By Akanimo Sampson
A ground-breaking study, released on Tuesday, is expected to underpin the development of a multi-country climate finance initiative in Africa.
African Development Bank, in partnership with the Climate Investment Funds (CIF), has commissioned the Coalition for Green Capital (CGC(link is external)) to prepare a study on the creation of national climate change funds and green banks in Africa.
CGC will identify and work with six African countries to conduct feasibility studies for the project, which was initiated at the Green Bank Design Summit held in Paris in March 2019.
The Summit tasked 23 developing countries to craft a new model to mobilise and accelerate investment in clean energy.
Andrea Colnes, Director of Global Green Bank Development at the CGC noted: “For countries to better access climate finance and fully engage the private sector, the climate finance system must reorient toward national financial capacity that is able to channel capital to projects and markets where it is needed most.”
When paired with effective grant programs through National Climate Change Funds and strong enabling environments and policies, locally-based Green Banks are powerful tools to address market needs, understand local risk and drive private investment.
Dr Anthony Nyong, the Bank’s Director for Climate Change and Green Growth welcomed the collaboration. “Green financing vehicles are increasingly recognized as a powerful instrument to mobilise private sector capital for low carbon and climate-resilient development.
Their ability to access even limited amounts of local currency finance presents significant opportunities to manage risk, attract concessional finance from climate funds and crowd in private sector finance,” Nyong said.
“We are excited to work with the team from CGC and look forward to presenting progress reports at the Green Bank Summit in 2020 and COP26”, he added.
Green Banks and National Climate Change Funds can play an important role in mobilising finance to support low-carbon, climate-resilient development, using methods such as blended finance to drive increased private investment.
Countries can mobilize funds from the diaspora, national financial institutions, private investors, asset managers, sovereign wealth funds, and more.
These instruments and funds can support the implementation of Nationally Determined Contributions (NDCs), CIF Investment Plans, CIF Strategic Plans for Climate Resilience and NDCs, and progress towards Sustainable Development Goals (SDGs).
For countries to better access and mobilize private investment, the climate finance system must reorient toward national financial capacity that can channel capital to projects and markets where it is needed most. Nationally-based green banks are powerful tools to address market needs, and drive private investment.
The Bank engaged six countries in the study – Ghana, Zambia, Uganda, Tunisia, Mozambique, and Benin – to explore how expansion of the Green Bank model in Africa could build country-based green finance capacity.
The study found that a combination of green banks working alongside national climate change funds has the potential to scale private investment in support of climate and sustainable development goals.
A combination of green grant programs and catalytic climate finance facilities focused on how the low-carbon and sustainable development sectors could help to boost private sector participation and mobilize support from global development partner institutions, according to the report.
Two sectors stand out as priorities across the study countries: renewable energy and climate-smart agriculture. Green cities infrastructure is another potential priority sector in several of the countries engaged in the study.
Innovative green finance could play a key role in Africa’s economic recovery from the COVID-19 pandemic, to build resilience and grow jobs, said Dorsouma Al Hamdou, Acting Director for Climate Change and Green Growth at the African Development Bank.
“As we look towards what will be needed to progress from emergency aid relief to medium- to longer-term measures to build resiliency and re-grow developing economies, the role of catalytic, innovative finance capacity to support sustainable infrastructure and social investment through mobilizing public and private resources will be essential,” Al Hamdou said.
“Green banks and national climate change funds are well positioned to fill this role and support economic recovery and job growth through the rebuilding of green development sectors such as agriculture, renewable energy, and green cities.”
Andrea Colnes, of the Coalition for Green Capital, the NGO recruited to carry out the study, said the green bank model had demonstrated its effectiveness in other regions of the globe and had great potential in Africa.
Green banks adjacent to national climate change funds have significant potential in Africa, based on their effectiveness at driving clean energy investment around the world, Colnes said.
“To date, members of the Green Bank Network have leveraged more than $24 billion in public capital to finance more than $70 billion in clean energy projects. This investment has supported jobs, economic development and avoided more than 25 million tonnes of CO2 emissions annually,” according to Colnes.
Download the full report here.
