Category: News

7 African Startups To Receive $385k In Developing Solutions For Blue Economy

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Today, climate resilience venture launcher Triggering Exponential Climate Action (TECA) has announced the selection of seven startups to each receive $55,000 in funding to advance their solutions for the blue economy in Africa.

The startup founders were selected following their participation in TECA’s fellowship program, where they were supported to create ideas for companies in the blue economy, build teams, and form companies.

The TECA program, managed by BFA Global and supported by FSD Africa, was created to accelerate the development of climate-resilient solutions to protect and sustain the environment and

vulnerable communities. Each startup will receive $27,500 in seed capital and $27,500 in hands-on venture building support to progress financial and tech-enabled solutions that bolster the climate resilience of communities and ecosystems in and around the oceans, lakes, and rivers across the Eastern region of Africa.

“Through the TECA program, we are proud to support and accelerate the development of innovative solutions that will protect and sustain the environment and vulnerable communities in the Eastern coast of Africa. These seven startups represent the forefront of the blue economy in Africa, and we look forward to seeing the impact of their financial and tech-enabled solutions on communities and ecosystems,” said David del Ser, Chairman and Chief Innovation Officer at BFA Global.

“The ventures that have been formed through the TECA program are an inspiration. They represent young Africans – including women – coming forward with great ideas and solutions to climate-related challenges, in this case, in the blue economy. I’m proud that FSD Africa is supporting this initiative, which leverages finance and technology to help build resilience and create opportunity in the context of climate adversity. Through our partnership with BFA Global, we plan to roll out TECA beyond the blue economy to also solve for other challenges and geographies across Africa.” said Juliet Munro,

Digital Economy Director at FSD Africa.

Founders of the seven startups selected in the current cohort originate from six countries in Africa—Kenya, Egypt, South Africa, Uganda, Zimbabwe and Tanzania—with ideas focusing on bridging existing gaps in: aquaculture; ecotourism; measurement, reporting, and verification (MRV) in conservation; seaweed value chain; mangrove restoration and protection; and financial services for fisher folk. The startup companies and their solutions are:

  • AquaTrack: a data-driven solution for sustainable aquaculture production. They aim to provide a water quality monitoring device for fish farmers seeking to increase production and efficiency in their farms.
  • Carboni Bank: a community-centred platform for tourists to offset their carbon emissions and support local climate initiatives.
  • ConserVate: utilizing innovative digital technology to build local capacity for monitoring reporting and credible verification (MRV) of conservation impact for both funders and implementers to reverse the effects of climate change.
  • Mwani Blu: building a seaweed marketplace with high-level traceability, providing women smallholder farmers with dignified and stable incomes.
  • RegisTree: empowering coastal communities to be agents of climate change mitigation by facilitating their role in mangrove restoration and protection.
  • Vua Solutions: a fintech company seeking to provide affordable and responsible financial services to people working in the blue economy.
  • Wezesha Aqua Farms: seeking to address the dwindling wild capture fisheries stocks that negatively impact the livelihoods and socioeconomic status of local fishing communities around the great lakes region in Eastern Africa.

To further invest in the success of these startups, TECA will provide comprehensive venture building support that includes mentorship, capacity building, business model refinement, and support launching their products and services in the market.

Startups working on climate resilience solutions are encouraged to apply for the next TECA cohort.

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Africa getting little of $382m renewable energy projects cash

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Renewable energy projects attracted investments worth $382 billion globally in 2021, according to the International Energy Agency, but only $13 billion, or three percent of that, funded projects in Africa, highlighting a major funding gap foiling green transition and energy access on the continent.

With only 48 percent of African population having access to electricity, experts say investment in the continent’s renewable energy sector could both leapfrog the green transition efforts and connect more people to the grid.

Despite this, it has been established that investors with the capacity to invest in this sector shy away from the African market, a problem which brought together several stakeholders in the energy sector in Nairobi this week, attempting to change the narrative.

At a forum convened by the World Resources Institute (WRI) and the Children’s Investment Fund Foundation, participants drawn from the private sector, government, civil society organisations from Kenya and beyond deliberated on how investors can be mobilised to support Africa’s green transition through investments.

Reluctant to invest

Rebekah Shirley, WRI’s deputy regional director told the forum that private sector players are reluctant to invest in this sector, creating a funding gap of billions of dollars every year, despite the wide access gap.

