Key highlights
- African countries need more climate investments to achieve their national targets for emissions reductions
- The African Development Bank is implementing mechanisms to facilitate and channel access to global climate finance, particularly from the private sector.
- The Bank has committed to mobilize $25 billion by 2025, representing 41% of its total funding commitments.
The African Development Bank (AfDB) revealed that African countries need more climate investments to achieve their national targets for emissions, adding there is much potential for climate finance in Africa to increase.
AfDB disclosed this in a statement titled “Africa: Climate finance facing global macroeconomic challenges; time for private sector support”, urging for more support for Africa’s clean energy efforts.
They added that Private equity funds under management reached a record $6.3 trillion in 2021, while global pension fund assets in the 22 largest markets hit a new high of $56.6 trillion by late 2022, citing the AfDB is implementing mechanisms to facilitate and channel access to global climate finance, particularly from the private sector.
Private Sector
The African Development Bank stated that greater involvement of the private sector is crucial to closing the gap in climate finance flows into Africa, which until recently, was dominated by non-private actors, they added:
- “For example, of the $29.5 billion invested in African climate finance in 2020, only 14% was from private actors.
- “This is significantly lower than comparable regions such as Latin America and the Caribbean (49%), East Asia and the Pacific (39%), and South Asia (37%).
- “Besides, these limited funds covered a small number of African countries with relatively developed financial markets, such as South Africa, Nigeria, Kenya, Morocco, and Egypt, which alone attracted $4.2 billion.
Annual Meetings
AfDB said this would be one of the reasons it is mobilizing private sector financing for climate and green growth the centerpiece of its 2023 Annual Meetings scheduled for 22-26 May in Sharm El Sheikh, Egypt.
- “The meetings will discuss successful strategies to galvanize more resources, including within Africa, and investment opportunities in renewable energy and sustainable agriculture.
- “ The Bank’s Governors, representing its shareholders, will be joined by global experts and development financiers to discuss the matter of a new architecture for mobilizing resources for sustainable investment in Africa.
- “This will include how to make African countries’ rich natural capital to finance climate and green growth. About a dozen heads of state and government are expected to attend.
AfDB added there is much potential for climate finance in Africa to increase, basing its view on a dataset of global private resources, which records that Private equity funds under management reached a record $6.3 trillion in 2021, while global pension fund assets in the 22 largest markets hit a new high of $56.6 trillion by late 2022.
- “To combat climate change and support green growth, African countries need more climate investments to achieve their national targets for emissions reductions and adaptation to the impacts of climate change.
- The African Development Bank is implementing mechanisms to facilitate and channel access to global climate finance, particularly from the private sector. It has also launched programs to mitigate risks and barriers to private sector participation in climate finance and green growth in Africa.
- “The Bank has committed to mobilize $25 billion by 2025, representing 41% of its total funding commitments.
Backstory
Recall Nairametrics reported last week that The African Development Bank revealed that Africa may lose as much as 12 percent of GDP by 2100 If current trends in climate finance flow into Africa continue.
They added the continent faces an annual shortfall that could exceed $127 billion by 2030.
AfDB revealed that the theme of this year’s meeting would be Mobilising private sector financing for Climate and Green Growth in Africa, which it says reflects the growing urgency expressed by Africa’s leaders for a step change in efforts to limit temperature rise to 1.5 °C above pre-industrial levels by 2100.