AfDB kicks off creation of four green banks in Africa
Monday December 04 2023
African Development Bank President Akinwumi Adesina makes his remarks during the second day of the Africa Climate Summit held at the Kenyatta International Conference Center (KICC) in Nairobi, Kenya on September 5, 2023. PHOTO | FRANCIS NDERITU | NMG
The African Development Bank (AfDB) has started creating four green banks in Africa to mobilise up to $1.5 billion by 2030 towards green financing.
The move, through the African Green Bank Initiative, is due to a lack of climate finance made available at each successive Conference of the Parties (COP) meeting on climate crisis held by the UN.
Under the plan, the AfDB is spearheading the green investment facilities in financial institutions in Benin, Ivory Coast, Morocco and Egypt to equip local banks with the technical capacity to attract climate finance from international and domestic investors.
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The African Green Bank Initiative is an initiative by the multilateral lender as a workable and realistic solution to the lack of climate finance in the continent.
It was launched at the COP27 in Egypt and aims to roll out large numbers of green banks in Africa over the next few years.
Under the plan, each green bank will raise funds for investing in transformative climate projects, putting Africa in a much better position to fight climate change.
In May, the AfDB announced the launch of the first green banks through a partnership with financial institutions in Ivory Coast, the National Investment Bank and Benin, La Caisse des Dépôts et Consignations du Bénin.
In December, it will partner with financial institutions in Morocco and Egypt to launch green banks in North Africa.
“The fact that African governments and financial institutions have put green banks at the top of the agenda shows that Africa is taking its climate finance needs into its own hands,” Audrey-Cynthia Yamadjako, coordinator at the African Green Bank Initiative, said in a statement on Thursday.
Read: AfDB to provide $25 billion climate financing, Adesina says
By 2030, the estimated funding needed for African countries to meet their Paris Agreement Nationally Determined Contributions is about $2.8 trillion.
“We cannot wait any longer to solve the lack of climate finance in Africa,” said Ms Yamadjako.
Despite being one of the most climate-vulnerable regions in the world, Africa receives just three per cent of global climate finance, making the continent of more than 1.4 billion people extremely vulnerable to extreme weather shocks as climate-resilient and climate-adapted projects cannot be rolled out at the pace required.
Rich countries promised $100 billion a year to help developing nations fight climate change at COP15 in 2009, but funding has been anything but forthcoming. Doubts persist that the situation will change at COP28 in Dubai.
In response to the lack of finance, the African Green Bank Initiative will roll out large numbers of green banks across the continent over the coming years.
Green banks or green investment facilities are blended financial instruments placed in existing financial institutions or created from scratch which have the technical and financial capacity to attract climate finance from international and local investors.
Read: African leaders bank on carbon taxes to raise climate finance
They overcome the traditional barriers to investment, making potential climate projects more attractive and less risky for investors and climate funds.
More African institutions and sovereigns are expected to develop clear climate strategies which include blended finance models that can de-risk investment to allow private sector participation.
Along with setting up new climate facilities in partner institutions, the initiative also helps to finance government-led green banks that have already been created.
In October, the AfDB along with the Green Climate Fund helped raise concessional funding for Rwanda’s green bank, Ireme Invest, as well as participating in the bank’s total capitalisation of $142 million from development agencies.
These development agencies included Denmark’s Danida, The French Development Agency (AFD), the UK’s Foreign, Commonwealth and Development Office (FCDO) and Sweden’s SIDA, as well as the Global Climate Partnership Fund (GCPF) and the European Investment Bank (EIB).