By Dr. Ebenezer Onyeagwu
According to the World Economic Forum’s 2024 Global Risks Report, extreme weather events are ranked as the second and first most severe global risks in the short term and long term, respectively. The African Development Bank (AfDB) identifies climate change as the foremost threat to development in Africa, disproportionately affecting the continent’s poorest countries and exacerbating existing vulnerabilities. Africa stands as the most climate-vulnerable region globally, with minimal resilience and preparedness against climate change.
This persistent challenge has galvanised global efforts towards climate change mitigation and adaptation, receiving support from governments and multilateral institutions worldwide. Commitments under the United Nations Sustainable Development Goals (SDGs) and the Paris Climate Agreement underscore the global dedication to combating climate change through emission reduction (mitigation) and enhancing resilience against extreme climate events (adaptation).
Financing is critical for implementing climate mitigation and adaptation programmes, especially in regions like Africa, which are significantly impacted by climate change. Despite stiff competition for funds, the AfDB highlights the global benefits of supporting climate action in Africa. However, it also points out that sub-Saharan Africa receives less than 3 per cent of global climate finance.
Amid these challenges, Development Finance Institutions (DFIs) on the continent are leading in driving resilience against climate change’s devastating impacts and supporting the transition to a low-carbon economy. DFIs contributed to 69 per cent of adaptation finance in Africa during 2019-2020, according to the Global Climate Centre on Adaptation. The contributions of key DFIs, such as the AfDB and the International Finance Corporation (IFC), in mobilising funds for climate projects in Africa are commendable.
The African Development Bank (AfDB) has established the Climate Action Window (CAW) to expedite and streamline access to climate finance. It aims to mobilise co-financing while prioritising assistance for the most vulnerable nations, including fragile states and those impacted by conflict. The CAW is committed to dedicating 75 per cent of its resources towards bolstering adaptation measures, 15 per cent to mitigation efforts, and the remaining 10 per cent to providing technical assistance. With an ambitious goal to secure $4 billion by 2025, the CAW sets its sights on an ultimate target of $13 billion funding portfolio. According to the AfDB, the flagship continental climate finance vehicle will support projects across six sectors including agriculture and food security; water security; climate information and early warning; green transport and infrastructure; green energy and energy efficiency; and green finance.
The International Finance Corporation (IFC) has identified climate change as a strategic focus, committing to increase its climate-related investments, globally, to an annual average of 35 per cent of its own-account, long-term commitments from 2021 to 2025. In partnership with various financial institutions, the IFC is financing projects that address climate risks through both mitigation and adaptation strategies. In fiscal year 2022, the IFC allocated $4.4 billion to global climate finance, leveraging an additional $3.3 billion from external sources. Of this, $2.1 billion was directed towards supporting Africa’s transition to green energy.
Notable among the IFC’s projects is its contribution to the World Bank Group’s Scaling Solar initiative. This programme seeks to accelerate the adoption of privately funded solar power in developing countries. The IFC, along with the Finland-IFC Blended Finance for Climate Programme, the European Investment Bank, and Proparco, financed the Kahone and Kael solar plants in Senegal, costing about $41million. Operational since 2021, these facilities have a combined capacity of 60MWac. Both plants supply power to 540,000 people at some of the lowest tariffs in sub-Saharan Africa and prevent approximately 89,000 tonnes of CO2 emissions annually.
As Africa confronts a diverse array of climate challenges across short-, medium-, and long-term horizons, securing funding from Development Finance Institutions (DFIs) for key climate adaptation and mitigation projects becomes crucial. AfDB estimates the cumulative financing needs for Africa to respond adequately to climate change at about $2.8 trillion over the 2020-2030 period. The needs are mainly split across four sectors: transport (58 per cent), energy (24 per cent), industry (7 per cent), and agriculture, forestry, and other land use (AFOLU) (9 per cent). Countries will need to develop comprehensive national climate policies and strategies, foster an investment-friendly climate, and prepare a portfolio of projects ready for investment. This strategic positioning is essential for attracting and harnessing the necessary funding to address the continent’s climate risks effectively.
Dr. Ebenezer Onyeagwu is the Group Managing Director/CEO of Zenith Bank Plc and Chairman of the Body of Banks’ CEOs in Nigeria.
