For more than 10,000 years the ice cap on Africa’s tallest mountain has stood as a frozen reminder of nature’s enduring power. But now the glacier which cloaks the highest peak of Mount Kilimanjaro in Tanzania is in retreat. The latest predictions are that this and East Africa’s two other iconic glaciers, on Mount Kenya and the Rwenzori Mountains, will have disappeared completely within two decades.
The melting ice caps are just one manifestation of the climate crisis unfolding across the continent. Temperatures in much of Africa are rising faster than elsewhere in the world while much of its coastline is seeing higher than average rises in sea-levels. Last year alone over 1.2 million people in the East and Horn of Africa were forced to leave their homes as a result of extreme weather and climate events such as floods, storms and drought. The economic cost to a continent, which is home to nine of the 10 poorest nations in the world, will also be devastating. On October 26, President Uhuru Kenyatta of Kenya warned that without urgent action to adapt to climate change GDP across the continent would fall by 30% by 2050.
And all this on a continent which accounts for just 2% of cumulative energy-related greenhouse gas emissions.
So it is not surprising that Africa, which will be home to a quarter of the world’s population by 2050, is at the heart of discussions about the financing needed to help developing and emerging economies deal with the impact of our warming planet.
Twelve years ago, developing countries were promised at least $100bn a year from developed economies to tackle and adapt to climate change. As of 2019, that amount was short by more than $20bn. And even if, as predicted, the target is hit in 2023, the actual amount of money needed to fund the necessary infrastructure is vastly greater. In Kenya alone, the government has said that delivering its Nationally Determined Contributions (NDCs) for reducing greenhouse gas emissions and adapting to climate change will require funding 10 times greater than the US $8bn a year it has committed over the next 10 years. The World Bank estimates US $4trillion a year will be required by developing and emerging economics and most of that is going to have to come from the private sector.
The good news is that the availability of private ESG capital has never been greater. The net zero commitments made by financial institutions in the global north — banks, asset managers, pension funds — mean there are trillions of dollars of green liquidity looking for new risk adjusted returns and new revenue opportunities.
So the need and the opportunity are clear yet Africa has so far struggled to attract the climate finance it needs. Just 3% of all global climate finance finds its way to Africa, according to the Climate Policy Initiative.
This isn’t just a question of volume. The pressing issue for Africa is how to create the enabling conditions to unlock that investment. That means institutional capacity but crucially it also means having the green finance policy and regulatory framework in place to reassure international investors who perceive Africa as a high risk investment destination as well as to encourage domestic investors to seize the opportunity of a green future.
This is the driving force behind the Africa Green Finance Coalition (AGFC), a new initiative aimed at bringing African countries together to pool resources, share learning and create a pathway for increased flows of green investment capital to the continent.
The AGFC is a recognition that progress in this area across Africa has been slow and patchy and also that African countries are more effective when they work together. It also recognises that tackling and adapting to climate change are challenges shared by all countries in Africa and that success depends on everyone making progress.
Introducing the sorts of reforms required — Climate Acts, pro-nature Constitutional reforms, Green Bond Guidelines, green fiscal policy incentives — would be a formidable task for any government. All the more so when those governments are also struggling with the administrative and fiscal burden of the COVID19 epidemic.
So at the heart of the AFGC is a peer learning mechanism which will enable members to learn from the experience of others, even taking legislation created by another country and adapting it to their own unique conditions. This will save them time, money and enable them to build on the progress of others whilst also sharing their learnings in other areas.
Allied to this idea of shared purpose and acknowledging how interdependent African countries are on each other when it comes to climate change, the AGFC also envisages a peer review mechanism to hold members to account on their commitments to the necessary reforms. This will also give the AGFC the necessary credibility and authority to become a powerful advocate for Africa to receive its fair share of climate finance and ensure Africa has a voice in the global discussions about green finance rules and reporting standards ensuring that they take account of the African context.
The AGFC is about Africa taking control of its own development as an investment destination. It is also Africa’s response to the biggest shift there will be this century in financial markets: the greening of financial markets.
Crucially, the AGFC should also be able to access the technical assistance and financial support from donors at the scale which will be needed to kick start this process and when the reforms are in place, to help access green investment capital.
The AFGC is not an entirely new idea. Rather it is an evolution of an existing grouping, the Africa NDA-GCF Network, hosted by Kenya’s National Treasury and Planning and co-convened by Kenya and Mali, which was set up to facilitate bids to the Green Climate Fund (GCF).
As a first step towards developing its broader mandate as the AGFC, the National Treasury of Kenya, with support from FSD Africa, has been working with a team of leading climate consultants to develop a concept for this proposed platform and conduct a baseline assessment of 15 African countries to establish where they are in relation to policy, legislation and regulation in green finance.
This will form the basis for discussions with other African partners with the aim of launching the AGFC at the COP27, the “African COP”, in Cairo in November 2022.
As an African-led, African-run institution, the AGFC would be a powerful signal that the continent is not willing to be just the victim of climate change but that it is determined to take its destiny in its own hands and seize the opportunity that green investment provides to forge a better, more sustainable future.
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A fair future demands not only financial commitments but also strategic and inclusive approaches that consider the needs of the present and future alike, argues Karishma Ansaram, Climate Champions’ Finance Youth Fellow.
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A fair future demands not only financial commitments but also strategic and inclusive approaches that consider the needs of the present and future alike, argues Karishma Ansaram, Climate Champions’ Finance Youth Fellow.
