Nigeria’s Vice President, Prof. Yemi Osinbajo, said Africa’s share of the global carbon market can be scaled up massively to reach foreign direct investment (FDI) of between $120 to $200 billion annually.
The Vice President stated this during his keynote speech at the Rockefeller Foundation meeting in New York.
He identified a combination of capital flows, job creation, and the avoidance of long-term climate destruction as critical drivers of African leaders’ interest in supporting this effort.
According to him, Africa currently has only a small share of the carbon market. He explained the importance of this projected carbon finance stream, saying:
“For a continent that needs $240 billion annually in mitigation investment alone, this carbon finance stream could be the difference between transitioning and not (transitioning). As all of us in this room understand well, the priorities of the African continent are not just to act decisively on the climate crisis, but to also create significant growth opportunities for our young and growing population.”
“The investment required to advance the energy transition in Africa is huge. World Bank estimates suggest that Africa needs $6.5 trillion US dollars between now and 2050 for mitigation action alone to keep temperatures below 2 degrees of warming.”
VP Osinbajo also highlighted that the carbon market pipeline could create 30 million jobs in the next decade, with the potential to create more than 100 million jobs through climate-aligned projects by 2050.
Africa’s carbon markets: During his speech, VP Osinbajo noted that the rapid progress recorded in Africa benefitted from the support of a very engaged Steering Committee with the United Nations, Global Energy Alliance for People and Planet (GEAPP), USAID, and a range of other public and private actors, which resulted in the successful launch of the African Carbon Markets initiative (ACMI) in Sharm-el-Sheikh, Egypt during the COP-27 event.
“The strong commitment and presence from fellow African leaders demonstrate the willingness and leadership of Africa. We already have 7 African countries (Burundi, Gabon, Kenya, Malawi, Mozambique, Nigeria, and Togo) signed up to develop country carbon activation plans and over $200 million in advanced market commitments, which we must continue to further advance as this is going to be the critical driver of action on the continent.”
“I think it’s an auspicious moment for Africa to be participating more fully in the global carbon market conversation, especially in the light of the slowing pace of green investment flows into the continent. The work several of us have done together in the past few months makes it clear that while other sources of flows are slowing down globally, carbon markets are growing rapidly,” Osinbajo said.
Advancing carbon markets: VP Osinbajo also spoke about the essence of collaborations in developing carbon markets on the continent. He said collaboration is a key to unlocking opportunities in Africa’s carbon markets. He said:
“One of the strong points of ACMI and the way we must structure it going forward, in terms of governance, is the flexibility to smoothly work with other initiatives, and there will be many others. Two days before the opening of Cop 27, Senator John Kerry and I had a conversation about the proposed Energy Transition Accelerator and we both agreed that once the details were worked out, we would work out a collaborative framework with ACMI.
“Carbon markets will play a critical role in the implementation of this (Energy Transition) Plan – in mobilizing the capital required to move to our net-zero economy-wide trajectory. I want Nigeria to have the first Carbon Markets Activation Plan.”
In his contribution, the US Presidential Envoy on Climate Change, Senator John Kerry, commended VP Osinbajo for his leadership on the issue of energy transition. Kerry said:
“We are grateful for the leadership of the VP, grateful for the reception you gave me on my visit to Nigeria. I am honoured to share the platform with you on how to move the African Carbon Market Initiative (ACMI) forward.
“It is possible to create a high-integrity carbon market in a way to address Climate Change and African Development aspirations. We are all joined together looking forward to developing the financing.”
In case you missed it: The ACMI is a new initiative that was launched during the conference of parties (COP 27) event held in Egypt. The ACMI will be led by a fourteen-member steering committee of African leaders, CEOs, and carbon credit experts. The ACMI aims to dramatically expand Africa’s participation in voluntary carbon markets.
A new report has pinned the overall value of nature markets at a huge $10tr – but will it cut through with decision makers at COP15?
The launch of the UN biodiversity talks in Montreal this week has prompted yet another report that attempts to put a financial value on the services nature provides to the global economy.
The, study published by the Taskforce on Nature Markets group this morning, pins the value of”nature markets” at almost $10tr a year, a figure which amounts to roughly 11 per cent of global GDP.
The report, produced with help from McKinsey sustainability analysis outfit Vivid Economics, identifies two dozen markets that are explicitly base on the valuing and trading of nature, ranging from emerging markets such as carbon and biodiversity credits and nature liability insurance to more established markets such as conservation, nature-related tourism, and soft commodities.
The findings were framed by NatureFinance, the group behind the task force, as proof of the need to enhance governance of these so-called nature markets through cross-jurisdictional governance and regulation. The group has warned that embedding rules and incentives in these markets that protect nature are in the interest of the global economy, noting they are likely to lead to improvements on the bottom line for both public and private sectors.
The findings add to a library of reports published recently that have sought to either put a price on nature’s services or highlight the economic benefits they bring and the risks associated with their destruction. NatureFinance analysis is notable, because it specifically explores the role nature plays in the trajectory of 24 specific markets, from agricultural and livestock to nature-based carbon credits.
