The continent has a wealth of possibilities for producing renewable energy, according to the Africa Green Business and Financing Report, which the UNDP (United Nations Development Programme) launched at Enlit Africa in Cape Town.
This is for internal usage and to fuel environmentally friendly production for businesses trying to reduce their greenhouse gas emissions globally.
However, the report points out that even if the shift is well underway throughout the continent, more investment is needed if advancement is to pick up speed.
Dr. Matthias Naab, Director of the UNDP Regional Service Centre for Africa, emphasised the difficulties the continent confronts in securing climate money during a speech at Enlit Africa.
According to the senior official, Africa needs to invest USD 277 billion a year in capital projects to carry out its Nationally Determined Contributions (NDCs) and meet its climate goals by 2030.
Nonetheless, Africa currently receives USD 29.5 billion in climate finance each year. According to Naab, 30 of the 40 most climate-vulnerable nations worldwide are located in Africa.
The report states that South Africa’s enormous green capital demands, which come to USD 107 billion a year, are the main reason why the Southern African region faces the largest financial deficit in absolute terms. With average GDPs of 26% and 23%, respectively, Central and East African nations face the greatest deficit in climate investment.
North African nations, on the other hand, have comparatively smaller climate investment gaps—3% of GDP—but they still need three to six times as much green capital as they do now. In light of the regional context, it is noteworthy that a small number of countries account for the majority of climate finance investments; ten of the 54 African nations receive more than half of these funds, posing a further challenge to the continent.
In 2021, the private sector will account for USD 4.2 billion, or 14%, of all climate finance efforts on the continent. With 81% of all investments going into mitigation measures, this is mostly because of the advancements in renewable energy technologies and associated business endeavours.
The UNDP is seeking to generate momentum for financing the expansion of green businesses in Africa and a major product of their Africa Green Business and Financing Initiative (AGBFI) is the published report.
Its purpose was to determine how best to encourage private sector involvement in green finances and businesses so that the industry can undergo long-lasting and significant transformation.
The main objective of this study and the AGBFI is to encourage practical initiatives in green finance and business that support significant and lasting change.
The next phase of the effort, the development of Country Action Roadmaps for the three participating countries—Angola, Malawi, and Togo—will draw from the findings of this report and the recommendations presented herein.
The report lays out several strategies for improvement. One of them is encouraging the establishment of specialised green investment banks, facilities, and funds whose main goal is to use green finance solutions to assist the growth of environmentally conscious companies in the area. The second is to assist Africa’s quickly expanding cities in addressing the twin concerns of rapid urbanisation and climate change, and establish an African urban green business and financing platform.
Some of the other suggestions include: making nature an asset class and using lessons from other carbon markets and Africa’s natural resources to create resilient carbon and biodiversity markets, ensuring that more value addition stays within the communities and areas involved in mineral extraction, apart from enhancing green value chains and capacity by leveraging Africa’s natural abundance of minerals needed in the green transition, along with the region’s potential for sustainable energy and human capital.
The report also calls for urging multilateral development banks to use fresh and creative tools, resources, and infrastructure to lower investment risk in Africa, apart from working with central banks to address concerns related to currency risk, providing private investors with access to their internal data and analytics for risk modelling.
“Establish an African Green Business Institute as well, which will function as a resource for best practices in human capital management and as a hub for green business in the area. These behaviours are connected in positive feedback loops and are not meant to be mutually exclusive,” the study stated further.
“Yet they are intended to be audacious and revolutionary, tackle the growth-hindering obstacles mentioned previously, support Africa’s leadership role, and mirror the regional objectives delineated in the Nairobi Declaration of 2023, which was ratified at the Africa Climate Summit,” it concluded.
Final Observation
The Africa Green Business and Financing Report emphasises the need for increased investment to accelerate the continent’s transition to green and sustainable practices. The outlined strategies, including the establishment of specialised green investment banks, urban green business platforms, and leveraging natural resources for sustainable energy, present a comprehensive approach to addressing the challenges and opportunities in Africa’s green business landscape.
The proposed initiatives not only aim to encourage private sector involvement in green finance but also seek to create lasting and transformative change in the industry. Furthermore, the development of Country Action Roadmaps for specific participating countries demonstrates a commitment to applying the report’s recommendations at a national level.
By pursuing these audacious and innovative strategies, Africa can overcome barriers to growth, strengthen its leadership role in sustainable development, and align with the regional objectives outlined in the Nairobi Declaration of 2023. The envisioned positive feedback loops from these strategies are intended to create a thriving environment for green business and financing in Africa, ultimately contributing to the continent’s sustainable and prosperous future.