June 2, 2023

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Climate finance in Africa: African Development Bank spearheading innovative mechanisms and instruments

State Minister Semereta Sewasew of the Ethiopian governmentā€™s Ministry of Finance and Kevin Kariuki, African Development Bank Vice President for Power, Energy, Climate & Green Growth, sign an agreement for $830,000 in technical assistance grant funding

ABIDJAN, Ivory Coast, May 16, 2023/ — Africa contributes the least – less than 3% — to global warming, yet the continent is the most vulnerable to climate risks. To build resilience against climate change, the countries have outlined tangible ambitions for green growth, including plans to increase climate investment.

Amid dwindling climate finance flows to Africa, the African Development Bank has committed to helping to de-risk and remove business barriers to increase private investors’ contribution to climate finance on the continent.

Over the past decade, the Bank has developed expertise and knowledge of financing climate-related projects. For example, the Bank launched its Africa Disaster Risks Financing Programme in 2018 in collaboration with the African Risk Capacity Group (ARC) to promote the deployment of disaster response mechanisms. Its total climate commitments increased to 45% in 2022, up from only 9% in 2016. By this, the Bank has exceeded its target of having 40% of its funding reserved for climate-related projects.

During its upcoming Annual Meetings from 22 to 26 May in Sharm el Sheikh, the Bank will host a session to explore how to mobilize more private sector financing to tackle climate change in Africa, including domestic natural capital. This flagship event will bring together entrepreneurs, pension and private equity fund managers, financiers and government representatives to discuss different instruments and how to deploy them on a large scale on the continent.

The delegates will consider green financing tools such as green bonds, sustainable bonds, social bonds, sustainability loans and debt-nature or debt-climate swaps. Participants will discuss national and international levers to overcome obstacles to implementing such instruments.

With lessons from best practices in Africa and internationally, the African Development Bank hopes to foster the development of innovative financial instruments to support investment in climate and green growth while ensuring a fairer distribution of resources across Africa. 

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