Jason Eis, executive director of Vivid Economics, said the findings highlighted the need to ensure that governance of these markets benefits nature. “The key is market governance and market infrastructure including features like rules of trade, product and certification standards, taxes and subsidies which could potentially help drive incentives for companies to support nature in responsible ways,” he said.
The Global Biodiversity Framework (GDF) under discussion at COP15 sets out a number of measures around how global systems of governance and finance can be reformed to better protect nature and close a massive $700bn annual biodiversity financing gap by 2030. Target 14 calls for biodiversity values to be integrated into policies, regulations, planning, development processes, poverty reduction strategies, accounts, and assessments of environmental impacts at all levels of governance. This integration of nature into policymaking dovetails with the aim of Target 19 in the draft text, which calls for a rapid acceleration in both public and private finance towards nature conservation and remediation, in particular in the Global South.
Simon Zadek, co-lead of the Taskforce Secretariat and executive director of NatureFinance, said it was critical that funding for biodiversity was not limited to foreign aid. “By redesigning nature
markets to include nature positive instruments and policies in their governance, we can include a broader array of financial tools and move beyond Official Development Assistance (ODA) as the principal source of biodiversity funding,” he said. “We have a unique opportunity to reshape the core logic of these markets so that nature positive, net zero and equitable outcomes are built into the way they operate.”
The start of the COP15 Summit this week has also been accompanied by the launch of a number of new products designed to help companies and investors track and reduce their exposure to nature-related risks or quantify the benefits generated by nature-positive investments.
For example, a new ratings agency launched by the African Leadership University’s School of Wildlife Conservation (ALU’s SOWC), consultancy firm Dalberg, and FSD Africa Investments is aiming to help investors measure, rate, track and communicate the positive impacts their investments have on biodiversity.
The new Biodiversity Investment Rating Agency is set to advise investors on identifying the opportunities for impact investing in biodiversity-related projects, spotlighting relevant frameworks to measure biodiversity investment impacts. “Institutional investment in biodiversity as an asset class will be the key to unlocking the billions of private capital we need to address climate change and promote the business of conservation,” said Mike Musgrave from the SOWC.
Anne-Marie Chidzero, CIO at FSD Africa Investments, said the Biodiversity Investment Rating Agency would “help investors measure and track the impact of their capital on biodiversity conservation and restoration will play a central role in increasing investment in the sector”.
Meanwhile, British start-up NatureMetrics has this morning announced the launch of a new nature performing monitoring service for companies, designed to help them continually monitor their impact on nature.
“By launching the world’s most accurate nature performance monitoring system, companies across the globe will have one simple-to-deploy tool, enabling them to understand, track and improve their natural capital,” said Katie Critchlow, CEO of NatureMetrics. “Through cutting edge environmental DNA technology, we’ve devised a way of turning complex nature data into simple and meaningful metrics to inform board room level decisions for business and nature.”
Attempts to measure and price nature remain controversial in some quarters, and the surge of new products and reports that frame nature as an asset class or cluster of markets will be met by criticism from some green groups as the talks get underway in Montreal. Some campaigners have long argued that appealing to companies and countries’ financial self-interest panders to the root cause of the destruction of nature – the pursuit of economic growth. There is also a debate around whether the focus on environmental risk disclosures and measuring natural capital is inadvertently helping companies to defer actions that can deliver a more nature-positive world.
The counterargument, of course, is that quantifying nature’s services can drive change rapidly and at scale, because translating natural assets into financial terms will inevitably hit home with governments and in boardrooms. There is also strong sense among companies that the introduction of nature risk reporting into financial accounts is an important first step in their journey towards becoming nature-positive operations and giving investors insights they need to divert capital towards greener businesses. More than 300 companies have expressed their support for any deal reached at COP15 to include rules that would make nature risk reporting mandatory at large companies and financial institutions.
At any rate, NatureMetrics headline $10tr figure for the value of nature markets is clearly designed to shock governments and businesses assembled at COP15 into delivering a deal that can secure future economic growth by protecting nature. Delegates should take note.
Earlier this year, Ethiopia launched Ethiopia Investment Holdings (EIH), a new sovereign wealth fund, in a bid to spur foreign direct investment under a wider programme of privatisation and financial liberalisation. EIH has since announced its intention to establish the Ethiopian Securities Exchange (ESX).
Working with the finance ministry and the specialist markets development agency FSD Africa, EIH expects the exchange to launch in two years, with 50 companies initially listed.
At least 50 companies are expected to list when Ethiopia’s stock exchange launches. The country’s new $38bn sovereign wealth fund Ethiopia Investment Holdings (EIH) is working with the Ministry of Finance and Nairobi-based FSD Africa to set up the Ethiopian Securities Exchange (ESX) with an aim to get it operating by end 2023 or in the first half of 2024.
Ethiopia Investment Holdings has set up a project team with FSD Africa, backed by British Government development aid, and in September was inviting consultants to bid for a fund-raising drive to raise capital for the new bourse. The project team is to develop the ESX business plan and its structures, as well as outlining the market segments. It is also to lead developing the ESX trading rules, policies and procedures, the ESX trading and operating systems, and other ICT infrastructure. It will set the ESX into operations and launch it.
