Sharm El Sheik, Egypt 25th May, 2023 (AEJ) - African Development Bank Group new research, based on African countries latest submitted Nationally Determined Contributions (NDCs), estimates that private sector financing will need to grow annually by 36 percent until 2030 to close the continent's climate finance gap, evaluated on average at $213.4 billion per year.
NDC's are a key outcome of the Paris Agreement and the achievement of its long term goal through national emission reductions to adapt to impacts of climate change.
In his opening remarks AfDB President Akinwuni Adesina pointed out that while developed countries must meet their commitment to provide USD 100 billion annually to developing countries in climate finance, this is miniscule compared to financing needs. Public climate financing must be complemented by mobilization of resources from the private sector.
“To mobilize more private sector climate financing for Africa, we launched the African Financial Alliance for Climate, to bring together all financial institutions, stock exchanges in Africa, to green the financial ecosystem. Financial institutions should incorporate climate financing into all their operations,” Adesina said adding that the valuation of companies on the stock exchange based on the greening of their portfolios will provide greater incentives for green investments.
This will be important to address the continent’s climate financing needs, estimated at as much as $2.8 trillion over 2020-2030, or $250 billion annually. Unlocking private climate financing will require addressing both demand- and supply-side barriers while developing innovative financing instruments to tap into the continent’s enormous investment opportunities in climate and green growth.
The report also highlights the important role of Africa’s huge natural capital, valued at $6.2 trillion in 2018, in bridging the prevailing climate finance gap and promoting green growth transitions.
Through sustainable management, Africa's abundant natural capital can be transformed into financial assets to complement financing for climate adaptation and mitigation, as well as into investments that support green growth transitions.
This will require the deployment of appropriate policies and instruments, including fiscal instruments, to better understand the true value of Africa’s natural capital and strengthen local content and value addition.
It will also build institutional capacity to address gaps in governance that have prevented the continent from realizing the full potential of its natural endowments and create regional value chains and markets to benefit from cross-regional synergies.