“Even in other regions of the world where energy access is still a challenge like the Southeast Asia, we don’t see funding gaps of this magnitude, why Africa?” she posed.

Alex Wachira, principal secretary for the state department of energy, said that there is a list of challenges contributing to the energy gap, even in Kenya, which slow down economic growth in the country.

“We (the Ministry of Energy) are aware of the many challenges attributed to this, including limited incentives to attract private sector investors,” he said in a speech read by a representative.

Lack of political will

Another challenge identified is the lack of political will for appropriate legislation and implementation of policies to incentivise private sector investment in renewable energy projects, especially in rural areas.

For instance, only two of Kenya’s 47 counties have drafted energy plans that would give way to appropriate energy policies, deprioritising renewable energy projects at the local governments.

This, according to Eva Sawe – a senior programmes officer at the Council of Governors, is because lawmakers have not been sensitised on why renewable energy projects should be a priority.

But even with the right policies and incentives to support private sector investment in renewable energy on the continent, investors said there is a still a shortage of talent in Africa limiting the production capacity of companies investing in the sector.

“If an investor is coming into the country to do any renewable energy project, the first hurdle they will face is the lack of skilled people,” said Andrew Amadi, the chief executive of Kenya Renewable Energy Association.

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FSD Africa Targets to Back $400 Million of Green Bonds This Year

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  • Africa needs about $300 billion in climate financing annually
  • Private funding for green projects in Africa is very low

FSD Africa is in talks with potential green-bond issuers across the continent to raise at least $400 million for climate-linked projects this year.

The agency backed by the UK’s Foreign, Commonwealth & Development Office will be a transaction adviser on the deals it expects to come from countries, including Tanzania, Zambia, Nigeria and Morocco. The amount to be raised will be about 70% higher than what FSD Africa said it helped to mobilize in climate- and gender-related financing in 2022. 

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7 start-ups get $385k to develop blue economy solutions

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Climate resilience venture launcher Triggering Exponential Climate Action (TECA) has announced the selection of seven startups to each receive $55 000 in funding to advance their solutions for the blue economy in Africa.

The startup founders were selected following their participation in TECA’s fellowship programme where they were supported to create ideas for companies in the blue economy, build teams, and form companies.

The TECA programme, managed by BFA Global and supported by FSD Africa, was created to accelerate the development of climate-resilient solutions to protect and sustain the environment and vulnerable communities.

Each startup will receive $27 500 in seed capital and $27 500 in hands-on venture building support to progress financial and tech-enabled solutions that bolster the climate resilience of communities and ecosystems in and around the oceans, lakes, and rivers across the Eastern region of Africa.

“Through the TECA programme, we are proud to support and accelerate the development of innovative solutions that will protect and sustain the environment and vulnerable communities in the Eastern coast of Africa. These seven startups represent the forefront of the blue economy in Africa, and we look forward to seeing the impact of their financial and tech-enabled solutions on communities and ecosystems,” said David del Ser, chairperson and chief innovation officer at BFA Global.

“The ventures that have been formed through the TECA program are an inspiration. They represent young Africans – including women – coming forward with great ideas and solutions to climate-related challenges, in this case, in the blue economy,” added Juliet Munro, digital economy director at FSD Africa.

“I’m proud that FSD Africa is supporting this initiative, which leverages finance and technology to help build resilience and create opportunity in the context of climate adversity. Through our partnership with BFA Global, we plan to roll out TECA beyond the blue economy to also solve for other challenges and geographies across Africa.”

Founders of the seven startups selected in the current cohort originate from six countries in Africa—Kenya, Egypt, South Africa, Uganda, Zimbabwe, and Tanzania—with ideas focusing on bridging existing gaps in: aquaculture; ecotourism; measurement, reporting, and verification (MRV) in conservation; seaweed value chain; mangrove restoration and protection; and financial services for fisher folk. The startup companies and their solutions are:

  • AquaTrack: a data-driven solution for sustainable aquaculture production. They aim to provide a water quality monitoring device for fish farmers seeking to increase production and efficiency in their farms.
  • Carboni Bank: a community-centered platform for tourists to offset their carbon emissions and support local climate initiatives.
  • ConserVate: utilizing innovative digital technology to build local capacity for monitoring reporting and credible verification (MRV) of conservation impact for both funders and implementers to reverse the effects of climate change.
  • Mwani Blu: building a seaweed marketplace with high-level traceability, providing women smallholder farmers with dignified and stable incomes.
  • RegisTree: empowering coastal communities to be agents of climate change mitigation by facilitating their role in mangrove restoration and protection.
  • Vua Solutions: a fintech company seeking to provide affordable and responsible financial services to people working in the blue economy.
  • Wezesha Aqua Farms: seeking to address the dwindling wild capture fisheries stocks that negatively impact the livelihoods and socioeconomic status of local fishing communities around the Great Lake region in Eastern Africa.