According to this news report on Capital Ethiopia,FSD Africa is funding technical support, legal advice and costs to get the stock exchange operational. The Ethiopian Securities Exchange will be a key step forward in capital markets development in Ethiopia as we highlighted in aprevious editorial.
The Capital Markets Proclamation (No. 1248/2021) says the exchange will be established as a Share Company (public company in Ethiopian law) by Government in partnership with the private sector, including foreign investors. Between 25% and 55% of the ownership of the ESX will be for corporations, capital market intermediaries and operators of international securities exchanges, while Government will not own more than 25%. It will be a for-profit entity.
According to the FSDA, “At least 50 companies, including banks and insurance companies, are expected to list at the launch of the exchange. The exchange is designed to provide a fundraising platform for small and medium-size enterprises, which are the backbone of the Ethiopian economy. The exchange will also offer a platform for the privatisation of Ethiopia’s state-owned enterprises.
“In the past few years, the Government has implemented several reforms to open the economy and the launch of a securities exchange will be a catalyst for attracting new investment from the private sector.” The exchange will be a platform for the privatization of Ethiopia’s state-owned enterprises and will help Ethiopian businesses, including small and medium-size enterprises to raise capital.
The Ministry, EIH and FSDA signed a cooperation agreement to launch the bourse on 18 May 2022. Finance Minister Ahmed Shide said the cooperation agreement “… is a first concrete step towards realizing our vision.”
Mark Napier CEO of FSDA, added: “Our assistance… will leverage FSD Africa’s vast expertise and experience in developing capital markets infrastructure across Africa. This support signals our long-term commitment to a thriving capital market that is deep, liquid, and efficient.”
The next day a local agency, FSD Ethiopia, was launched to maintain the momentum. The timetable has become more realistic since 2019, when the exchange was flagged for 2020.
Meanwhile, work continues to build the Capital Market Authority regulator. In November 2021, Meles Minale, a senior macroeconomic advisor at the National Bank of Ethiopia (central bank) was appointed to chair a team of 14 experts to explore the establishment of the Authority. They report to Yinager Dessie, Governor of the NBE. According to this report by United Nations Development Programme, in June 2022, the NBE’s Capital Market Project Implementation Team (CMPIT) outlined a 10-year implementation plan and a roadmap with 4 pillars: market development, infrastructure development, capacity development and policy reviews.
Prime Minister Abiy Ahmed will appoint a director and a deputy director for the Authority, which will be a federal agency accountable to Parliament. Its role includes safeguarding investors and overseeing the integrity of the capital market and supervising securities brokers, investment advisers, collective investment scheme operators, investment bankers and securities dealers.
EIH is a key shareholder in the ESX and is also likely to boost the exchange with a pipeline of listings, at least of minority stakes, in its $38 bn business portfolio. According to a EIH statement: “ESX will democratize corporate ownership of the nation’s largest and most influential companies, empowering Ethiopians with a direct stake in their country’s economic infrastructure.”
Observers believe it could still be two years before the ESX opens its doors for trading. It is expected to trade equities, derivatives, financial and debt securities, and FX (currency exchange) contracts. The country lacks stockbrokers, investment advisors, fund managers, custodians and many others.
A team from Ethiopia, including Ethiopia Investment Holdings CEO Mamo Esmelealem Mihretu and FSD Ethiopia CEO Ermias Eshetu, came to AFSIC 2022 conference in London in October to meet potential investors and discuss progress on the stock exchange.
AFRICA needs to mobilise a staggering US$170 billion annually in long term financing to develop infrastructure key sectors, agriculture included to accelerate growth dwarfed by the COVID 19, conflicts and climate change.
Faced with an overarching ‘debt overhang’ buffeting many of the continent’s 54-member states, the African Development Bank is dangling two options; float Green Bonds on security markets or entice cooperating partners to secure finance and close the continent’s current annual US$108 billion infrastructure financing deficit to close the gap.
The AfDB in noting Africa’s infrastructure predicament amid the crisis that linger over the continent with lust to integrate and industrialise and make it competitive in intra and international trade practices has two immediate options to use capital market instruments or draw donors to the table.
Africa’s predicament has further been heighted by geopolitical influence and‘ a debt overhang’ that hinder the attainment of the much-espoused sustainable development in all growth sectors including agriculture, SMEs, among others, hence the need to stimulate financing options.
Officiating at the three-day- 2022 African Long Term Finance Workshop dubbed: “Financing Africa Sustainable Development in Times of Global Headwinds” in Lusaka, AfDB’s country Manager-Zambia, Raubil Olaniyi Durowoju believes the funds can be mobilized to create ‘resilient infrastructure’ and enhance sustainable growth in key sectors in its 37-member states.
In 2019, the Pan African financial institution had in collaboration with Germany Cooperation (GIZ) GmbH, Financial Sector Deepening Africa (FSD) Africa and the Making Finance Work for Africa (MFW4A) sought to improve intermediation of LTF on the continent by strengthening knowledge generation and dissemination through the creation of a database and scored board to act as comparative indicators of the level of development for the fund.
