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”.
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.
The 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).
Thousands of delegates gathered for the 2022 United Nations biodiversity conference (Cop15) in Montreal in December, tasked with finding a pathway to halt the alarming decline in global biodiversity. The negotiations eventually produced a landmark agreement to protect 30% of the Earth’s land and oceans by 2030, along with a host of other targets to reduce the loss of biodiversity.
While the agreement was signed by national governments, private sector representatives were conspicuous by their presence at the conference. But financial institutions have increasingly been making commitments to protect and enhance biodiversity in recent years, giving rise to a plethora of new jargon.
“Nature-based investing” – where investors provide benefits to nature and ecosystems, alongside achieving a financial return – is the latest buzzword. At the heart of this approach is the acknowledgement that “natural capital” – in other words, the Earth’s biodiversity and natural resources – provides benefits, often defined as “ecosystem services”, to the human population.
Nature is clearly indispensable to many economic activities. In Kenya, for example, tourism is making rapid progress in recovering to pre-pandemic levels, when it generated over 8% of GDP, and the tourist trade depends heavily on the lure of the country’s wildlife. Threats to biodiversity and ecosystems in Africa and around the world are therefore an issue of profound importance for investors, as well as governments.
“We have been losing natural capital at such an incredible rate over the last 60 or so years, and the pressure from consumption and demographics is so huge, we are now at that point in time where there’s just not enough resources to go around,” warns Alejandro Litovsky, CEO of consulting firm Earth Security. “There’s a real question around the operating conditions for companies and assets that depend on the services that have been free for a very long time.”
The sixth extinction?
The gravity of the crisis facing nature has sometimes been overshadowed by the climate crisis (which is itself one of the main drivers of biodiversity loss). But the data on nature makes for grim reading. Over 6,400 species of animals and 3,100 species of plants in Africa are at risk of extinction, according to the International Union for the Conservation of Nature.
Globally, the scale of the disaster is such that many scientists argue that the Earth is entering its sixth period of mass extinction. This puts the current biodiversity crisis on a par with the asteroid strike that wiped out the dinosaurs 65m years ago.
The destruction of vital ecosystems across many parts of the world is the consequence of prevailing economic models prioritising short-term gain at the expense of long-term sustainability. “I spend a lot of time with African leaders,” says Kaddu Sebunya, CEO of the African Wildlife Foundation, “and they’ll tell you frankly that ‘the global economy doesn’t pay or reward me if I secure forests. But they reward me if I cut down the forest and export sugar.’”
But when habitats are lost or damaged, it is often humans who pay the ultimate price. The devastating mudslides that hit Freetown, Sierra Leone, in August 2017, killing over 1,000 people, were partly caused by deforestation on hillsides around the city. As the city grew, its surrounding hills lost much of the tree cover that had held soils together and provided a natural drainage mechanism.
In the aftermath of the tragedy, Freetown has become one of the pioneers of nature-based investing in urban areas in Africa, according to John-Rob Pool, senior manager at the World Resources Institute. Among other initiatives, the city is establishing a ‘water fund’ as a public-private partnership to protect nearby areas of forest that provide Freetown with its water supply.
Other African cities can benefit from following Freetown’s example, says Pool. “Nature-based solutions, when implemented and deployed properly, can be really useful in improving air quality, in reducing extreme urban heat, improving the quality and the supply of water, in reducing the risk of landslides and flooding, and so on.”
The Chinese minister of ecology and environment, Huang Runqiu (L), shakes hands with the DRC’s environment minister, Ève Bazaiba Masudi at the 2022 UN biodiversity conference in Montreal, Quebec. (Photo: Lars Hagberg / AFP)
Financing dilemmas
The 2022 UN biodiversity conference produced a historic agreement on biodiversity – but the conference concluded in controversial circumstances. In declaring the text of the agreement to be final, the Chinese president of the conference ignored the objection of the Democratic Republic of the Congo, which was continuing to seek additional financial commitments from wealthy nations.
“We didn’t sign the agreement,” Ève Bazaiba, the DRC’s environment minister, said. “It is not possible for us to implement it. We cannot accept the level of ambition without more finance.”
The UN Environment Programme states that the private sector currently provides only 17% of total investments into nature-based solutions. It estimates that total financing will need to more than double, to $384bn a year by 2025, in order to meet biodiversity goals.
