AfDB interview: “Private sector investments bring the innovations, the technology and scalability needed to drive real impact”

Exclusive interview with Prof Anthony Nyong, Director of Climate Change and Green Growth, African Development Bank (AfDB), Côte d’Ivoire. The AfDB is a platinum sponsor of the upcoming Africa’s Green Economy Summit from 19–21 February 2025 in Cape Town, and Prof Nyong is a keynote speaker in the opening session on Wednesday 19 February. He will deliver a keynote address on “Accelerating Africa’s green growth: Unlocking climate finance for a resilient and prosperous future.”

Q: Thank you for joining us today. Let’s start with some background on you, and please tell us more about your role at the AfDB.

My name is Professor Anthony Nyong, and I’m the Director of the Climate Change and Green Growth Department here at the African Development Bank. In this role, it is my responsibility to see to the delivery of all the bank’s corporate targets on climate change. These include ensuring that climate change and green growth are mainstreamed into all of the bank’s investments, and what that means is that all of our investments are based on climate-informed designs.

Second, we allocate a minimum of 40% of our investments as climate finance. This is absolutely important considering that Africa just accesses about 3% of global climate finance. And then third, ensuring that we achieve parity between climate mitigation and adaptation. We’ve always exceeded this in favour of adaptation, as we’ll be talking about it later. You will also see that about 90% of global climate resources go to mitigation. So we try to strike a balance there. And then considering the wide disparity between Africa’s climate finance availability and needs of the continent, I also oversee resource mobilisation efforts for climate finance on the continent, especially adaptation finance.

Other positions that I’ve held in the bank include the head of environmental and social safeguards, head of gender, climate change, environment, and sustainable development and coordinator of the bank’s new deal on energy. Prior to joining the African Development Bank, I was a senior programme specialist at the International Development Research Center of Canada, and before then, a professor of global environmental change at the University of Jos in Nigeria. I have a PhD in geographical sciences from McMaster University, Canada.

Q: How important is the AfDB’s Adaptation Benefits Mechanism (ABM) for mobilising new and additional public and private sector finance to enhance climate change adaptation action?

Global climate finance is skewed in favour of mitigation, as I mentioned, with only 5% of it going towards adaptation. Adaptation is generally seen as a public global good and has not been able to leverage the resources needed from the private sector. As we’ve seen, most climate adaptation finance has come from the public sector, from the public sources. The Adaptation Benefits Mechanism is an in-house financing instrument developed by the African Development Bank and is designed to attract private sector investors into adaptation. This has been a challenge. It is cited as an example of a non-market mechanism in Article 6 rule book of the United Nations Framework Convention on Climate Change.

Developing countries need developed and wealthy nations to mandate their entities that they meet greenhouse gases to contribute to the cost of the damage that they do by investing a certain amount, you could say $5 per tonne of CO2 emitted, on purchasing certified adaptation benefits. This cash flow would make adaptation projects financially attractive to private sector project developers in developing countries, and it would enable them to access debt capital markets to borrow money to build their projects.

This initiative, the Adaptation Benefits Mechanism, is a transformational proposal as the need for adaptation increases with the level of emissions and global warming. So the simple trick is the more you emit, the more you cause the damage, the more people need to adapt. So when you put in money for mitigation, should also put in money for adaptation. Like we’ve said, the Adaptation Benefits Mechanism presents an opportunity to parties to take a major step towards balancing investment in adaptation and mitigation.

Interestingly, in November, 2024, on the margins of the 12th World Urban Forum in Cairo, the Adaptation Benefits Mechanism won the Special Jury Grand Prize at the inaugural Finance Your Cities Innovation Awards, hosted by the Global Fund for Cities Development and supported by, among others, the European Commission and France. The jury declared the Adaptation Benefits Mechanism to be the most inspiring innovation in urban climate finance.

Q: How important is the private sector’s role in climate finance and promoting resilience and sustainability in a green economy?

The private sector plays a critical role in the green transformation and in the green transition generally. While governments and development institutions provide the foundation, private sector investments bring the innovations, the technology and scalability needed to drive real impact. From climate resilient agriculture, to green buildings and renewable energy, the private sector can turn climate challenges into business opportunities. This is the bank’s and Africa’s narrative, while we state that Africa needs about $2.8 trillion to implement its nationally determined contributions as agreed at COP21 or revised thereafter. This is not a sunk cost. This for us is an investment opportunity. It’s a market for private sector investors because it’s not the government that will be installing those rooftop solar or solar home solutions or battery storage systems. No, these are private operators.

So they are very a critical element in addressing climate change issues and also contributing to the green economy. However, to fully engage the private sector, we must create the right incentives, de-risking strengthening policy frameworks and building bankable pipelines of adaptation and mitigation projects. However, private sector participation in climate change initiatives or in the green economy remain weak, particularly in Africa. There is an overhype of perceived risks, which are beyond what is normally there.