To further invest in the success of these startups, TECA will provide comprehensive venture building support that includes mentorship, capacity building, business model refinement, and support launching their products and services in the market.

Startups working on climate resilience solutions are encouraged to apply for the next TECA cohort. For more information, visit the TECA website.

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What Africa Needs to Go Green Is Finance

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From sunshine to rare minerals to a youthful population, Africa has the raw ingredients to make the green transition. Now it needs the finance.

Take power. Exceptionally strong sun and vast swathes of desert mean Africa is the region with the highest solar generation potential over the long term, according to calculations by the World Bank. It’s now cheaper to build and operate new large-scale wind and solar farms in many parts of the world than to keep running coal or gas-fired power plants. With more than half of people in Sub-Saharan Africa living without electricity, expanding solar should be a no-brainer.

Yet investment in renewable energy in Africa fell to an 11-year low in 2021, comprising just 0.6% of the global total, according to a report by BloombergNEF. Financing options are insufficient and expensive because lenders worry about the risks of taking on new projects in often politically or economically unstable countries with broken supply chains — though the opportunities can be unrivaled.

“African cities and economies are growing faster than anywhere in the world, so it’s ripe for transformation. The question is why we are not seeing the uptick in investment we should expect,” said Wanjira Mathai, regional director for Africa at the World Resources Institute. “The biggest challenge right now is the cost of capital. To unlock that would be absolutely catalytic.”

Renewable Investment in Africa

Source: BloombergNEF

Note: Global renewable energy asset investment by region

The world’s least developed continent, Africa produces just 4% of global greenhouse gas emissions but is already suffering some of the worst consequences of a changing climate. Rich nations have never met a 2009 pledge to funnel $100 billion a year to help developing countries shift toward cleaner energy sources and bolster their infrastructure against extreme weather.

At the UN-sponsored COP27 climate talks in Egypt last year, delegates agreed to create a new fund for countries battered by climate disasters, though the details have yet to be hammered out. And private sector lenders are calling for multilateral development banks to play a bigger role in financing clean energy projects in poorer nations.

It’s an issue that looms large over this year’s climate conference, which is taking place in Dubai.

Africa needs investments worth $2.3 trillion to meet the needs of its population, plus an additional $1 trillion to bolster its infrastructure against climate disasters, according to estimates from the Africa Finance Corp.

Financing for climate-related projects around the world reached an estimated $632 billion in 2019 and 2020, according to the Global Climate Initiative. Only $19 billion of that came to Africa, including just $2 billion from the private sector.

Even the continent’s buzzing startup scene lags behind the rest of the world. Africa was on the receiving end of just over 1% of the $415 billion in venture capital that went into the startup sector globally in 2022, according to research firm Briter Bridges. Of that, 15%, or around $800 million went into “clean tech” or “climate tech.”

Drought Ravaging East Africa Bankrupts Farmers
A worker fills a truck that delivers water to remote communities from a pump in Garissa, Kenya, on Friday, May 20, 2022.
Photographer: Simon Marks/Bloomberg

Faced with limited resources and immediate challenges, governments are making stark — and divergent — choices.

“Two days ago, we went to distribute food relief to 4.3 million affected Kenyans in an emergency program that has forced us to re-allocate funds budgeted for education and health,” Kenya’s newly-elected president, William Ruto, told COP27 leaders in November.  “The tradeoffs we are forced to make between indispensable public goods is evidence that climate change is directly threatening our people’s life, health and future.”

Ruto called for Africa to leapfrog fossil fuels and embrace clean power as the foundation of its future development. Lacking the oil, gas and coal deposits abundant in some parts of the continent, Kenya has embraced renewables instead. Over 90% of its power comes from sources including solar, wind and geothermal. It also beat the European Union by four years in banning single-use plastic bags and is now considering forcing drivers to pay a congestion charge to curb pollution, a measure that only London has enacted and that New York is debating.