The fact that financial institutions are lining up to express their enthusiasm for nature-based investing may be seen as an encouraging sign. Gautier Quéru, head of the Land Degradation Neutrality Fund, which provides long-term financing to projects that meet strict environmental and social standard, says Cop15 has brought “momentum” to nature-based investing.
“Public money will not be enough to meet the objectives,” he says. “We need the mobilisation of private sector actors, including finance and industry. And the good news is that at Cop15, the positive mobilisation of the business and finance sector was really striking.”
A natural fit?
While the availability of finance is one part of the challenge, investors also need to determine what, in practice, they can actually invest in when it comes to nature.
Devang Vussonji, a partner at consulting firm Dalberg, says that the difficulty of measuring and assigning value to different types of biodiversity is a major factor holding back investment in nature-based solutions in Africa.
“There’s a lot the market needs to figure out,” he says. “What do we value and not value?
“How do we set a price around it? How do you compare mangrove populations declining to elephant populations declining? How do you compare tropical areas to temperate areas and so forth?”
For many investors, a possible starting point is carbon credit schemes, which are designed to conserve or enhance forests that act as carbon sinks – theoretically enabling companies to offset emissions from other activities. Such schemes are mainly intended to contribute towards net zero targets, but nature is a possible added beneficiary.
“There’s now a recognition that if the carbon markets have proven themselves, are beginning to take off, there’s good demand for products as well as good supply of products, then the same can be replicated for broader nature-based investing as well,” says Vussonji. “The first of those opportunities we’re seeing is piggybacking on carbon credits, so as carbon credits are being created or being sold, other ‘biodiversity credits’ can be added on to them.”
While private sector finance has an indispensable role in conserving biodiversity in Africa and elsewhere, another essential element is coordination between the public and private sectors.
Sebunya emphasises that governments and NGOs must help provide a pipeline of projects that investors can adopt. Even where funds may be available from impact-focused investors, he says, “finding the bankable pipelines that are shovel-ready for investors is a huge, huge challenge”.
The African Wildlife Foundation, in an effort to meet this challenge, has been working with the Rwandan government on ways to support the mountain gorilla population in the country’s Volcanoes National Park. With the gorilla population expanding thanks to the success of recent conservation efforts, Sebunya says that thoughts are turning on how to expand their habitat.
One solution, he suggests, is encouraging local communities to grow bamboo – the gorillas’ favourite food – as a cash crop. This would potentially provide a win-win solution, allowing locals to generate income from selling bamboo to companies that could process the crop into various products, while providing a food source for the gorillas.
Will life find a way?
Conservation will have to compete with many other priorities in Africa, including the need to ensure a food supply for a human population that is set to almost double by 2050. “You do have that trade-off between protecting virgin nature and cultivating food for a growing population,” Litovsky acknowledges. Developing agricultural techniques that regenerate natural ecosystems will be “really quite fundamental” to Africa’s future, he adds.
Yet it is worth bearing in mind that Africa has in fact been more successful than most of the world in retaining its biodiversity up to now. The continent hosts around one-quarter of the Earth’s biodiversity. It contains the mighty Congo Rainforest, one of the “green lungs” of the planet. Its megafauna have remained relatively intact, thousands of years after early humans slaughtered the largest animals they encountered on other continents.
“Africa today has abundant nature in many places and abundant natural resources,” says Litovsky. “If you think about those as an asset that can be monetised in a variety of different ways, as part of a long-term economic development model, then that can really create a very exciting prospect for how Africa can develop into the future.”
Nairobi, 17 January 2023 – FSD Africa is delighted to announce that Nigel Topping, until recently the UK’s High-Level Climate Action Champion, will be joining the organisation as a senior climate advisor to strengthen its offering in developing innovative approaches to addressing the impact of climate change in Africa.
Nigel was appointed as the UK’s High-Level Climate Action Champion in January 2020 ahead of COP26 in Glasgow, stepping down from the role in November 2022 after COP27 in Sharm-el-Sheikh. During this period, working closely with both the outgoing Climate Champion from Chile, Gonzalo Muñoz, and the incoming Climate Champion from Egypt, Mahmoud Mohieldin, Nigel worked tirelessly to promote climate action on the part of non-state actors – civil society and the private sector – and establish the Climate Champions Team as a formidable catalyst for climate action. The Climate Champions Team has been able to amplify its direct impact through an extraordinarily impressive range of innovative partnerships, including in Africa.
