Washington DC, USA 23rd October – A new report into Africa’s climate finance landscape, undertaken by Climate Policy Initiative (CPI) and commissioned by FSD Africa, has found that climate finance flows in Africa have grown by 48% to USD 44 bn in 2021/2022 up from USD 30 bn in 2019/2020. Private sector finance also doubled in the period to reach USD 8 bn. Despite this growth, climate finance flows in Africa are far below what is required to meet the continent’s climate adaptation and mitigation needs – with potentially catastrophic social and economic implications.
The report, titled “Landscape of Climate Finance in Africa 2024”, was launched at a meeting of the Brookings Institute, on the sidelines of the Annual Meetings of the International Monetary Fund and the World Bank Group. It follows the first-of-its-kind assessment of climate finance in Africa released by CPI and FSD Africa in 2022, which has become an essential source for policy, advocacy, and investment decisions.
The research exposes the grave financing gap which threatens Africa’s long-term sustainable development trajectory, tracking only 23% of the estimated annual needs for Africa to implement its Nationally Determined Contributions (NDCs) and meet its 2030 climate goals. Funding from African governments also remains quite low and in decline from USD 1.6 bn 2019/20 to USD 1 bn in 2021/22, reflecting tight fiscal space for most African governments. Other key findings from report include:
- Finance from domestic actors made up only 10% of Africa’s total climate finance (USD 4.2 billion), 75% of which came from private finance. There is a huge opportunity to increase this with private domestic assets-under-management (AUM) estimated at USD 2.4 trillion in 2020.
- There remain huge regional imbalances in the flow of climate finance in Africa with the top ten countries alone receiving 50% of the total, while the bottom 30 countries receive just 10%.
- While climate investment in Africa reached an all-time high, public finance is still the primary funder. Private finance comprises only 18% of Africa’s total climate flows, a far lower share than any other region globally.
- These disparities are even starker in private finance flows, where ten countries received 76% of the total private climate finance in Africa, while the remaining countries received only 16%.
- Half of all private climate finance goes to South Africa, Egypt, and Nigeria.
- Debt-distressed countries receive significant grants, but debt still makes up 36%-43% of their climate finance.
The report also makes a number of recommendations to address the current climate financing gap and accelerate investment into Africa’s diverse opportunities including:
- Establish an ambitious enabling environment to mobilise domestic and international capital, including green fiscal incentives, project preparation support.
- Strengthen coordination between investors and development financiers to scale up private sector investment through concessional resources.
- Maximize the impact of mitigation and adaptation investments by stronger integration of climate and development objectives into national policy development and long-term strategies.
- Seek out and invest in the multitude of business opportunities for green, resilient growth in Africa, taking advantage of growing pools of concessional finance and guarantees, while integrating climate risk management from the outset into decision-making.
Further, through its recommendations to the private sector and regional, national and subnational development banks, the report offers a vision of climate finance’s future – in which the private sector actively pursues climate adaption as an exciting and rewarding commercial opportunity, and Africa’s domestic green bond markets effectively mobilize capital for major climate-resilient infrastructure projects.
Commenting on the report, Mark Napier, Chief Executive Officer of FSD Africa: “Climate change has the potential to cause Africa major and unprecedented economic disruption and reverse gains made in the recent past. To counter that, all actors must invest in a more sustainable future. Climate finance is the key element which will determine Africa’s ability to adapt to, mitigate, and develop through, a changing climate. This report by the CPI provides policymakers and decision-makers on the continent with a survey of the climate finance landscape as it is now, and as it can – and must – develop in the future.”
Barbara Buchner, Global Managing Director of Climate Policy Initiative, said: “It is encouraging to see more climate finance flows in Africa, but the rate of growth is too slow. Public policy and investment must be targeted effectively, and private capital, both domestic and international, can no longer sit on the sidelines. Otherwise, the significant economic opportunities currently available across the continent will be overshadowed by severe economic losses and catastrophic social consequences.”
Contact
Kaara Wainaina
FSD Africa
Ag. Director, Communications, and Engagement
kaara@fsdafrica.org
Jana Stupperich
Climate Policy Initiative
Senior Communications Associate
jana.stupperich@cpiglobal.org
About FSD Africa
FSD Africa is a specialist development agency established in 2012 by the UK Government working to make finance work for Africa’s future. We work on the ground in over 30 African countries to mobilise “green plus” finance that will power economic and social development while delivering environmental gains and building Africa’s resilience. We work on policy and regulatory reform, capacity strengthening and improving financial infrastructure, and addressing systemic challenges in Africa’s financial markets to spark large-scale and long-term change.
FSD Africa is part of a family of 10 financial sector deepening, or FSD programmes, operating across sub-Saharan Africa, known as the FSD Network. Together, the network provides over £50m a year in financial support to high-potential financial market development programmes, and employs over 150 financial sector experts, based in local offices across Africa. Our work has contributed to tackling financial exclusion challenges within Africa, supporting over 10.2 million people to access financial services. Such improved access has been particularly helpful during the COVID-19 crisis. For instance, between 2020 and 2021, we saw an 87% increase in the demand for and use of remittance services to cushion families from the adverse economic effects of COVID-19.
As of 2020, we supported approximately 35,700 Full-Time Equivalent (FTE) jobs, of which 20% were green jobs and 40% for women. About 42% of the jobs were created in Nigeria and the rest are spread across multiple countries. However, we are looking to intensify job creation in our priority countries. Since 2017, we have helped mobilise more than £2 billion in long-term capital to underfinanced sectors, such as renewable energy and housing. This has resulted in a more efficient allocation of private and public capital to the productive sector, basic services, and climate finance.
In more recent years, our strategy has evolved to respond to Africa’s growing needs, with an increasing focus on finding innovative ways to mobilise capital for sustainable economic development. Following several successful initiatives, such as developing regulations and supporting green bond issuance programmes in Kenya and Nigeria, we have doubled our investment into initiatives that support a just transition to a green future for Africa. Since 2017 our green portfolio and pipeline have continued to grow, and we have invested close to £50 million into green investments. We continue to invest in programmes that deliver environmental and social outcomes. For more information, visit: www.fsdafrica.org
About Climate Policy Initiative
CPI is an analysis and advisory organization with deep expertise in finance and policy. Our mission is to help governments, businesses, and financial institutions drive economic growth while addressing climate change. CPI has seven offices worldwide, in Brazil, India, Indonesia, South Africa, the United Kingdom, and the United States.