What on Earth?What on Earth?What on Earth?The Bloomberg Green newsletter is your guide to the latest in climate news, zero-emission tech and green finance.The Bloomberg Green newsletter is your guide to the latest in climate news, zero-emission tech and green finance.The Bloomberg Green newsletter is your guide to the latest in climate news, zero-emission tech and green finance.

But Kenya’s an exception. Countries like Nigeria, Senegal and Mozambique are planning to increase oil and gas production, taking advantage of prices buoyed by Russia’s invasion of Ukraine almost a year ago. If the industrialized countries, which prospered for two centuries at the expense of the planet, want them to curb those plans — or avoid drilling in pristine rainforests — they will have to pay.

Fossil Fuels in Africa’s Grid

Source: BloombergNEF

Note: Share of electricity generation from fossil fuels by country, 2021

“They ban coal, and we follow, they say firewood is not for fetching, they say we need to plant more trees,” Bola Tinubu, a leading candidate in this month’s Nigerian presidential elections, said in October. “If you don’t guarantee our finances and work with us to stop this, we are not going to comply with your climate change.”

The Just Energy Transition Partnerships are an effort to respond. The first was signed in 2021 between South Africa and the US, the UK, the European Union, Germany and France. The $8.5 billion financing package was designed to help South Africa transition away from coal and provide a blueprint for new agreements between developed countries and middle-income nations that depend on dirtier fossil fuels.

The details of the deal weren’t agreed until a few months ago though, with South Africa and its partners disagreeing about how the money should be spent. In the meantime, South Africans have faced daily power rationing as the loss-making state utility Eskom struggles to manage its ageing coal-fired plants.

The African Hydrogen Partnership, a grouping of private sector organizations, is pushing to develop green hydrogen as an alternative fro everything from public transport to clean cooking fuel.

“Our focus is on the domestic market,” said its co-founder and vice-chairman Siegfried Huegemann. “It’s where we see great potential, fantastic potential for developing new industries.”

When pipelines and harbors are built, however, Africa could become a major source of green hydrogen for markets elsewhere. The continent has the potential to produce €1 trillion ($1.1 trillion) worth of green hydrogen annually by 2035, according to a study by the European Investment Bank. As with electricity generation, however, transformational changes of that magnitude need money.

“We know that the climate challenge will be significantly difficult to manage and to adapt to — and in Africa the opportunity is dependent upon building resilience and economic resilience above all,” Mathai said. “You can see what a vicious circle this is.”

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50% of the global economy is under threat from biodiversity loss

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  • Human activity is destroying biodiversity faster than ever before.
  • Almost 80% of threatened species are impacted by economic activity.
  • The COP15 summit has started work towards a new global pact on nature protection.
  • 5 key transformations can save the natural world and boost GDP by trillions of dollars.

Whether you live in a city, a rural area or by the ocean, it’s likely you have noticed a decline in biodiversity. Maybe fewer birds visit your urban feeders, larger mammals are less common in the fields and forests around you, or your catches on those fishing trips are getting smaller.

What we’re all witnessing is a potentially catastrophic loss of biodiversity on which entire ecosystems depend.

Global efforts to protect nature

In an ongoing effort to slow the destruction of nature, delegates at the 2022 United Nations Biodiversity Conference in Montreal, Canada, focused on reversing the rapid decline of animals, plants and insects. The conference, also known as COP15, worked towards a new global agreement to protect biodiversity.

In a strongly worded opening address, UN Secretary-General António Guterres told delegates that “humanity has become a weapon of mass extinction”. Guterres piled further pressure on attendees by describing the conference as “our chance to stop this orgy of destruction”.

The destruction to which Gueterres refers spans the globe and is happening on a massive scale. According to a UN Global Land Outlook assessment, more than 1 million species are now threatened with extinction, vanishing at a rate not seen in 10 million years. As much as 40% of Earth’s land surfaces are considered degraded.

Research by the International Union for the Conservation of Nature found that human activity for food production, infrastructure, energy and mining accounts for 79% of the impact on threatened species.

Human systems for food, infrastructure and energy are destroying biodiversity.

Human systems for food, infrastructure and energy are destroying biodiversity. Image: WEF/IUCN

Creating a nature-positive economy

Only by fundamentally transforming these systems can we shift from destructive human activity to a nature-positive economy. The World Economic Forum’s New Nature Economy Report II sets out a range of transitions that will reverse nature loss and pull us back from the brink. Without these changes, the world will suffer irreversible destruction of biodiversity that will have far-reaching impacts on the economy and all life on Earth.

