African Development Bank launches model for deploying green finance across the continent | African Development Bank

Abdou Aziz Diedhiou, Head of Studies and Strategy, La Banque Agricole Senegal; Kossivi Domegni, expert in energy efficiency and renewable energy, Togo; Audrey-Cynthia Yamadjako, Coordinator, African Green Finance Facility Initiative, African Development Bank; Kevin Kariuki, Vice President Power, Energy, Climate and Green Growth at the African Development Bank; Doug Sims, senior advisor for green finance and co-founder of the global Green Bank Network; Craig Weise Chief Executive at New Zealand Green Investment Finance; Thimotee Jaulin – Head of ESG Development and Advocacy, Amundi; and Gareth Phillips, Manager, Climate and Environment Finance Division, African Development Bank

The African Development Bank is driving the promotion of resilient, green and sustainable growth with the launch of the African Green Bank Initiative, a model for deploying green finance across the continent.

The initiative, which was presented at the just concluded UN Climate Change Conference (COP27) in Egypt, will support the implementation of African countries’ Nationally Determined Contributions (NDCs).

As part of the African Financial Alliance on Climate Change (AFAC), the Green Bank Initiative will be supported by the African Green Finance Facility Fund (AG3F). AG3F will provide technical assistance to governments and financial institutions in creating and capitalizing on green facilities, co-investing them in green projects and providing risk mitigation tools to increase private sector mobilization.

Launching the initiative, Kevin Kariuki, vice president for energy, energy, climate and green growth at the African Development Bank, said the African Green Bank model would help increase the continent’s access to global climate finance.

“The Green Bank Initiative is a powerful tool to reduce borrowing costs and mobilize private investment in climate action in Africa,” said Kariuki.

He said multilateral development banks and international financial institutions play a vital role in enabling local financial institutions to develop a green pipeline of projects and facilitating their access to resources.

The African Green Bank initiative, which will be endowed with a $1.5 billion trust fund, was conceived as part of measures to ease access to global finance from the current 3% to 10% per annum by 2030.

Kariuki said the initiative was based on an assessment by the African Development Bank and the Climate Investment Funds of the potential of green banks in six African countries, namely Benin, Ghana, Mozambique, Tunisia, Uganda and Zambia.

“The assessment found that green banks have significant potential to leverage new sources of catalytic funds in supporting low-carbon, climate-resilient development by combining capital and mobilizing local private investment for green investments in Africa,” he said.

Kariuki said the initiative would strengthen the capacity of local financial institutions to build a robust pipeline of bankable green projects while de-risking investment and boosting long-term investor confidence towards climate-resilient and low-carbon projects in Africa.

“It will do this by investing in sectors such as energy efficiency and renewable energy, climate-smart agriculture, resilient infrastructure and nature-based solutions,” he said.

African countries still face major challenges in financing their climate transition. While investment needs due to NDCs are estimated to reach $2.8 trillion by 2030, funds invested in the continent still represent a limited share of global green finance flows and the share covered by the private sector remains limited.

The launch event featured a panel discussion on the possibilities of establishing an ecosystem of green finance facilities in Africa. Panelists included climate finance experts, asset managers, African commercial banks and existing green banks.

Audrey-Cynthia Yamadjako, coordinator of the initiative, said green finance facilities, newly created or hosted in existing financial institutions, were “the solution to scale private finance into climate action through the translation of the $2.8 trillion NDC deployment needs in well-structured and financeable projects.”

European asset manager Amundi will support the initiative through technical support activities, including training green facility management and investment teams. Amundi will also mobilize its investment vehicles focused on sustainable development in emerging markets and emerging economies to support the capitalization of green facilities and thus participate in the development of green investments across the continent.