The diagnostic efforts so far undertaken in three countries, Cote d’Ivoire, Ghana and Ethiopia as part of the market data intelligence, has however not been sustained for various administrative reasons although there is still zeal by the AfDB to sustain the research to determine the countries’ capabilities.
However, the willingness of Central Bank across the member states to assist in data collection have raised hope to supplement AfDB’s efforts to attain the objectives of the LTF initiative and help capture an accurate hope to improve data collection picture on the continent, raising a ray of hope for the attainment of LTF.
Mr. Durowoju calls for the unlocking of the potential endowed in 37-member states to access LTF through the creation of credible databases through enhanced policy reform while striving to make the database creation as LTF ‘one -stop-shop as priority for the realization of the long-cherished dream.
“We the AfDB hope to improve data collection on the continent and strengthen the quality of available data, ultimately, we hope to encourage more dialogue between policymakers, governments and financial stakeholders to create a synergy that will provide solutions to our financing deficit and support African financial sectors and economies,”
And Zambia’s Central Bank Governor, Denny Kalyalya expressed the country’s unwavering desire to complement the data collection as sought by the AfDB and that the success of the LTF was vital for Africa’s quest to raise resources for infrastructure development to become resistant to climate crisis.
Dr. Kalyalya acknowledges the theme adopted at the Lusaka-three-day conference, propping a drive for LTF that has been endorsed by the Breton Woods institution-IMF for Africa to raise a staggering US$30-50 billion in additional funds per year for climate change adaptation through among other instruments, the Green Bonds, an alternative to debt accruals as it seeks to invest in infrastructure.
He acknowledges the risks associated with the climate change effects which has prompted policy makers to pay attention to the devastations and are actively taking steps to counter the effects.
The lingering effects of COVID 19 pandemic on world economies further serves to emphasis the unwavering need to raise LTF.
The heightening geopolitical unrest as evidenced in the Russia-Ukraine war and recent inflationary pressures have heightened economic uncertainty globally, de facto, limiting fiscal space on the continent.
The Lusaka-based Bank of Zambia realizes the need to partner in the data collection and compilation and foster the generation and disbursement of the would-be funds for the intended purposes, though regrets the slow pace at which the diagnostic process was undertaken-covering a paltry three countries, hopeful the exercise would be revisited and expedited to allow Africa raise LTF.
“The Bank of Zambia is pleased to take part in the significant project and I can confirm that the BOZ has completed all necessary steps to submit the requested data for 2022,” he said in a speech read on his behalf by Ms. Gladys Mposha, the director, Bank supervision
COP27 may be over but its impact will be felt for many decades to come.
Discussions highlighted nature’s pivotal role in tackling the climate crisis.
Here we reflect on 10 areas where progress is being made on climate action.
The implications of COP27 will likely be felt for decades to come, for better or worse. While a broad range of analysis has already been published on the ultimate outcomes of COP27, this summary includes reflections on how nature was the stand out topic at COP27 – here are the top ten takeaways.
1. Calls for structural reform of finance for nature and climate
It was impossible to pass a day at COP27 without having a conversation about finance – but finance means different things to different people. The breakthrough on loss and damage funding made the headlines, but this year there was much attention on structural reform of the financial system as well as the need to create innovative mechanisms that support nature and climate outcomes at national and ecosystem levels.
The Bridgetown agenda remained a central theme within these discussions. Before COP27, there was much focus on the need for financing adaptation measures – although in fact, very little progressed on this agenda from Glasgow. The multilateral development banks are also under scrutiny – sovereign bonds and sustainability-linked loans and bonds have been high on the agenda. Leading financial institutions from Japan to Norway to Brazil, all signatories to the Financial Sector Commitment on Eliminating Commodity-driven Deforestation have been moving forward with implementation through the Finance Sector Deforestation Action (FSDA) initiative.
FSDA members have published shared investor expectations for companies, and they are stepping up engagement activity and are working with policymakers and data providers. More broadly, the 10 point plan for financing biodiversity moved ahead at COP27 with a ministerial meeting between 16 countries representing five continents to set a pathway for bridging the global biodiversity finance gap – and looking ahead to the biodiversity COP15 in December 2020.
2. Biodiversity COP15 looms large
The biodiversity COP is usually a distant cousin to the climate COP, but in Egypt there was a considerable amount of attention on the need to create a “sister agreement” – a Paris moment for nature. The messaging that the climate and nature crises are deeply linked was made loud and clear at COP27.
On Biodiversity Day, the Paris climate champions urged leaders to step up action to address the accelerating loss of nature by delivering an ambitious biodiversity agreement at COP15 in Montreal. On the same day, more than 340 civil society leaders called on governments to prioritise the biodiversity COP, and a new survey from more than 400 experts from 90 countries revealed that a shocking 88% believe that the state of the world’s nature is “alarming” or “catastrophic and potentially irreversible”.
However, even though many countries were pushing for COP15 to be included in the COP27 text, the attempt failed – a disappointing outcome as net-zero emissions will not be enough to limit rapidly rising temperatures. Governments also need to halt and reverse biodiversity loss by 2030.