The report delivers a stark warning about the risks we are creating by destroying nature, stating that “$44 trillion of economic value generation – over half the world’s total GDP – is potentially at risk as a result of the dependence of business on nature and its services”.

Biodiversity loss was ranked as the third most severe threat humanity will face in the next 10 years in the World Economic Forum’s Global Risks Report 2022.

Five key transitions in the global economy could have a dramatic impact in slowing the loss of biodiversity, while bringing trillions of dollars of new economic opportunities and creating more than 100 million jobs.

Five key transitions in the global economy could have a dramatic impact in slowing the loss of biodiversity.
Five key transitions in the global economy could have a dramatic impact in slowing the loss of biodiversity. Image: WEF New Nature Economy Report II

These transitions are:

1. Compact built environment

Higher-density urban development will free up land for agriculture and nature. It can also reduce urban sprawl, which destroys wildlife habitats and flora and fauna. Existing cities and settlements should be considered for strategic densification. Conservation-management projects should be established to protect biodiversity in areas that have been spared from development. This transition creates a $665 billion opportunity, with 3 million jobs created by 2030.

2. Nature-positive built environment

These built environments share space with nature. They are less human-centric, instead placing biodiversity at the core of project design. Infrastructure is located to avoid or minimize the destruction of nature, and all buildings are energy and resource efficient. Developments must include nature-friendly spaces and eco-bridges to connect habitats for urban wildlife. There’s a $935 billion opportunity in these built environments, and the possibility to create 38 million jobs by 2030.

3. Planet-compatible urban utilities

To stall biodiversity loss, we need utilities that effectively manage air, water and solid waste pollution in urban environments. In addition to benefiting nature, this will provide universal human access to clean air and water. Smart sensors and other Fourth Industrial Revolution technologies can transform urban utilities and make them planet-compatible. Creating them could deliver a $670 billion business opportunity and create 42 million jobs by 2030.

4. Nature as infrastructure

This transformation involves incorporating natural ecosystems into built-up areas. Instead of developments destroying floodplains, wetlands and forests, they would form an essential part of new built environments. This approach to development can also help deliver clean air, natural water purification and reduce the risk from extreme climate events. The business opportunity by using nature as infrastructure could hit $160 billion and create 4 million jobs by 2030.

5. Nature-positive connecting infrastructure

“Connecting infrastructure” includes roads, railways, pipelines and ports. Transitions in this area mean a change in the approach to planning to reduce biodiversity impacts, with a willingness to accept compromises when it comes to travel time and distance between departure point and destination. Building in wildlife corridors and switching to renewable energy in transport are key elements of nature-positive connecting infrastructure. The business opportunity here could peak at $585 billion, with the opportunity to create 29 million new jobs by 2030.

Time to make peace with nature

The outcomes of the COP15 biodiversity summit will shape the direction of humankind’s relationship with the natural world.

António Guterres urged delegates to overcome their differences and reach agreement on protecting nature, telling the conference: “it’s time for the world to adopt a far-reaching biodiversity framework – a true peace pact with nature – and deliver a green, healthy future for all.”

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Climate finance regulation: Morocco, an example in the Maghreb

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Morocco has once again emerged as a leader in the Maghreb in matters of climate finance systems and regulation to support climate action, according to the “Climate Finance Readiness Index” report

The report, published recently by the Toronto and Casablanca-based consulting firm Green For South, highlighted that Morocco is, in its sub-region which also includes Algeria and Tunisia, the first to have adopted “appropriate regulations and guidelines (mostly voluntary at this stage), an interesting volume of climate finance activity (dealing with international funds and issuing green bonds) and effective awareness raising schemes.”

The report also highlighted Morocco’s efforts to improve its climate resilience, particularly in terms of mitigation, which requires significant investment, recalling in this regard the total cost of climate mitigation and adaptation actions included in the NDC (Nationally Determined Contribution) as published in June 2022. The amount is estimated at $78 billion, divided between mitigation measures ($38) and warning measures ($40 billion).

Tunisia also has appropriate regulation (on a voluntary basis), an interesting volume of climate finance activity, the report said, noting, however, that there has been no issuance of green bonds or “Sukuk” and awareness provisions are still limited.

As for Algeria, the report noted that the country “has no regulation in the financial sector to support climate action and that climate finance activity is still limited,” estimating that overall, the North African region is at an early stage of implementation of these actions.

