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Combatting climate change: boosting green investment in Africa with the African Development Bank's AFAC initiative
Launched on the sidelines of the Annual Meetings of the African Development Bank in Busan in May 2018, the African Financial Alliance on Climate Change (AFAC) was the subject of a special session held at the Africa Investment Forum on November 7 in Johannesburg.
The AFAC Steering Committee comprising investors, lenders, regulators and insurers from Africa’s financial sector, met to approve the guiding principles underlying this new African Development Bank initiative, which seeks to boost the flow of climate finance towards the continent.
Currently Africa receives only three percent of the world's climate finance despite being the continent most at risk from climate change and accounts for less than 4% of global greenhouse gas emissions.
African Development Bank Vice-President for Power, Energy, Climate Change and Green Growth, Amadou Hott, opened the session in a packed room, pointing out that the Bank was at the front line of the fight against climate change in Africa: "We have agreed that 40% of our investments will include a 'climate change' aspect by 2020. We reached 28% last year and will achieve 32% this year". He added, "If the Bank is strongly committed to this fight, investments must be strengthened.”
Jens Frølich Holte, the State Secretary for Foreign Affairs in Norway, one of AFAC's earliest contributors, reaffirmed his country's support for the Bank's action and the new pan-African financial alliance launched by the Bank to increase climate finance for Africa. "We are an enthusiastic partner of the Bank", he began. "A transition is under way in the energy sector in many African countries, and the market for renewable energies is developing very quickly. But we are surprised that there is not more investment in Africa, where the potential is huge. It's a shame". He continued, "In 2017 Norway pledged to double its development aid for renewable energies by 2019. And Africa will be at the heart of these actions!”
The co-chair of the AFAC steering committee, Rwandan Minister of Finance and Economic Planning, Uzziel Ndagijimana, began by thanking the Bank's leadership for this excellent AIF initiative, before describing how Rwanda had seized upon the climate change challenge, integrating it in its policies. "Climate finance from public sources will not be enough to meet Africa's colossal needs… We need extensive cooperation and more political will,” she said.
AFAC co-chair, Lord Nicholas Stern, former Vice-President of the World Bank, in his video message reiterated "the need to act". This sense of urgency was shared by all the panellists, including Dolika Banda of Zambia, the president and managing director of the African Risk Capacity Insurance – which is at the forefront of risk mutualisation linked to natural disasters in Africa – Youssef Rouissi, Assistant Managing Director for the Attijariwafa finance and insurance bank, and Parks Tau of South Africa, president of United Cities and Local Governments (UCLG).
According to Anthony Nyong, the African Development Bank's Director for Climate Change and Green Growth, this urgency has arisen "because the financial sector is crucial". He repeated AFAC's purpose: "to lead the African financial sector at the heart of action to combat climate change…We must build an entire ecosystem: multilateral development banks, central banks, national and regional banks, commercial banks, institutional and sovereign investors, etc. We must strengthen financial institutions in Africa," he added.
Carla Montesi, the Director of Planet and Prosperity at the European Commission's Directorate-General for International Cooperation and Development, addressed the session and in particular welcomed the Bank's "ambitious" goal of integrating climate change in 40% of its investments by 2020: "We know that climate change will have a huge impact on African economies. But doing nothing will take a heavy toll," Montesi said.
Final remarks came from Amadou Hott, who welcomed the commitment and will of all actors present to move forwards.
"We want Africa to advance towards a green economy; not as a fad, but because it is a viable and responsible economic vision," he added.