countries. The African Development Bank calculates that to merely adapt to climate change – before even trying to mitigate it – Africa requires $20-30 billion of finance annually until 2030.
Despite this obvious need, Africa fails to attract significant amounts of finance for climate change. Climate Policy Initiative’s (CPI) 2019 Global Landscape of Climate Finance estimates that just 3 per cent, $19bn of the $580bn, global climate finance finds its way to Africa.
While this financing gap remains unplugged, the incidence of damaging weather events increases year on year and climate variability continues to drive increased hunger on the continent. Without action, the social, environmental and political ramifications will only grow.
At a time when global Environmental, Social, and Corporate Governance (ESG) funds are growing rapidly, harnessing private sector investment is vital for climate change action in Africa, helping the continent bounce back from the shock of Covid-19 and deliver growth that is faster, cleaner and fairer than under business-as-usual scenarios.
Building momentum
Kenya is ideally placed to be a leader in this green transition, having spent more than a decade building a supportive environment for green investment and nurturing a hub of private sector innovation, especially in renewable energy, including pay-as-you-go solar, agriculture and mobile technology. Almost all – 90 per cent – of its power generation comes from renewables – wind, hydro, geothermal – and it has made a strong constitutional commitment to protect its world-class biodiversity.
Harnessing private sector investment is vital for climate change action in Africa
To help build on this momentum, the UNFCCC High Level Champions in March co-hosted a roundtable in Kenya that brought together actors from across the green spectrum. These included, renewable energy innovators, natural capital experts and green fiscal policy-makers; united in their aim to catalyse green investment and bring new innovation to the market.
On the investors panel, Steve Waygood, Chief Responsible Investment Officer at Aviva Investors asked how we “transition finance to finance [Africa’s] transition”, with Rhian-Marie Thomas, CEO of the Green Finance Institute, highlighting the need to “mobilise the local domestic capital pools across Africa towards green investment”.
Sparking conversation about imaginative financing mechanisms for environmental projects, Giles Davies, founder of Conservation Capital, urged investors “to start thinking about natural capital investment not only in terms of upside and return, but also avoided downside”, while Wanjira Mathai, vice president of World Resources Institute (WRI), stressed that “Restoration of degraded land is not only good for the planet, it’s good business”.
Leading the Kenyan industry representatives, Joshua Oigara, CEO of KCB bank, noted the acute need for cooperation in the face of such a colossal challenge; “We need to champion new ways of match-making between project-developers and financers of green development with positive environmental and social impacts”.
Finally, Nigel Topping, the UK’s High-Level Champion for COP26, urged the audience to build on the lessons learnt and partnerships formed, asserting: “We know that the private sector is going to be absolutely key to the pace and scale of innovation and deployment of capital necessary to tackle the challenges we face, and to meet the goals of the Paris Agreement”.
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A fair future demands not only financial commitments but also strategic and inclusive approaches that consider the needs of the present and future alike, argues Karishma Ansaram, Climate Champions’ Finance Youth Fellow.