For this firm specializing in sustainable finance, green and climate, Morocco and Tunisia are called to further strengthen their regulations and make them mandatory, and encourage green emissions and launch more awareness initiatives and training.

In the Middle East, Egypt is leading the way in making all ESG and climate risk regulations mandatory in the different financial sectors, namely banking, insurance, and capital markets, unlike countries like Jordan, Morocco, Tunisia, and Turkey that generally have voluntary reporting requirements.

The consulting Green for South firm, specializing in sustainable, green and climate finance, has evaluated in its Climate Finance Readiness Index report the regulations and measures taken by 14 countries in terms of climate finance. The assessment, covering 4 regions – North Africa, Middle East, Gulf and Turkey – takes into account the specificities of each territory and sets up appropriate criteria. With a score of 31.33%, the North African region shows promising results, with Morocco representing the most successful model.

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New study: Impact bonds are significant in unlocking climate finance flows to address climate change challenges in Saint Louis, Senegal

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FSD Africa, in partnership with UMOA-Titres (UT), commissioned Genesis Analytics, a consulting partner, to develop a study that determines the feasibility of deploying a financial instrument to address climate change, environmental and/or waste management challenges in the city of Saint-Louis, Senegal.

Both the physical and socio-economic characteristics of the city make it vulnerable to climate change. Numerous government and donor-led resilience interventions have been implemented in Saint-Louis. However, there has been little participation by the private sector at scale.

The UK government through the Foreign Commonwealth and Development Office (FCDO) has provided support to FSD Africa for the study. The new study will be launched at the 2023 West African Economic and Monetary Union (WAEMU) Government Securities Markets Meetings in Dakar, Senegal. It highlights the opportunities to tackle flooding, coastal erosion, heavy rains, land and ecosystem degradation, fishery decline, and poor waste management, to improve living conditions for the communities living in Saint-Louis.

With an estimated population of 1.1 million people living in Saint-Louis, approximately 80,000 of these live in densely populated fishing neighborhoods, high-risk zones which are constantly under attack from flooding and coastal erosion. Between 2019 and 2020 more than 2,000 people, mostly inhabitants of the fishing district of Guet N’dar, north of Saint-Louis, lost their homes due to the rising sea levels. The World Bank estimates that 10,000-15,000 people in the city are either already displaced or live within 20 meters of these high-risk zones. Furthermore, climate change continues to cause rising sea levels, heavier rainfall and higher temperatures in the city, further impacting the livelihoods of local people.

Saint-Louis is the former capital of Senegal and a UNESCO World Heritage site since the year 2000. The city benefits from programs such as the Safeguard and Enhancement Plan (PSMV), the main legal instrument for the protection of the site adopted in 2008 by the government of Senegal. However, it still faces the effects of climate change with the sea levels on the West African coast rising between 3.5 and 4 millimeters annually, which poses an existential threat. The city has an opportunity to capture a greater portion of the international climate finance flows available globally, through the deployment of Impact Bonds.

Impact bonds, the recommended financial instrument for challenges facing Saint-Louis, comprise Social Impact Bonds (SIBs), Development Impact Bonds (DIBs), or Environmental Impact Bonds (EIBs).  Across Africa a high concentration of economic activity and investment in the capital cities has limited the funds available to other regions in need of funding for climate change resilience and adaptation programmes.  To deal with these challenges, the study unveils solutions such as the involvement of the private sector through impact bonds to widen the capital pool for various projects.

Climate Policy Initiative (CPI) estimates that the continent requires USD 277 billion annually to implement its NDCs and meet 2030 climate goals[1]. But annual climate finance flows in Africa stand at only USD 30 billion. This gap is likely even wider as countries often underestimate their financial needs, especially in relation to adaptation, due to data and methodological problems in costing their NDCs (UNFCCC, 2021). Time is of the essence; delaying action will cost the continent more in the future.

Evans Osano, Director, Capital Markets at FSD Africa emphasised that climate action requires significant financial investments, “Africa requires USD 2.8 trillion between 2020-2030 to implement its Nationally Determined Contributions under the Paris Agreement. This is the cost of the continent’s contribution to limiting warming to 1.5°C and addressing the biggest impacts of climate change. However, annual climate finance flows in Africa stand at only USD 30 billion with private sector contribution at only 14%. This study is critical in identifying opportunities  to attract climate finance flows in addressing climate challenges”.

