An aggressive new push by the African Development Bank (AfDB) and the International Finance Corporation (IFC) is tipped to help unlock critical financing to supercharge Africa's ambitious pivot from hydrocarbons to a clean energy future, as globally, extreme weather due to climate change bites.
Seth Onyango and Conrad Onyango, bird story agency
On Monday, AfDB and IFC will host a virtual forum in a push to drive private sector finance to help accelerate Africa's shift to low emission pathways.
This includes drawing up investible project pipelines to woo climate-conscious investors for the continent's abundant renewables base.
Monday's conference is part of a build-up to the UN Climate Change Conference 2022 (COP27) in Egypt later this year where Africa is expected to make a unified pitch for green financing.
As green hydrogen, solar and wind become central in Africa's energy architecture, the AfDB and IFC are upbeat that they can jumpstart a new wave of funding into the green energy sector.
AfDB, IFC ratchet up Africa's green energy urgency [Graphics: Hope Mukami]
Their two-pronged approach that includes raiding both domestic and international wallets is part of a wider scheme to get as many hands on deck as possible to drive Africa's energy transition.
Stakeholders hope to eliminate the critical obstacle to the deployment of renewable energy technologies in Africa – difficulty attracting sufficient and affordable finance.
According to International Energy Agency (IEA) estimates, around 70 percent of clean energy investment will need to be carried out by private developers, consumers and financiers responding to market signals and policies set by governments.
It is on that premise that the focus is shifting to the private sector to implement Africa's green energy blueprint, ahead of the COP27.
"Achieving rapid clean energy transitions depends on enhancing access to low-cost finance for clean energy projects," the IEA said in its World Energy Outlook.
"This means channelling retained earnings from the balance sheets of large energy companies, as well as opening funding from a range of companies and external sources – notably banks and the enormous pools of capital in financial markets."
The push to direct financing to Africa's green programs comes as global investment in renewable energy remains below the targets needed to meet the Paris Agreement.
The Organisation for Economic Co-operation and Development's (OECD) report published last month shows rich economies fell US$17 billion short of their pledge to collectively deliver US$100 billion of climate finance a year by 2020.
It shows rich nations mobilised US$83.3 billion of climate finance, a 4 per cent increase on the previous year but short of the US$100 billion of 2009 target.
Developed countries are now only expected to meet that target in 2023, with previous research showing that the US is responsible for the vast majority of the shortfall.
The bulk of the funding was in the form of loans rather than grants and went to Asian and middle-income countries.
Asia received 42 per cent of the finance, roughly equal to its share of the global population, while Africa got 26 per cent and the Americas received 17 per cent.
Reports suggest that combating climate requires a dramatic jump in global private investment in low-carbon, climate-resilient (LCR) infrastructure such as renewable energy and energy efficiency.
Green banks will also need to step up to buttress private capital streaming in from Africa and overseas.
While Africa received roughly a quarter of all climate‐related financial flows from developed countries between 2016 and 2019, based on the Organisation for Economic Co-operation and Development (OECD) 2021 figures, more than half of those flows were in the form of debt instruments, while roughly 30 per cent were grants.
There have been further high-profile pledges, including the US$8.5 billion promised South Africa at the United Nations Climate Change Conference in Glasgow (COP26) in 2021, to support its move from dirty fuels to renewables.
The AfDB is hoping to build on its Sustainable Energy Fund for Africa (SEFA), a multi-donor Special Fund it launched in 2011, to further mobilise clean investments.
The fund provides catalytic finance to unlock private sector investments in renewable energy and energy efficiency.
Its broader focus includes building green baseload, green mini-grids and enhancing energy efficiency.
SEFA was established in 2011 in partnership with the government of Denmark and it has since received contributions from the governments of the United States, United Kingdom, Italy, Norway, Spain, Sweden, Nordic Development Fund and Germany.
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