3. Strong signs of political will for forests
The creation of the Forest and Climate Leaders’ Partnership (FCLP), announced at the World Leaders’ Summit, is being driven by the reality that there is no time to lose when it comes to halt and reverse forest loss by 2030, with the intent to demonstrate success by COP28. The leaders of the 28 – and counting – FCLP member countries serve as key actors in the partnership, and its ultimate priority setters.
The FCLP will hold regular meetings, including leader-level moments at the beginning of climate COPs to encourage accountability. Starting in 2023, the FCLP will also publish an annual Global Progress Report that includes independent assessments of global progress toward the 2030 goal, as well as summarising progress made by the FCLP itself, including in its action areas and initiatives.
The presence of Brazil’s president elect, Luiz Inacio Lula da Silva, put a spotlight on the Amazon at COP27 – with Brazil promising to prioritise stopping deforestation and offering to host COP30 in three years’ time. Also, an announcement by Brazil, Indonesia and the Democratic Republic of Congo – made in Indonesia ahead of the G20 – signalled their intentions to work together to protect their vast swathes of tropical forests, earning the nickname “the OPEC of rainforests”.
This chart shows the total hectares of forest that have been destroyed in different countries. Source: Statista.
4. Implementation of forest pledges
Coming into COP27, there were clear signs that the global community is not yet on track to halt and reverse forest loss and degradation by 2030. Another UN-led report found that for 2030 goals to remain within reach, a one gigaton milestone of emissions reductions from forests must be achieved not later than 2025, and yearly after that, but that current public and private commitments to pay for emissions reductions are only at 24% of the gigaton milestone goal.
However, it wasn’t all bad news on the implementation front. Nature4Climate’s new joint commitment tracker found that 55% of the commitments tracked are demonstrating substantial signs of progress. There are also some bright spots to celebrate. For example, tropical Asia is on the path toward reversing forest loss by 2030: Indonesia’s deforestation rate dropped by 25% last year, and Malaysia also reported a fall of 24% in the pace of forest loss last year.
Forest pledges made in Glasgow at COP26 were also in the spotlight. In 2021, $2.67 billion was put towards forest-related programmes in developing countries – 22% of the $12 billion pledged at COP26, meaning that donors are on track to deliver by 2025. Private sector funds are also moving: for example, one year after launch, the IFACC initiative is scaling innovative financial mechanisms to help farmers without further conversion of the Amazon, Cerrado and Chaco ecosystems.
So far, commitments have risen from $3 billion to $4.2 billion and disbursements are expected to exceed $100 million this year. Similarly, the public-private LEAF Coalition has mobilised an additional $500 million in private finance, bringing a total of $1.5 billion in support of tropical forest protection. This is part of $3.6 billion of new private finance announced at the climate summit.
And exciting private sector initiatives worth noting include the launch of a new company Biomas (by Suzano, Santander, Itau, Marfrig, Rabobank and Vale) to restore 4 million hectares in the Amazon, the Mata Atlantica rainforest and the Cerrado. Also, 1t.org announced pledges from its first four Indian companies (Vedanta, ReNew Power, CSC Group and Mahindra) to join 75 other companies worldwide committed to planting and growing 7 billion trees in more than 60 countries.
5. Nature of negotiations
In the negotiations, nature-based solutions were included in the COP27 text for the first time, with forests, oceans and agriculture each having their own section. The Koronivia Dialogue – the track where food and agriculture is discussed at the UNFCCC – has finally been included in the text, but all eyes turn to COP28 for the focus required to truly transform food systems.
In the wonderful world of Article 6, things remain complex. Last year, at COP26 in Glasgow, countries decided on the basic framework of Article 6. Throughout 2022, countries have been focused on how to operationalise the Article 6 mechanism that allows countries to actually begin trading. In Egypt, the discussions were very technical – such as how registries are going to work, how countries will report on the trading, and what information should be submitted –with the aim of making things easy to track.
For nature, it was decided at COP26 that land use emissions were part of Article 6 – as it includes all sources and sinks. The focus in Egypt has been on article 6.4 – the mechanism for developing guidance on activities involving removals which includes reforestation, restoration, afforestation etc.
6. Technology meets nature
In a similar way to finance, “tech” gets everywhere at climate COPs, although historically that is not really the case when it comes to nature – not this year however. In Egypt, the need for high-tech solutions for nature and climate challenges was a constant refrain. The role of tech in improving transparency and accountability in monitoring supply chains (and tackling deforestation) and also in enhancing the integrity of carbon markets was evident everywhere.
Notable developments include Verra’s partnership with Pachama to pilot a digital measuring, reporting and verification platform for forest carbon. A new Forest Data Partnership was announced by WRI, FAO, USAID, Google, NASA, Unilever and the US State Department. WRI’s Land and Carbon Lab was on show demonstrating the new frontier of measuring carbon stocks and flows associated with land use.
