The African continent presents a massive investment opportunity for investors to advance the deployment of climate solutions in the coming decade according to a new report Climate Finance Innovation for Africa. However, this will require innovation in financing structures and the strategic deployment of public capital to ‘crowd-in’ private investment at levels not yet seen.
Current levels of climate finance in Africa fall far short of needs. Africa’s USD 2.5 trillion of climate finance needed between 2020 and 2030 requires, on average, USD 250 billion each year. Total annual climate finance flows in Africa for 2020, domestic and international, were only USD 30 billion (CPI forthcoming), about 12% of the amount needed.
Barriers related to shallow financial market depth, governance, project-specific characteristics, and enabling skills and infrastructure have stifled private investment in African climate solutions to date.
Overcoming these challenges will require innovation in financing structures. But there are no one-size fits. Public and private investors must tailor their financial instruments and strategies depending on the acute or chronic nature of the barriers identified.
Recommended actions for increasing the deployment of innovative finance include: Identifying and understanding barriers constraining finance by sector and geography, matching instruments with barriers, matching instruments with project and technology lifecycles, enhancing engagement, and co-financing with local stakeholders, and supporting innovation by establishing conducive policy and regulatory frameworks.
This work provides a framework for how these instruments and strategies can be efficiently deployed to overcome barriers to finance and capitalize on climate solutions in Africa.