In his new role as a Senior Adviser, Nigel will complement FSD Africa’s work on climate finance, and particularly in innovative green financing.
It has been estimated that climate finance in Africa needs to increase by a factor of nine times (by an additional $250bn per annum) to meet the continent’s aggregate Nationally Determined Contributions and, in particular, to increase climate finance coming from the private sector which, at just 14% of the total, is a much lower share than in other regions. There is also a need to spread climate finance more equitably around the continent (as more than 50% of climate finance currently goes to just 10 countries) and to change the mix of climate finance more towards equity (or grants) than debt which the continent can scarcely afford at present.
To achieve this, FSD Africa is planning to both scale up its work in green finance and support new partnerships with organisations looking to drive climate and nature-positive action and which see advantage in leveraging FSD Africa’s financial sector expertise and networks.
Commenting on his appointment, Nigel Topping praised FSD Africa for its trailblazing work in developing Africa’s financial markets and innovation in tapping capital using new instruments such as green bonds and gender bonds. He observed that FSD Africa has been supporting green finance in Africa for several years having initiated green bond programmes in Kenya and Nigeria in 2017. It has used this experience to build out an extensive and diversified portfolio of other projects in the climate and nature space.
He commented: “Climate finance will be critical for enabling Africa to adapt to the growing impacts of climate change and to ensure that its future development path is consistent with the goal of limiting global warming to no more than 1.5°C. I look forward to working with the FSD Africa team of experts across the African market to fast track the development of innovative climate finance and nature programmes and ensure that more benefits are realised by the population and investors across the markets.”
FSD Africa’s CEO Mark Napier welcomed Nigel Topping’s appointment:
“We are delighted to have Nigel joining our team. Nigel is an incredibly impressive and collaborative leader with great sectoral knowledge on climate action. I have no doubt at all that he will be able to accelerate the impact of our work on climate, deepen our technical knowledge in relevant sectors and join us in brokering exciting new partnerships.”
FSD Africa’s Board Chair, Frannie Léautier, joined the CEO in welcoming Nigel Topping observing that a commitment to developing and implementing transformative adaptation programmes to tackle climate change in Africa will be key in tackling poverty and inequality: “Nigel’s decision to join FSD Africa as a Senior Climate Adviser is a fantastic endorsement of the work that our team has been doing for several years to develop solutions to the continent’s most pressing challenge of the day – climate change. We will benefit greatly from his leadership and experience,” she added.
Catalyst Fund recently announced its first investments in ten African startups that are leading the way in areas like agtech, insurtech, waste management, disaster response, and carbon finance. The goal is to help communities adapt to the effects of climate change and build their resilience.
This is the first group of entrepreneurs to get help from its new $30 million pre-seed venture capital fund and accelerator. Its first partner, FSD Africa, is the fund’s leader, and the fund’s goal is to support high-impact entrepreneurs who are working to help underserved, climate-vulnerable communities in Africa become more resilient.
Catalyst Fund’s goal is to help entrepreneurs who use new ideas in technology, finance, and data to solve the biggest problems and take advantage of the biggest opportunities of our time. To do this, it has expanded its mission to include investing in businesses that tackle climate change, which is the biggest problem we all face.
Catalyst Fund already has 61 companies in emerging markets in its portfolio. These new startups will join them and get money, expert-led help building their businesses, and access to a network of investors, corporate innovators, and talented people who can help them grow.
Today pre-seed venture capital (VC) fund and accelerator Catalyst Fund announced a $2 million investment into 10 startups building solutions to improve the resilience of climate-vulnerable communities in Africa.
This is the first group of companies to get money from Catalyst Fund’s new $30 million venture capital fund, which is led by the financial sector development agency FSD Africa. The goal of the fund is to help early-stage founders create technology that will make Africa more resistant to the effects of climate change.
Each of the ten firms will receive $100,000 in equity investments as well as $100,000 in hands-on venture-building assistance.
These companies will join Catalyst Fund’s existing portfolio of 61 startups in emerging markets. They will get funding, specialized and expert-led help building their businesses, and direct connections to investors, corporate innovators, and talent networks that can help them grow.