Nature4Climate demonstrated a beta version of its new online platform (naturebase) to help decision makers implement natural climate solutions. And the new Global Renewable Energy Watch – a partnership between The Nature Conservancy, Microsoft and Planet – was also demonstrated. Capturing this emerging trend, Nature4Climate and Capital for Climate launched a report on the size and potential of the whole “nature tech” market that was discussed at an event in the Nature Zone.
7. Food finally arrives on the scene
Food was on everyone’s mind at COP27 in Egypt – but for the first time, it also made it onto the main agenda – being recognised in the final text and also with at least five event spaces solely dedicated to food and agriculture.
Important developments included the Food and Agriculture for Sustainable Transformation Initiative (FAST) launched by the Egyptian COP presidency – a multi stakeholder partnership to accelerate access to finance, build capacity and encourage policy development to ensure food security in countries most vulnerable to climate change.
Also related to food, 14 of the world’s largest agricultural trading and processing companies shared their roadmap to 1.5℃ – to mixed reactions – with detailed plans on outlining how they will remove deforestation from their agricultural commodity supply chains by 2025.
8. An increasingly blue COP
Observers have expressed encouragement at this being “an increasingly blue COP”, with the ocean called out in the final declaration and the first ever ocean pavilion in the blue zone. Several declarations reinforced the recognition of the fundamental role of the ocean in the climate system.
The critical role that Indigenous peoples and local communities (IPLCs) play as guardians of the forest is now firmly established and beyond question. At COP27, there was a polite but palpable frustration from IPLCs that climate funds are not reaching them. This massive deficit is increasingly being acknowledged by both by Indigenous and non-Indigenous actors, with a wide range of events dedicated to this topic.
While COP27 was a good space for Indigenous and non-Indigenous actors to share knowledge, to listen deeply to one another, to build relationships, it clearly can’t be the only space. While there are a number of encouraging signs of progress, including linking IPLCs with high-integrity markets, it’s clear the clock is ticking and IPLCs are getting impatient.
Clearly we must act with urgency, but it’s critical to take the time to build trust and mutual understanding, including absolute adherence to free, prior and informed consent protocols. This is necessary so that IPLCs can decide (or not) to participate in carbon markets with transparency, full understanding, and free consent. This takes time.
10. African-led initiatives take centre stage
While this was not the “African COP” that many hoped it might be, there were still a range of significant announcements coming out of Egypt that highlighted the continent’s potential as a natural capital powerhouse. These included the launch of the Africa Carbon Markets initiative, the Declaration for the Africa Sustainable Commodities Initiative, the launch of a $2 billion African restoration fund, a funding boost for Africa’s visionary Great Green Wall initiatives, and the announcement by the Global EverGreening Alliance and Climate Impact Partners of a new partnership to up to $330 million in community-led removal programs across Africa and Asia.
At An Average Investment Of USD 250 Billion Annually From 2020 To 2030
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.
To overcome these challenges will require innovation in financing structures. But there is no one-size fits all. 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 deployment of innovative finance include:
Identify and understand barriers constraining finance by sector and geography. Private investors must have the data to assess the risks affecting each investment decision based on its geographic and sectoral context. Building on their role as a catalyst for change, public investors should then deploy capital in a targeted way to address the specific barriers constricting private investment.
Match instruments with barriers. Public and private investors must tailor their financial instruments and strategies depending on the acute or chronic- nature of the barriers identified. The framework developed in this CPI study can serve as a toolbox for investors to access when reviewing investment opportunities in climate solutions.
Match instruments with project and technology lifecycles. As climate investments are typically long-term opportunities, investors must look to deploy different financial instruments and strategies in direct response to lifecycle-dependent considerations.
Enhance engagement and co-financing with local stakeholders. International private and public investors must work in collaboration with local stakeholders. This can help build capacity among local investors and inform targeted action by governments to improve investment performance.
Support innovation by establishing conducive policy and regulatory frameworks. Governance barriers remain one of the key impediments to sourcing climate finance in Africa. Most importantly, policymakers and regulators can foster climate finance innovation by adopting policy frameworks and long-term roadmaps.
This work provides a framework for how these instruments and strategies can be efficiently deployed to overcome barriers to finance and capitalise climate solutions in Africa. Real-world examples include:
TerraFund for AFR 100 has deployed a standardized process to deploy early-stage catalytic finance and technical assistance to spur the growth of grassroots innovators operating in the challenging land restoration sub-sector. It has mobilized USD 20 million in its initial round of investment, doubling the fundraising target it set out to raise over three years in 2020.
The Sub-National Climate Finance Initiative’s use of blended private equity and technical assistance to overcome the project and governance barriers facing investment in mid-sized climate infrastructure projects. To date, it has secured USD 150 million in funding for its blended equity fund.
Revego Africa Energy’s strategy of aggregating a diversified portfolio of operating renewable energy assets into Africa’s first YieldCo to attract investment from key/blue chip institutional investors. With support from a public-private partnership between Macquarie and the UK Government, Revego has secured institutional capital from one of the largest pension funds in South Africa.
This brief provides an overview of financial and non-financial solutions to address sector specific barriers. It provides six groups of practical instruments: non-tradable finance instruments; capital market instruments; result-based finance instruments; risk mitigation instruments; structured finance mechanisms and non-financial tools. Each of these tools has the potential to address one or more of the barriers currently hindering climate investments in Africa.
