A World Economic Forum report released just prior to the Davos 2025 meeting, “Bridging the gap: How to finance the net-zero transition,” describes the transition finance gap as “a critical fault line in global efforts to meet climate goals: The gap is not simply one of capital and business case, but also of public policy and frameworks.”
The report particularly analyses how the gap affects developing and developed countries differently and investigates the potential of “common but differentiated responsibilities and respective capabilities” in ameliorating the developing-developed country divide.
Private capital is argued as being central to bridging the climate finance gap. This is not a new opinion. Many experts have argued that public funding alone cannot meet the demand.
The recent AU-UNDP Climate Finance in Africa report describes climate change as “arguably the greatest challenge facing humanity in the 21st century.” Not only has it significantly managed to alter the natural world but is affecting global economic performance and human well-being.
A 2024 study estimates that the damage from climate change globally to farming, infrastructure, productivity and health will cost an estimated $38 trillion per year by 2050 and see a 19% reduction of income. In Africa, this could be as high as 30% and provides an example of how climate change impacts are experienced unevenly across the world.
According to the AU-UNDP report, when compared globally, Africa receives only around 2% of total global climate finance. While climate finance to Africa has increased, growing about 24% each year over 2011–2021 according to OECD data, the share of climate finance going to African subregions has varied.
Over this period, East Africa mobilised the largest total amount of climate finance ($43,866), followed by West Africa ($36,227), Northern Africa ($34,607), Southern Africa ($19,817) and lastly, Central Africa ($10,834). Regional, multi-country finance over this period totalled $25,025.
Despite the numerous challenges, the report states, there are “robust opportunities for scaling up climate finance for Africa,” including the following actions that African governments and climate finance funders can engage in:
Figure from AU-UNDP report: Share of total international public and philanthropic climate finance flows in Africa by sources of funding, 2011–2021 (%).
“Dramatically accelerate our efforts”
On the sidelines of COP29 in Baku in November last year, the African Development Bank, alongside key partners, discussed innovative climate finance solutions for Africa.
The meeting brought together prominent decision-makers from governments, fund coordinators, private sector leaders, philanthropies, and civil society organisations. Discussions emphasised the urgent need for increased climate finance contributions and stronger partnerships.
The African Development Bank’s Manager for Climate and Environment Finance, Mr. Gareth Phillips explained Africa’s significant financing gap to effectively combat climate change: a financing requirement of approximately $2.7 trillion by 2030—equivalent to $400 billion annually.
However, Phillips stated. “Africa received just $47 billion in 2022, accounting for only 3.6% of global climate finance. While the Bank’s record $5.8 billion investment in climate adaptation and mitigation last year marks progress, it remains insufficient. We must dramatically accelerate our efforts to mobilise climate finance.”
The AfDB has several initiatives to bridge this gap, including establishing green banks, expanding support through the Climate Action Window, creating new revenue streams for adaptation actions through the Adaptation Benefits Mechanism, the African Adaptation Acceleration Programme and increasing focus on carbon markets, nature-based solutions and biodiversity conservation.
With 44% or $42.6 billion of its loans going towards climate adaptation and mitigation, the World Bank Group describes itself as “by far the largest provider of climate finance to developing countries.”
The bank said in a recent accounting report that “When we approve a project, we systematically assess whether its activities will help reduce greenhouse gas emissions or directly address climate change vulnerabilities. We follow a strict methodology, shared by all multilateral development banks, to calculate the portion of our funding that counts as climate finance.”
“Although we did not cause the problems around climate change, we have to drive the solution,” says Ziyanda Mpakama, Associate Vice President, Business Development at the Africa Finance Corporation.
She adds: “The AFC funds infrastructure projects throughout the continent, such as power and energy, transport and logistics, integrated industrial parks, digital technology and heavy industries. We also do mineral resources, oil and gas.
We are invested in over 38 countries on the continent. The AFC has been around since 2007, and we have about 43 member countries. So, within this mandate and to date, we have deployed over $12 billion in investments.”
She adds: “In charging and leading in constructing the continent’s assets in terms of infrastructure that are so critically needed, there was obviously a need to look at how we respond to some of the climate challenges that are experienced on the continent. And so, the AFC came up with the Infrastructure Climate Resilient Fund (ICRF), which is managed by AFC Capital Partners, the asset manager.
This fund is using climate finance from the GCF (Green Climate Fund) to implement, build and fund climate resilient infrastructure in a way that the infrastructure will have longer lasting resilience in terms of weathering some of the severe events that we see due to climate actions.” [Read full interview here.]
According to Briter Intelligence’s online platform that monitors business, technology and investment across emerging markets, 4,595 investments totalling $25 billion have taken place in Africa since 2011.
A large majority of these financial transactions (3,005) were equity deals. The highest number of deals, 1,011, took place in 2022.
This has steadily reduced since then: 613 deals in 2023 and 461 deals in 2024. The highest value in deals was recorded in 2021: $5,346,316,457, followed by $4,759,417,807 in 2022, $4,031,122,548 in 2023 and $2,223,998,018 in 2024.
Nigeria and Kenya were the top two recipients of these investments, followed by South Africa and Egypt.
(Tables sourced from Briter Intelligence.)
How focused were these deals on mitigating climate change? The leading sectors for investments were fintech and digital financial services; digital employment platforms (Jobtech); agriculture and agritech; health; e-commerce; clean technologies; and logistics.
The main sustainability development goals (SDGs) being addressed through these deals were mainly affordable and clean energy as well as good health and wellbeing, followed by quality education, zero hunger and decent work and economic growth.
The most active investors were Y Combinator, Kepple Africa Ventures, Future Africa, Google For Startups Black Founders Fund and Launch Africa.
“When we think about COP29, I think the jury’s out in terms of the key announcement of the new quantified goal of $300 billion. I think, from the developing nations’ point of view, there’s a sense that this is much lower than the 1.3 trillion that is required,” says Dr Gori Olusina Daniel, Managing Partner at Africa PPP Advisory Services (AP3).
He adds: “Another perspective which perhaps we share is that despite these criticisms, a new concrete financial commitment provides a foundation for further enhancements and negotiations towards increasing the flow of finance. We’re very excited though by the issuance of a half a billion dollar climate bump from the climate investment funds, and the fact that these bonds were oversubscribed to the tune of $3 billion. That tells us that there is a real appetite to provide support for increasing the flow of climate finance projects to lower middle income countries and particular Africa.”
Over the last two years, AP3 has worked on a climate finance study; conducted under the High Volume Transport (HVT) Applied Research Programme and funded by UK Aid, the project commissioned two leading research suppliers, WRI and SLOCAT, to explore how low- and middle-income countries (LMICs) can better access climate finance for sustainable transport projects.
Dr Gori explains: “Now this is important for all sorts of reasons. The transport sector accounts for a significant share of greenhouse gas emissions, but this continues to remain underfunded in LMICs.
The study analysed 839 transport projects across Asia, Africa, and Latin America, resulting in about 14 in-depth case studies to identify actionable pathways for project sponsors in the pilot countries of Kenya, Vietnam, and India to secure financing needed for low-carbon transport solutions.
Furthermore, we conducted stakeholder consultations in the pilot countries to explore barriers and innovative solutions for mobilising climate finance.”
The key deliverables of the report include:
– This article first appeared in the GREEN ECONOMY EXPRESS, issued by Africa’s Green Economy Summit.
www.wearevuka.com/press-release/afc-interview-although-africa-did-not-cause-the-problems-around-climate-change-we-have-to-drive-the-solution/
www.briterbridges.com/
https://wearevuka.com/press-release/ap3-interview-ages25/
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