Mitigating the effects of climate change
Across Africa countries are grappling with ways to mitigate the effects of climate change.
The continent is one of the most vulnerable regions to climate change, surpassing the global rate of temperature increase. According to the USbased Brookings Institution, seven of the 10 most climate vulnerable nations in the world are located in Africa.
Climate change and global warming will have a profound impact on the continent’s infrastructure. A combined World Bank and UN Economic Commission for Africa study found that river basins such as the Orange and Congo river basins could become wetter, while others could get drier; the rehabilitation life cycle of roads could shorten, significantly increasing maintenance costs; and hydropower production could be impacted, among others.
A recently published report by the World Bank Group, titled Lifelines: The Resilient
Infrastructure Opportunity, has called for the development of more resilient infrastructure which can, for example, withstand more frequent or stronger floods and water pipes that can resist earthquakes. The reports says that in developing countries, in particular, when infrastructure fails, it threatens economic development.
However, with rapidly growing populations and climate change increasing the frequency and intensity of natural hazards, adapting and investing in resilient infrastructure should be an urgent priority.
The reality is that Africa has no choice but to take climate change and its impacts seriously. The focus of Africa Climate Week, held in Ghana earlier this year, was on how African countries can achieve the goals of the Paris Agreement and limit climate change.
Conference speakers called for embedding mitigation and adaption actions in national development strategies, making data on climate change actions consistent, reliable and comparable, as well as planning and implementing actions at all levels across all sectors.
However, while some countries have successfully managed to obtain funding from multilateral mechanisms such as the Green Climate Fund — which incidentally has allocated half its $4.6bn global portfolio to African climate projects — access to climate finance at scale remains one of the biggest challenges facing African countries, says Aliou Dia, head of the Climate Change, Disaster Risk and Energy Management team at the UNDP Regional Centre in Africa.
“A survey conducted earlier this year for Africa Climate Week revealed more than 50% of countries in Africa battle to mobilise international and national climate finance, less than 25% have a financing strategy in place, and just 33% have any financial instruments in place,” he says.
Despite these constraints, 66% of countries surveyed have started implementing their nationally determined contributions (NDC) and 80% have started implementing mitigation and adaptation measures to achieve the NDCs.
Private money is following the “business case” for addressing climate change, says Dia. There is a growing call on financiers globally to withdraw their support of fossil fuel investments and focus instead on investments that embrace environmental, social and governance (ESG) practices.
However, while early adopter financial firms are shifting away from environmentally unfriendly investments such as coal-fired power projects and fossil fuel stocks and choosing to focus instead on renewable energy projects, there continues to be a significant investment in carbon assets.
ESG has officially moved from the fringes of the investing world to a critical priority for institutional investors who are increasingly considering the impact of their investments and the idea that investors can improve society while achieving market-related returns, says Adam Bennot, senior associate, Alternative Investment Services at RisCura. In 2019, there were more than 2,500 signatories to the United Nations’ Principles for Responsible Investment (UN-PRI), compared to 1,200 signatories in 2013.
The appetite for impact investing in Africa, he says, is on the rise. “Of the estimated $500bn of global impact assets under management, subSaharan Africa has attracted more than $70bn. This amount is about to increase significantly with the launch of the US Development Finance Corporation in October, which has an investment budget of $60bn and a mandate to invest in private equity funds and projects with an impact focus.”
CLIMATE RESILIENT INVESTMENT FACILITIES
The Africa Climate Resilient Investment Facility (AFRI-RES) aims to strengthen the capacity of African institutions and project developers to integrate climate resilience into the planning, design and implementation of investments in energy, water, transport and agriculture.
The Green Climate Fund is a climate finance facility which aims to crowd in private investment by targeting commercially viable technologies that can’t, in their current form, attract marketrate capital at scale. The fund focuses on infrastructure projects that mitigate or adapt to climate change.
The facility is funded via a R650m Development Bank of Southern Africa investment and a Green Climate Fund investment of $55m.
An Embedded Investment Programme forms part of the Green Climate Fund and supports embedded generation renewable energy projects that are unlikely to reach financial close.