Africa’s Private Sector Investments in Climate Adaption

Climate change has had a substantial impact on the development and progress of most African countries. for which little investment has been made by the countries in and around the continent. The African Development Bank has indicated that Africa would require US$ 20 to US$ 30 billion annually until 2030 to fund adaptation measures. The traditional evolution of low-carbon technologies must be inclusive by providing a framework that includes the social and economic development of the people.

Despite the huge financing gap, the frequency of destructive weather patterns and climate unpredictability has wreaked more havoc to the continent. The 2019 Global Landscape of Climate Finance indicates that about 3% of the US$ 560 global climate finance ends in Africa. As most African countries have bounced back from the pandemic and the global economic challenges severely affecting the continent, there is a need for private-sector investment to spur growth and development in the clean and sustainable energy sector in order to improve climate adaptation and resilience projects in Africa.

African countries must ensure favorable regulatory and investment frameworks regarding climate action projects to attract investors. Governments must institute policies, agencies and laws to regulate the renewable energy sector, as well, as improve the business and investment environment in order to ensure investors’ confidence.

African countries must promote new and innovative ways of connecting viable and investor-ready projects to green financiers. Government must look out for new climate-friendly financial instrument sources such as green bonds, sustainability bonds, sustainability-linked bonds and loans, Debt-for-climate swaps, and climate-linked debt for project developers with bankable and investor-friendly projects in energy transitions, sustainable infrastructure, natural resource reclamation and restoration, biodiversity, and projects that have positive environmental and social impacts.  These financial instruments complement climate resilience and the just energy transition in Africa

An important requirement of the climate financing structure is transparency by both the donor and the recipient. It behoves the governments of African countries to ensure governance and institutional agencies are well defined and structured to ensure transparency in the financing arrangement. The donor agencies and the recipient government must have clarity on the usage of grants and loans given to ensure continuity of funding.

In preparation for the COP27 event in Egypt from November 7 to 18 2022, it is essential for African countries to improve adaptation measures in order to increase the opportunities for development of a clean and sustainable value chain across the continent. With this progress, the African Continental Free Trade Area (AfCFTA) would fully serve as an economic backbone for socio-economic growth and development as aligned with Agenda 2063.