Improving access to climate finance for enhanced climate action in Africa

The 27th UN Climate Change Conference of the Parties (COP27) of the United Nations Framework Convention on Climate Change (UNFCCC) is scheduled to take place from November 6–18, 2022 in Sharm el-Sheikh, Egypt.

State Parties to the UNFCCC, companies, civil society, and citizens will gather together on a shared podium to deliberate on how to build a more inclusive and sustainable future through enhanced action on adaptation and mitigation. The COP26 in Glasgow made some modest gains on adaptation actions. At COP27, the Egyptian government envisages an inclusive, rules based, ambitious and practical outcomes that correspond with the challenges based on science and guided by the foundational principles of the UNFCCC regime.

Moreover, aside from the global goal on adaptation having a high priority at the upcoming COP27, developing countries, especially those from Africa, are pushing for increasing financing for adaptation to bridge the critical gap between mitigation and adaptation actions. The recently revised African Climate Change Strategy and the African Union Climate Change and Resilient Development Strategy and Action Plan (2022-2032) prioritise adaptation due to the continent’s unique geography and per capita GHGs emission. However, major global climate funds including the Green Climate Fund are failing to bridge this gap as climate finance remains disproportionately allocated towards mitigation actions.

To provide context, Africa is the driest of the world’s continents with 45 per cent of its land mass consisting of drylands and 50 per cent of the population living in arid, semi-arid, dry, sub-humid and hyper-arid areas. Climate change induced water stress could affect an estimated 700 million people in arid and semi-arid areas. Surface temperatures in Africa are likely to rise faster than the global average as warming between 0.5°C and 2.5°C is projected by 2050 for Africa under all scenarios.

Africa is likely to experience an increase in droughts in several regions, heavy precipitation events and associated flooding almost everywhere on the continent. African countries therefore have valid and strong interest in low carbon and climate resilient development pathway as it offers the continent prospects for addressing climate change and fostering sustainable development through improving livelihoods, energy security, and job creation. Achieving these, however, will require substantial financial resources from public and private actors across scales and multiple levels. The Landscape of Climate Finance in Africa report in 2022 prepared by the Climate Policy Initiative provides an in-depth assessment of climate finance flowing into and within African countries. The report also highlights the legal, policy and institutional mechanisms that are needed to create a conducive environment for effective mobilisation and scaling of climate and just transition finance.

Africa will need about $133 billion annually in clean energy investment to meet its energy and climate goals between 2026–2030. The continent’s financing needs for adaptation and mitigation are estimated to exceed one trillion dollars annually by 2030. African countries collectively need $2.8 trillion between 2020-2030 to implement their Nationally Determined Contributions under the Paris Agreement. This is the cost of the continent’s contribution to limiting warming to 1.5°C and addressing the impacts of climate change. However, African countries receive annual climate finance flows of only  $30 billion. Clearly, African countries have been struggling to mobilize adequate funds from public and private finance for climate action especially as developed countries have, so far, failed to fully deliver on their pledge to jointly contribute $100 billion annually to assist developing countries to address the impact of climate change.

The barriers African countries face in accessing public and private climate finance are commonly similar to challenges in mobilising other types of developmental finance including an unstable political context, a volatile macroeconomic situation, and weak institutional and regulatory frameworks. However, similar to other investment decisions, international and domestic climate finance investment decisions are characteristically disincentivised by negative risk perceptions of the African continent. Thus, African countries have to create enabling institutional and financial mechanisms to effectively and efficiently attract the much-needed climate finance.

The majority of African countries face capacity challenges in terms of institutional and legal readiness in planning, accessing, delivering and monitoring and reporting on climate finance. The underlining challenges include ineffective legal and regulatory frameworks and weak enforcement regimes, weak governance capacities, delays in budgetary prioritisation for climate action, and lengthy technical and administrative processes involved in issuing permits and license for climate change activities.

African countries’ legal and institutional readiness to access climate finance is essential as the ability to secure public and private funds to implement the NDCs is linked to the effectiveness of the enabling framework which is predictable, transparent, and efficient. However, most African countries have regulatory systems that are unclear, fragmented, or create unintended barriers and thus are unlikely to attract the much-needed climate funds for the implementation of their NDCs.

The legal and institutional preparedness for climate finance will become increasingly vital for African countries in translating their NDCs into tangible climate activities on the ground. There is therefore the urgent need for capacity development, legal reforms and multilateral assistance.

For this to be successful, there is general need for increased awareness of legal barriers and the required reforms needed to enhance the flow of climate finance into African countries. The international community and multilateral development banks (especially the African Development Bank) as the main financial intermediaries for public international funds and facilitators for private international finance, should play greater role in providing legal assistance. This will ensure that different combinations of legal tools are employed effectively to help adjust the requesting African country’s legal and regulatory framework to integrate climate change consideration.

Specifically, the AfDB can lead the way by fully mainstreaming climate change considerations and risks into its operations. This could be boosted by developing a climate change operation policy to provide strategic direction and guideline across priority sectors. This should be followed by providing technical support for policy and institutional development, knowledge and capacity building to African governments to enhance their readiness to attract climate finance and investments.

Michael Addaney is a lecturer in the Department of Geography and Sustainability Science of the University of Energy and Natural Resources, Sunyani, Ghana, and a senior research associate of the Centre for Public Management and Governance of the University of Johannesburg’s School of Public Management, Governance, and Public Policy.

The views expressed in this article are the contributor’s own and do not necessarily reflect BII’s investment policy or the policy of the UK government.

This article was originally published on The African Climate Conversation platform hosted by British International Investment, the UK’s development finance institution – a global leader in providing climate finance to African nations. The platform can be found at www.bii.co.uk/african-climate-conversation.