As the international climate community prepares to descend on Sharm el-Sheikh in Egypt, new analysis shows just how far off their host continent is in terms of attracting the finance it needs to adapt to catastrophic global warming, build renewable energy plants and enhance its carbon-absorbing ecosystems.
At $30 billion, annual climate finance flows in Africa are just 11% of the $277 billion needed, according to research published Wednesday by the Climate Policy Initiative, a US-based nonprofit. The research was commissioned by FSD Africa, an organization funded by the UK government, the Children’s Investment Fund Foundation, a charity set up by billionaire hedge fund activist Christopher Hohn, and UK Aid. It’s the first to map climate finance flows in Africa by region, sector and source, and captures available data for 2019 and 2020.
Top of the agenda at the November UN climate summit in Egypt, known as COP27, will be demands from developing nations for more funding from rich countries to adapt to global warming and a financing mechanism to help them cope with natural disasters and extreme weather events. In 2009, developed countries committed to $100 billion of assistance for poorer nations every year. They have fallen significantly short of that target.
Africa accounts for a tiny fraction of the world’s carbon emissions but its nations will be among the hardest hit by global warming, already manifested globally in disasters ranging from heat waves in Europe to droughts in the Horn of Africa and floods in Pakistan.
“A report such as this allows us to measure whether the commitments of developed countries to provide finance to developing countries, is indeed being delivered,” said Valli Moosa, deputy chairman and effective head of South Africa’s Presidential Climate Change Coordinating Commission, in a statement.
Private sector finance in particular remains too low, the Climate Policy Initiative said in the report. Companies and commercial financial institutions contributed just 14% of total climate finance received in Africa, much lower than in other developing regions.
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Existing flows are highly concentrated, with 10 of the 54 countries on the continent accounting for more than half of Africa’s climate finance. These include Egypt, Morocco, Nigeria, Kenya, Ethiopia and South Africa. The Southern African region bears the largest financing gap in absolute terms, attributed by the researchers to the $107 billion annual needs of South Africa alone, combined with one of the lowest regional levels of climate investment. As a percentage of gross domestic product, countries in Central and East Africa face the largest investment gaps.
Investment Opportunities
South Africa, the continent’s most industrialized nation, is transitioning from reliance on coal for more than 80% of its electricity to renewable energy, meaning that billions of dollars will need to be spent on new power plants and an expanded electricity grid.
“Public and private actors must act with scale and speed to help bring Africa’s climate goals to fruition,” said Barbara Buchner, global managing director of the Climate Policy Initiative. “Africa offers a wealth of climate-related investment opportunities” and “the social, economic, and environmental benefits which could be realized are even greater,” she said.
Those investment opportunities are spread across a number of sectors, including clean energy plants and agribusiness. Annual investment in renewable power stands at just 7% of the $133 billion that the International Energy Agency estimates African countries need to meet their 2030 energy and climate goals, according to the research. Agriculture and forestry investments are also falling short of financing needs.
Several venture capital firms are actively hunting startups while others are building up their war chests to capitalise on existing opportunities – including the take-over of successful and promising energy startups.
Nairobi. Startups working to mitigate climate change in Africa have caught the eye of investors as venture funds flow into technology that could shape the future of energy on the continent.
Investment into African tech startups that focus on mitigating climate change is beginning to rise, following a global trend – albeit at much lower valuations than elsewhere.
Since the start of the year, green tech startups offering solutions that help countries keep to the Paris Agreement’s goal of limiting global warming to below 1.5 degrees Celsius have attracted growing investor interest.
Several venture capital firms are actively hunting startups while others are building up their war chests to capitalise on existing opportunities – including the take-over of successful and promising energy startups.
The recent acquisition of Ghana-based solar energy startup, PEG Africa, by UK-based power company, Bboxx is among the most significant deals in this vertical, so far.
PEG, with a pay-as-you-go solar home system, has a customer reach of one million. The company, already present in Senegal, Ghana, Mali and Ivory Coast, is served by over 500 employees in 100 centres. Reports value the deal at US$ 200 million.
“The agreement was closed on 6th September 2022. Financials have not been disclosed,” said Bboxx in a statement.
Following the deal, the two became the fastest-growing clean energy firms on the continent, with a combined customer base of 3.5 million across 10 African countries.
Canadian investor FinDev Canada pumped US$ 13 million into the Energy Entrepreneurs Growth Fund (EEGF) in January. EEGF invests in early and growth-stage energy startups in sub-Saharan Africa.
The fund – founded by oil marketer Shell – seeks to increase access to clean energy for households and off-grid businesses in the region.
Two months ago, Africa’s Climate Venture Builder, Persistent Energy, closed a $10 million series C funding round to strengthen its team and scale climate activities in Africa. It said the funding has the potential to improve 2 million lives, create 6,000 green jobs and cut 700,000 tonnes of carbon emission.