So we spend most of our resources trying to de-risk private investors to enable them to come back. We’ve done this successfully, and we know that they are very important in addressing these issues. We’ve set up good initiatives. We have the Alliance for Green Infrastructure in Africa that is putting in $500 million to create an investment opportunity of $10 billion for the private sector to engage in green infrastructure opportunities. We also have created a one-of-a-kind de-risking instrument that we call Room-to-Run, which, working with the UK government and some private sector people who believe in the African Development Bank, who also believe in Africa, have taken the risk premium off us and then held it to allow us to have more resources to implement our projects. So that is an example that has worked well, and we’re calling on partners to look into this for replication.

Q: Are there specific sectors that are best suited for climate finance investments in your view?

I can tell you that Africa is a land of many opportunities for investors. But let me pick maybe three. Let’s look at renewable energy and energy access. I keep saying it’s a shame, it’s a paradox that despite the fact that Africa has vast renewable energy potential, when you talk of solar, you talk of wind, you talk of hydropower, geothermal, that we still face significant energy access deficits. As we speak, nearly 600 million people in Africa lack access to basic electricity, affecting nearly every aspect of our daily lives, from healthcare and education, to economic productivity and social integration.

The African Development Bank recognises this and is prioritising energy access. For instance, through the Mission 300 which we are implementing along with the World Bank and other DFI development finance institutions to provide renewable energy access, including clean cooking to 300 million households in Africa by 2030. This is going to be transformational. When you speak to most CEOs in Africa, their greatest challenge and impediment to making their businesses profitable is electricity, limited access, whether to health, whether to education. So that to me would be important.

The second one that I would consider is sustainable agriculture and food security. Agriculture is a key economic driver in Africa, employing a large proportion of the population, over 280 million people in Africa, that’s about 20% of the population, are undernourished. This is an increase of about 57 million people since the COVID-19 pandemic began. More than a billion people are unable to afford a healthy diet. Around 30% of the children are stunted because of malnutrition. Yet, we have such a surplus of arable land. We have great opportunities. So climate resilient agricultural practices and irrigation systems can boost productivity and adapt to climate change. At the African Development Bank, we are supporting climate smart agriculture and we are implementing the innovative technologies for Africa’s agricultural transformation that is providing drought-resistant and heat-tolerant crops, for instance, seeds to local farmers that has ultimately increased productivity and income by almost 50%.

Let me add one more, and that is in the water sanitation and hygiene sector, where we see that access to clean water and sanitation remains a significant challenge in many African countries, affecting health and productivity. According to the 2023 Africa Sustainable Development Report, over 400 million Africans still lack access to safe water, and almost 75% don’t benefit from safely managed sanitation services. This is huge. And with climate change, this is going to get worse. But if we invest in this sector, through the green economy, we would have solved economic problems, solved human dimension health problems, and then positioned the African continent on the forefront for sustainable development.

Q: How important is green entrepreneurship on the continent?

Green entrepreneurship is absolutely important and the way to go on the African continent, because Africa is blessed, for instance, with enormous and natural resources, such as natural gas, critical minerals, land, sunshine, and biodiversity, including wind, but their value is poorly measured, and they remain largely untapped. The continent has 65% of the world’s uncultivated arable land, the second largest and second longest river, the Nile and the Congo, the second largest tropical forest, the Congo Basin, and an estimated 45% of the total global technical potential of renewable energy. So, if we have to get people to invest in Africa’s future, it is in the green entrepreneurship space. Africa’s measured natural capital was estimated about $6.2 trillion in 2018, with its mineral and fossil fuel deposits estimated between $290 billion and $1.05 trillion, respectively. The continent also earned an estimated $40 billion in ecotourism in 2019, with an estimated 60% of its GDP coming from natural resources and essential ecosystem services. So, Africa has huge potential to benefit from its natural resources to finance its developing goals. Therefore, it is very important that if we have to invest, build entrepreneurship and create jobs, it has to be on the African continent where these resources are. Green entrepreneurship in Africa is important to drive the transition to a more sustainable economy in Africa. Gone are the days of coal, going are the days of fossil fuel. We are in a new era and Africa has what it takes to drive that new agenda.

However, while the green economy holds immense potential to drive Africa’s transition to a sustainable and inclusive green economy, several critical challenges and obstacles remain. And some of these include limited access to finance, it costs money. Second is the high perceived risk, which I’ve talked about, that when you mention Africa, everyone just thinks about risks, which is really not true, because studies have shown that the continent has been the least in defaulting or honouring loans or pledges or being able to pay back loans at stake. The third is the lack of appropriately tailored financial instruments. You need to understand the economy, the ecosystem, the bioeconomy for you to be able to develop the right set of instruments that can be used there. The fourth is the high cost of capital. Many green entrepreneurs struggle with accessing affordable financing. In many African countries, interest rates go up as much as 30, 35, 40%. When that happens, it is very difficult for oncoming entrepreneurs who are going into this space to be able to take loans at such interest rates and be able to make sense of it and then pay back. So it’s quite difficult and we have seen that all over.

