Climate finance in Africa: African development bank leads the way with innovative mechanisms and instruments | African Development Bank

At its annual meetings in Sharm El-Sheikh, Egypt, May 22-26, 2023, the African Development Bank will explore innovative approaches to boost private sector finance for climate action on the continent.

Africa contributes the least – less than 3% – to global warming, but the continent is the most vulnerable to climate risks. To build resilience to climate change, countries have outlined concrete ambitions for green growth, including plans to increase climate investments.

Amid declining climate finance flows to Africa, the African Development Bank has committed to helping reduce risk and remove business barriers to increase private investor contribution to climate finance on the continent.

Over the past ten years, the Bank has developed expertise and knowledge about financing climate-related projects. For example, in 2018 the Bank launched its Africa Disaster Risks Financing Program in collaboration with the African Risk Capacity Group (ARC) to promote the deployment of disaster response mechanisms. Its total climate commitments rose to 45% by 2022, compared to just 9% in 2016, surpassing its goal of earmarking 40% of its funding for climate-related projects.

At its upcoming annual meetings May 22-26 in Sharm el Sheikh, The Bank will host a session to explore how to mobilize more private sector finance to tackle climate change in Africa, including domestic natural capital. This flagship event brings together entrepreneurs, pension and private equity fund managers, financiers and government representatives to discuss different tools and how to deploy them at scale across the continent.

The delegates will consider green financing instruments such as green bonds, sustainable bonds, social bonds, sustainability loans and debt-nature or debt-climate swaps. The participants discuss national and international levers to overcome barriers to the implementation of such tools.

With lessons learned from best practices in Africa and internationally, the African Development Bank hopes to promote the development of innovative financial instruments to support investment in climate and green growth while ensuring a fairer distribution of resources across Africa.