The African Development Bank (AfDB) 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 mobilising finance to support low-carbon, climate-resilient development in Africa.
The ground-breaking study, released on Tuesday, March 23, 2021, is expected to underpin development of a multi-country climate finance initiative in Africa.
For countries to better access and mobilise 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 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 programmes 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 AfDB.
“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 mobilising 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.