Catalyst Fund’s Managing Partner, Maelis Carraro, said, “We are thrilled to be able to work with ten innovative African startups to build a more resilient and sustainable future.”
Our goal is to help mission-driven founders who share our vision of a world where everyone has the tools and opportunities they need to thrive. From agtech to insurtech, waste management to disaster response, and carbon finance to carbon finance, these startups show finance, tech, and business model innovations that will help communities better adapt to climate change and become more resilient.
Here are the top ten startups.
Agro Supply (Uganda)
A mobile layaway system that helps farmers save money slowly using their cell phones and cash out to buy farm inputs like hybrid (drought-resistant) seeds, from maize to sorghum, sunflower, and soybean, during planting season.
Assaraf (Senegal)
A digital insurtech platform that gives end users accesses to a variety of insurance products from more than 20 insurance companies, such as insurance for agriculture, cars, health, homes, and natural disasters. It also has a fully integrated claims management system.
Bekia (Egypt)
A technologically advanced waste management solution that enables businesses and households to trade in their waste (including plastic, paper, electronics, metals, and cooking oil) for cash rewards paid to a digital wallet.
Eight Medical (Nigeria)
A cloud-based platform for Emergency Medical Services (EMS) that lets people get urgent care when and where they need it.
This “911 for Africa” puts emergency medical workers on motorcycles in touch with people in trouble in 10 minutes or less, even if the problem is caused by the weather.
Farm to Feed (Kenya)
Afirm n the food supply chain that offers a digitally enabled solution to food loss/waste. Their environmentally friendly strategy focuses on giving farmers a market for their surplus and imperfect produce, improving food security, and lowering greenhouse gas emissions.
Farmz2U (Nigeria + Kenya)
An agtech company promoting sustainable agriculture. Farmers can obtain individualized farming guidance (particularly on regenerative farming practices), reasonable loans, quality and traceable inputs, and direct customers for their harvest through Farmz2U.
Octavia Carbon (Kenya)
Global South’s first Direct Air Capture (DAC) firm is constructing the world’s most affordable DAC hub.
Octavia is building DAC equipment to pull carbon out of the air and sell it to off-takers as either carbon dioxide or carbon credits.
Paddy Cover (Nigeria)
Works with established insurers and digital platforms to create and sell customized products through their platform. These products include health, life, and index-based crop insurance, which will be available in the future.
The services are built into the customer’s life in some way, either as a convenience or as a way to add value.
Sand to Green (Morocco)
Using agroforestry and a solar-powered desalination system, they turn deserts into land that can be used for farming. They also design climate-smart regenerative farms.
VAIS (Egypt)
A precision agtech startup dedicated to climate resilience and food security by giving farms data intelligence through their FarmGATE application, which is powered by proprietary artificial intelligence/machine learning (AI/ML)-based virtual field probing (VFP) technology. This helps farms make better use of water and other farm inputs to get better yields.
Catalyst Fund’s portfolio companies have raised more than US$640 million in follow-on funding so far, and they now serve more than 14 million individuals and MSMEs around the world.
Three Nigerian tech startups, PaddyCover, Farmz2U, and Eight Medical, have secured a total of $600,000 from pre-seed venture capital and accelerator Catalyst Fund.
This breaks down to $200,000 each for each of the three startups to scale their businesses.
The funding was part of a $2 million investment into 10 startups building solutions to improve the resilience of climate-vulnerable communities in Africa.
Each of the 10 startups is offered $100,000 of equity investments as well as $100,000 of hands-on venture-building support.
According to the VC, this is the inaugural cohort of the new $30 million VC fund of Catalyst Fund, anchored by financial sector development agency FSD Africa, aimed at supporting early-stage founders to develop technology that will make Africa more resilient to the impacts of climate change.
Who they are: The three Nigerian startups benefiting from the funding cover insurtech, agtech, and medtech.
PaddyCover works with established insurers and digital platforms to design and offer bespoke products via their platform that facilitates flexible insurance packages, including health, life, and, in the future, index-based crop insurance. The offerings are built into the lifestyle touchpoints of the customer, either as a convenience or as complementary value-adds.
Farmz2U is an agtech enterprise driving sustainable agriculture. Through Farmz2U, farmers can access personalized farming advice (especially on regenerative farming practices), affordable credit, quality and traceable inputs, and direct buyers for their harvest.