Then we also have barriers to climate finance themselves, that most times the limited knowledge of climate change makes it difficult for many of our private sector enterprises to go in there. They want to do it, but they just don’t know how to do it. So building capacities becomes very important. And what is it that we recommend? I’ve talked about creating an enabling environment, building capacities, and also collaboration with other partners. Nobody can address Africa’s climate or the green economy issues alone, partnerships become the way to go.

Q: You are a keynote speaker at Africa’s Green Economy Summit in Cape Town, focusing on unlocking climate finance as well as resilience. Can you give us a preview of your main message?

Yes, it’s an honour to join you at Africa’s Green Economy Summit, a platform dedicated to unlocking climate finance and accelerating resilience across our dear continent. Climate change is no longer a distant threat, it is already here and affecting the green economy completely. It is a reality we face every day. And yet amidst the challenges, there are immense opportunities to build a greener, more resilient, and more prosperous Africa.

I will be giving three key messages at the conference. The first is that Africa must lead the way in shaping a greener, resilient future. And this requires bold action, strong partnerships and innovative financing solutions for green and just transition in Africa. We cannot afford to treat climate and environmental finance as an afterthought. It must be at the core of our economic transformation. We just have to take the lead. We can capitalise on our underdevelopment. And as I’ve always said, it’s easier to do it right the first time than to retrofit. As 70% of our infrastructure is yet to be built, this is the time for us to think about green infrastructure. This is the time for us to think about resilient infrastructure and do it right than to retrofit. So we have that advantage. The second is that Africa has a growing youth population with median age of about 19 years. This could be an asset or a liability. For us, on the continent and at the African Development Bank, we are turning these into assets. And to make that an asset, we need to create jobs for this teeming youth population. The green economy is estimated to create about 3 million jobs by 2030. And this can rise to about 100 million jobs by 2050. This is where we should be investing. And we believe if we do this and create jobs and create entrepreneurship and build and support small and medium scale enterprises, it would be the way for us to go.

Thirdly, the African Development Bank is supporting the African continent in this direction. We’re not just talking. We have launched the YouthADAPT programme that creates access to finance for our youth to enable them to invest. And we’ve created the Youth Entrepreneurship Investment Bank to support youth and SMEs. The Youth Entrepreneurship Investment Bank is the future to unlock green finance, to stimulate green entrepreneurship on the continent and for our youth. So it is very important that we consider this.

Q: What are your expectations of this year’s event?

For this year’s event, we’ve tailored it to our youth, to investments, to entrepreneurs and so on. And for us, this event is very important because many things are happening across the continent. People are doing their things and learning lessons and working. This event and my expectation is that it will bring together partners, it would bring together ideas. What is working where? What needs to work where? Where can we leverage? What can we do differently? So those are the expectations. It’s not going to be a talk shop. I don’t expect it to be that, but I expect to see where deals are going to be struck, where investors are going to be able to reach out to people that finance investments, and where financing or investment organisations will identify opportunities for investments.

As a platinum sponsor for the event, the African Development Bank will demonstrate its leadership role in supporting Africa’s climate resilience, low-carbon development and just energy transitions through the bank’s investments in renewable energy, energy efficiency, smart grids and smart infrastructure and cities. So that’s our expectation, that all these opportunities will be brought on the table and then we will have concrete deals that would have been made regarding investments and solutions.

Q: How important is such an event for the continent in your view?

This is very important for us as a continent. Many people don’t fully understand Africa’s opportunities. What they see most is the risk. But when they get in contact with investors who have actually invested and made comfortable internal rates of returns on their investments and people are not owing their paying back, I think it will encourage more people to come onto the continent. Like I said, most of the risk we have on the continent is perceived risk. We don’t really understand where that is coming from. But when we meet with other people who are investing, we can share experiences and create opportunities. One thing I’ve always said is that M-Pesa, that became the foundation of mobile money, was created somewhere in Africa. And I believe that somewhere through these events, we are going to have several investors in other sectors of the economy. So let’s get together. Let’s meet at this conference. And let’s not reduce this to another talk show. Let’s create business partnerships and investment relations.

Q: Anything you would like to add?

Let me leave you with this. Africa’s green transition is not just about finance, but also about technology and capacity development. It’s also about ambition, vision, and it’s about action. By mobilising the right resources and empowering our youths, investing in the right solutions and fostering the right partnerships, we can create a climate-resilient Africa that strives for generations to come.

Africa lost out in the First Industrial Revolution. We lost out in the second. We tried to peep into the third. The Fourth Industrial Revolution has gone far. The fifth is starting. The fifth is about where we are. Africa cannot afford to play tag along in this Fourth and Fifth Industrial Revolution. The green economy puts us at an advantage, because that would form the focus of the Fifth Industrial Revolution. We need to be in the limelight. We need to lead from the front. And that’s what I believe this summit will deliver. I thank you.