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Africa’s climate finance challenge sees hope in DI bonds

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  • As Africa gets just $30bn of required $277bn
  • Continent needs $2.8trn 2020-2030 to implement NDCs under Paris agreement

A new study by FSD Africa in partnership with UMOA-Titre (UT) in which Genesis Analytics was commissioned, has found that deploying Development Impact and Social Impact bonds can significantly unlock climate finance flows to address climate change challenges in Africa.

The study carried out in Saint Louis, Senegal’s port city, aimed at developing a study that determines the likelihood of deploying a financial instrument to address climate change, environmental and/or waste management challenges in Saint-Louis, a coastal town with an estimated 1.1 million people.

The impact bonds recommended as financial instruments for challenges facing Saint-Louis include, Social Impact Bonds (SIBs), Development Impact Bonds (DIBs), or Environmental Impact Bonds (EIBs).

Impact bonds such as social impact bonds (SIBs), also known as social bonds or social benefit goods, are a type of financial security that offers capital to the public sector to fund projects that will create better social outcomes, and lead to savings. The Centre for Global Development (CGD) says these bonds are a new development in finance.

According to Climate Policy Initiative (CPI) estimates, Africa requires $277 billion annually to implement its Nationally Determined Contributions (NDCs) and meet the 2030 climate goals. Published with the title: “Landscape of Climate Finance in Africa,” CPI indicates that, so far, Africa’s annual climate finance flows stand at only $30 billion.

The United Nations Framework Convention on Climate Change (UNFCCC) in 2021 said this gap is likely to get even wider as countries often underestimate their financial needs, especially in relation to adaptation, due to data and methodological problems in costing their NDCs. It warned that time is of the essence; delaying action will cost the continent more in the future.

Africa’s climate finance challenge sees hope in DI bondsThe FSD Africa – UMOA-Titre study found that both the physical and socio-economic characteristics in Saint Louis make it vulnerable to climate change. Numerous government and donor-led resilience interventions have been implemented in the area. However, there has been little participation by the private sector at scale. Also, approximately 80,000 of people of the coastal city live in densely populated fishing neighbourhoods, high-risk zones which are constantly under attack from flooding and coastal erosion. Between 2019 and 2020 more than 2,000 people, mostly inhabitants of Saint-Louis’ northern fishing district of Guet N’dar lost their homes due to the rising sea levels. The World Bank estimated that 10,000-15,000 people in the city are either already displaced or live within 20 metres of these high-risk zones. Also, climate change continues to cause rising sea levels, heavier rainfall and higher temperatures in the city, thereby impacting the livelihoods of the local people.

Saint-Louis is the former capital of Senegal and a UNESCO World Heritage site since the year 2000. The city benefits from programmes such as the Safeguard and Enhancement Plan (PSMV), a key legal instrument for the protection of the site adopted in 2008 by the government of Senegal. However, it still faces the effects of climate change with the sea levels on the West African coast rising between 3.5 and 4.0 millimetres annually, which poses an existential threat.

With the new study, the city has a big chance to capture a greater portion of the international climate finance flows available globally, through the deployment of impact bonds.

Reproducing Saint Louis across Africa

It follows that African national governments can successfully reproduce the Saint Louis research success across the continent. The study is due for launch during the forthcoming West African Economic and Monetary Union (WAEMU) Government Securities Markets meetings in Dakar, Senegal.

There is a continental refrain of limited finance to fund climate change resilience and adaptation programmes. It was to deal with these challenges that the Saint Louis study appears to have unveiled solutions such as involving the private sector through impact bonds to widen the capital pool for various projects.

Evans Osano, the director of capital markets at FSD Africa, emphasised that climate action requires significant financial investments.

“Africa requires USD 2.8 trillion between 2020-2030 to implement its Nationally Determined Contributions under the Paris Agreement. This is the cost of the continent’s contribution to limiting warming to 1.5°C and addressing the biggest impacts of climate change. However, annual climate finance flows in Africa stand at only USD 30 billion with private sector contribution at only 14%. This study is critical in identifying opportunities to attract climate finance flows in addressing climate challenges,” Osano said.

The new study highlights the opportunities to tackle flooding, coastal erosion, heavy rains, land and ecosystem degradation, fishery decline, and poor waste management, to improve living conditions for the communities living in Saint-Louis. Funding for the study was provided by the UK government through the Foreign Commonwealth and Development Office (FCDO).

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