When we talk about climate change and sustainable development, the continent that is often highlighted as facing the greatest socio-economic challenges is Africa.
It is in many African nations that the impacts of climate change are hitting the hardest and that communities need the most support to ensure food security, decent housing, access to clean energy and so much more, including jobs for the ballooning youth unemployment which is seeing more than 12 million youth enter the labour market each and every year.
The will and the knowledge exist to turn things around. A survey for Africa Climate Week in March showed that most African nations were already starting to implement their mitigation and adaptation commitments under the Paris Agreement.
But over half of the countries have struggled to mobilize climate finance, less than one quarter have a financing strategy, and only one third have appropriate financial instruments.
There is some movement. The World Bank Group has promised US$22.5 billion over 2021-2025 in climate support in Africa, while nations are increasingly able to secure money from the Green Climate Fund.
Private finance is desperately needed, however, which is why the UN Environment Programme (UNEP)-convened International Network of Financial Centres for Sustainability (FC4S) is launching a new work programme for the continent.
Financial Centres for Sustainability, a global network of 30 financial centres, will work with its five Africa member centres—Abidjan, Cairo, Casablanca, Lagos and Nairobi—to encourage strategic action, collaborate with peers across the continent, and facilitate engagement with major international hubs.
“There is an appetite for investing in Africa, in recognition of the fact that of all the investment bets you can make, this is the one that is sure to come up trumps,” said Patrick Njoroge, Governor of the Central Bank of Kenya, at the launch of the new work programme at the Financial Centres for Sustainability’s annual meeting in Geneva. “There is also an appetite to use the members’ investment muscle to do good and help defend the planet against the ravages of climate change and environmental degradation.”
There is, despite many old-fashioned notions about Africa, plenty of private money in the continent. Nairobi, for example, is a thriving regional hub for banks, businesses and entrepreneurs with money to invest.
But there are many barriers to boosting sustainable finance in African countries, including a lack of clear policies and regulatory frameworks on climate change, a lack of awareness on the sources of climate finance and limited engagement from the private sector.
These barriers, and the different levels of development on the sustainable finance agenda in African financial centres, requires a coordinated strategic effort to help mainstream sustainable finance as a foundational element of financial centre development strategies.
The programme will help the centres assess the green finance landscape in their countries and set strategies for sustainable finance development. It will provide technical assistance on specific green and sustainable finance projects, including support on the development of a green bond market in Abidjan, activating the green bond market in Egypt, and a proposal to advance “green tagging” of bank loans in Lagos.
“Financial centres generate a powerful clustering effect by concentrating banking, capital markets, investing, insurance, professional services with policy and regulation,” said Mohammed Omran, Executive Chairman, Financial Regulatory Authority of Egypt. “Financial centres in Africa are no different. We have a real opportunity to turn African centres into global green hubs and provide the finance the continent needs for a brighter future.”
Financial Centres for Sustainability will also increase policy dialogue and engagement, and collaboration between African centres and the rest of the international network.
Specific actions will include setting clear definitions for green or sustainable finance, integrating sustainability priorities relevant for a given national context into the design and execution of strategies, and identifying options to create strong enabling environments to attract international investment into green and sustainable investment options in local markets.
The message is that with the over 3.5 trillion of financing gap for both the nationally determined contributions and the Sustainable Development Goals implementation, social-driven financing will not be optimal. Africa as a region urgently needs to move from this socially inclined financing to investment financing where returns are environmental, social, economic and financial. This should build on already ongoing initiatives like the innovative financing mechanisms across the continent like the risk-sharing facilities coming up across the continent.