The African Development Bank and the Climate Investment Funds (CIF) have joined forces to produce a study of the role of green banks and national climate change funds in mobilizing finance to support low-carbon, climate-resilient development in Africa. The ground-breaking study, released on Tuesday 23 March, is expected to underpin the development of a multi-country climate finance initiative in Africa.
For countries to better access and mobilize private investment, the climate finance system must reorient toward national financial capacity that can channel capital to projects and markets where it is needed most. Nationally-based green banks are powerful tools to address market needs and drive private investment.
The Bank engaged six countries in the study – Ghana, Zambia, Uganda, Tunisia, Mozambique, and Benin – to explore how the expansion of the Green Bank model in Africa could build country-based green finance capacity.
The study found that a combination of green banks working alongside national climate change funds has the potential to scale private investment in support of climate and sustainable development goals. A combination of green grant programs and catalytic climate finance facilities focused on how the low-carbon and sustainable development sectors could help to boost private sector participation and mobilize support from global development partner institutions, according to the report.
Two sectors stand out as priorities across the study countries: renewable energy and climate-smart agriculture. Green cities infrastructure is another potential priority sector in several of the countries engaged in the study.
Innovative green finance could play a key role in Africa’s economic recovery from the COVID-19 pandemic, to build resilience and grow jobs, said Dorsouma Al Hamdou, Acting Director for Climate Change and Green Growth at the African Development Bank.
“As we look towards what will be needed to progress from emergency aid relief to medium- to longer-term measures to build resiliency and re-grow developing economies, the role of catalytic, innovative finance capacity to support sustainable infrastructure and social investment through mobilizing public and private resources will be essential,” Al Hamdou said.
“Green banks and national climate change funds are well positioned to fill this role and support economic recovery and job growth through the rebuilding of green development sectors such as agriculture, renewable energy, and green cities.”
Andrea Colnes, of the Coalition for Green Capital, the NGO recruited to carry out the study, said the green bank model had demonstrated its effectiveness in other regions of the globe and had great potential in Africa.
Green banks adjacent to national climate change funds have significant potential in Africa, based on their effectiveness at driving clean energy investment around the world, Colnes said.
“To date, members of the Green Bank Network have leveraged more than $24 billion in public capital to finance more than $70 billion in clean energy projects. This investment has supported jobs, economic development and avoided more than 25 million tonnes of CO2 emissions annually,” according to Colnes.
The report explores and understands the potential for “Green Investment Banks” and National Climate Change Funds (NCCFs) to increase the capacity of African countries to access and mobilize climate finance in support of implementing NDCs and related national climate and development goals. This initiative includes a high-level assessment of current market conditions, identification of potential climate investment-related market barriers and constraints, an indicative view of market opportunities in key climate sectors, and broad recommendations on the potential for how Green Banks and National Climate Change Funds can be applied to mobilize climate finance and scale-up private climate-related investment. The potential for attracting new sources of catalytic funds into African countries including, but not limited to resources from the Green Climate Fund is also addressed.