“By leveraging powerful partnerships, we will be able to accelerate our most pioneering venture building investments, driving the transition to clean energy, promoting e-mobility and finding innovative business models and technological developments across the continent,” said Persistent Managing Partner, Tobias Ruckstuhl.
Over the last two decades, Persistent has engaged in 22 early-stage investments in pay-as-you-go- solar home systems, commercial and industrial solar, as well as e-mobility players including Kenya’s e-mobility startup, Ecobodaa.
Boston-based venture accelerator, Catalyst Fund has announced plans to begin funding Fintech and climate resilience startups in Africa starting October 2022.
“We are actively looking for early-stage startups that improve the resilience of underserved and climate-vulnerable communities in emerging markets. Our next cohort will kick off in October 2022,” announced the venture firm.
It is looking for startups offering solutions in recycling, sustainable agriculture, carbon credits and sustainable utilities like water management and clean energy. Already, the fund has received $3.5 million from FSD Africa to support these initiatives.
Research firm Magnitt, shows energy startups raised hundreds of millions of dollars in the first half of 2022. Africa energy startups drove 67 percent of this capital.
A comparative report, State of Climate Tech 2021 by advisory firm PwC also highlights the growing attractiveness of the sector across the globe.
According to the report, investments in climate tech surged in the first half of 2021, to US$ 87.5 billion globally, from a low of US$ 28 billion in the second half of 2020.
“Though this area presents a major commercial opportunity, due to the inherent value associated with reducing emissions, there is still much work to be done to channel this investment appropriately,” said PwC researchers.
US climate tech firms raised the largest share (US$ 56.6billion), followed by Europe and China (US$ 18.3 billion and US$ 9 billion respectively). Most of this capital funding growth targetted electric vehicles.
This article was submitted to TechCabal by Conrad Onyango, bird story agency*
Investment into African tech startups that focus on mitigating climbing change is beginning to rise, following a global trend – albeit at much lower valuations than elsewhere.
Since the start of the year, green tech startups offering solutions that help countries keep to the Paris Agreement’s goal of limiting global warming to below 1.5 degrees Celsius have attracted growing investor interest.
Several venture capital firms are actively hunting startups while others are building up their war chests to capitalise on existing opportunities – including the take-over of successful and promising energy startups.
The recent acquisition of Ghana-based solar energy startup, PEG Africa, by UK-based power company, Bboxx is among the most significant deals in this vertical, so far.
PEG, with a pay-as-you-go solar home system, has a customer reach of one million. The company, already present in Senegal, Ghana, Mali and Ivory Coast, is served by over 500 employees in 100 centres. Reports value the deal at US$ 200 million.
“The agreement was closed on 6th September 2022. Financials have not been disclosed,” said Bboxx in a statement.
Following the deal, the two became the fastest-growing clean energy firms on the continent, with a combined customer base of 3.5 million across 10 African countries.
Canadian investor FinDev Canada pumped US$ 13 million into the Energy Entrepreneurs Growth Fund (EEGF) in January. EEGF invests in early and growth-stage energy startups in sub-Saharan Africa.
The fund – founded by oil marketer Shell – seeks to increase access to clean energy for households and off-grid businesses in the region.
Two months ago, Africa’s Climate Venture Builder, Persistent Energy, closed a US $ 10 million series C funding round to strengthen its team and scale climate activities in Africa. It said the funding has the potential to improve 2 million lives, create 6,000 green jobs and cut 700,000 tonnes of carbon emission.
“By leveraging powerful partnerships, we will be able to accelerate our most pioneering venture building investments, driving the transition to clean energy, promoting e-mobility and finding innovative business models and technological developments across the continent,” said Persistent Managing Partner, Tobias Ruckstuhl.
Over the last two decades, Persistent has engaged in 22 early-stage investments in pay-as-you-go- solar home systems, commercial and industrial solar, as well as e-mobility players including Kenya’s e-mobility startup, Ecobodaa.
Boston-based venture accelerator, Catalyst Fund has announced plans to begin funding Fintech and climate resilience startups in Africa starting October 2022.
“We are actively looking for early-stage startups that improve the resilience of underserved and climate-vulnerable communities in emerging markets. Our next cohort will kick off in October 2022,” announced the venture firm.
It is looking for startups offering solutions in recycling, sustainable agriculture, carbon credits and sustainable utilities like water management and clean energy. Already, the fund has received US $ 3.5 million from FSD Africa to support these initiatives.
Research firm Magnitt, shows energy startups raised hundreds of millions of dollars in the first half of 2022. Africa energy startups drove 67 percent of this capital.
A comparative report, State of Climate Tech 2021 by advisory firm PwC also highlights the growing attractiveness of the sector across the globe.
According to the report, investments in climate tech surged in the first half of 2021, to US$ 87.5 billion globally, from a low of US$ 28 billion in the second half of 2020.
“Though this area presents a major commercial opportunity, due to the inherent value associated with reducing emissions, there is still much work to be done to channel this investment appropriately,” said PwC researchers.
US climate tech firms raised the largest share (US$ 56.6billion), followed by Europe and China (US$ 18.3 billion and US$ 9 billion respectively). Most of this capital funding growth targetted electric vehicles.
