The African Development Bank (AfDB), through the African Green Bank Initiative, has kickstarted the creation of four green banks in Africa as an innovative response to the lack of climate finance made available at each successive COP meeting. Setting up green investment facilities in financial institutions in Benin, Ivory Coast, Morocco and Egypt, the initiative seeks to empower local banks with the technical capacity needed to attract climate finance from international and domestic investors.
In May, the AfDB announced the launch of the first green banks in Africa, through a partnership with financial institutions in Ivory Coast, the National Investment Bank (BNI), and Benin, La Caisse des Dépôts et Consignations du Bénin (CDC Benin). In December, it will partner with financial institutions in Morocco and Egypt, to spearhead the launch of green banks in North Africa.
Audrey-Cynthia Yamadjako, Coordinator at the African Green Bank Initiative, said: “The fact that African governments and financial institutions have put green banks at the top of the agenda shows that Africa is taking its climate finance needs into its own hands. By 2030, the estimated funding needed for African countries to meet their Paris Agreement Nationally Determined Contributions (NDCs) is approximately $2.8 trillion. We cannot wait any longer to solve the lack of climate finance in Africa”.
Despite being one of the most climate-vulnerable regions in the world, Africa receives just 3% of global climate finance. This makes the continent of over 1.4 billion people extremely vulnerable to deadly climate shocks as climate-resilient and climate-adapted projects cannot be rolled out at the pace required.
Developed countries promised $100 billion a year to help developing nations fight climate change at COP 15 in 2009, but this finance has been anything but forthcoming. Doubts persist that the situation will change at the upcoming COP 28 in Dubai. In response to the lack of finance, the African Green Bank Initiative will roll out large numbers of green banks across the continent over the coming years.
Green banks or green investment facilities are blended financial instruments placed in existing financial institutions or created from scratch which have the technical and financial capacity to attract climate finance from international and local investors. They overcome the traditional barriers to investment, making potential climate projects more attractive and less risky for investors and climate funds.
The problem is not so much that there is a lack of climate finance in the world (a popular misconception) but more that African institutions and sovereigns must develop clear climate strategies which include blended finance models that can de-risk investment to allow private sector participation. Along with setting up new climate facilities in partner institutions, the initiative also helps to finance government-led green banks that have already been created.
In October, the AfDB along with the Green Climate Fund helped raise concessional funding for Rwanda’s green bank, Ireme Invest, as well as participating in the bank’s total capitalisation of $142 million from development agencies including Denmark’s Danida, The French Development Agency (AFD), the UK’s Foreign, Commonwealth and Development Office (FCDO) and Sweden’s SIDA, as well as the Global Climate Partnership Fund (GCPF) and the European Investment Bank (EIB).
By 2030, the African Green Bank Initiative aims to support the creation of an ecosystem of green investment facilities worth up to $1.5 billion across all corners of the continent. The sum of these activities is that each green bank will be able to raise funds that can be invested in transformative climate projects, putting Africa in a much better position to fight climate change.