Eight Medical is a cloud-native Emergency Medical Services (EMS) platform that provides on-demand urgent care when and where it is needed. This “911 for Africa” connects emergency medical responders on motorcycles to users in distress in 10 minutes or less, including for climate-induced crises.
The goal of the Fund: While expressing the Fund’s excitement in partnering with groundbreaking African startups working to build a more resilient and sustainable future, the Managing Partner of Catalyst Fund, Maelis Carraro said:
“Our goal is to back mission-driven founders that share our vision of a world where every individual has the tools and opportunities they need to thrive. From agritech to insurtech, waste management, disaster response, and carbon finance, these startups display finance, tech, and business model innovations that will help communities better adapt to climate impacts and grow their resilience.”
Other African startups that received the investment include Agro Supply from Uganda, Assuraf from Senegal, Bekia from Egypt, Farm to Need from Kenya, Octavia Carbon, also from Kenya, Sand to Green from Morocco, and VAIS from Egypt. Only Nigeria has up to three startups in the cohort.
Financial Sector Deepening Africa (FSD Africa) will be quantifying changes in credit risk under different nature and climate scenarios for African central banks this year, the Kenya-based development agency’s director of risk, Kelvin Massingham, told Responsible Investor.
Massingham was speaking to RI after FSD Africa was selected to deliver the UK government’s Nature Positive Economy programme, alongside the UNDP’s Biodiversity Finance Initiative (BioFin).
Established in 2012, FSD Africa is a non-profit company funded by the UK’s Department for International Development, which aims to promote financial sector development across sub-Saharan Africa.
The aim of the £7.2m Nature Positive Economy initiative, which was announced at COP15 in Montreal last year, is to support the transition of developing countries to nature-positive economies.
Massingham explained that FSD Africa will collaborate with six unnamed central banks in some of Africa’s largest economies and hopes to build upon work already done by the Dutch and French central banks.
Last year, the non-profit used publicly available central bank data to do nature stress tests for Zambia, Ghana, Kenya, South Africa, Egypt and Mauritius.
FSD Africa will also collaborate with the World Bank and BioFin to create a working group focused on central bank stress testing regarding nature, Massingham said.
In particular, it will centre on sharing learnings across geographies, creating knowledge briefs, and feeding into the work of global coalitions such as the Network for Greening the Financial System (NGFS).
As the group has not yet launched, no banks have formally joined.
FSD Africa also works with other players in the financial sector. It is currently conducting pilots of the Taskforce on Nature Related Disclosures (TNFD) with six entities in the banking and insurance sectors, and will look to increase that to 20 this year.
Massingham said: “During initial piloting of TNFD, when the financial institutions did their assessment, although they of course found nature to be a material risk for their portfolios, they all identified it as a major opportunity.”
Specifically, some banks are apparently looking at the potential for biodiversity bonds.
FSD Africa is also working with financial regulators in Kenya, Nigeria, Ghana and Egypt on how they can signal to their markets that nature-related financial disclosures are coming, in line with the commitment made by signatory countries in Target 15 of the Kunming-Montreal Global Biodiversity Framework.
Each of the 10 startups will be offered $100K of equity investments as well as $100K of hands-on venture-building support.
These ten companies will join Catalyst Fund’s portfolio of 61 startups across emerging markets and receive capital, bespoke and expert-led venture-building support.
The Catalyst Fund has announced a $2 million investment into 10 African startups building solutions to improve the resilience of climate-vulnerable communities in Africa.
The Catalyst Fund is a pre-seed venture capital (VC) fund and accelerator that backs high-impact startups that seek to improve the resilience of underserved, climate-vulnerable communities.
This is the inaugural cohort of the new $30 million VC fund of Catalyst Fund that is anchored by the financial sector development agency, FSD Africa.
It is aimed at supporting early-stage founders to develop technology that will make Africa more resilient to the impacts of climate change.
Catalyst Fund managing partner Maelis Carraro said that they are thrilled to have the opportunity to partner with ten African startups working to build a sustainable future.
“Our goal is to back mission-driven founders that share our vision of a world where every individual has the tools and opportunities they need to thrive,” Carraro said.
“From agritech to insurtech, waste management, disaster response, and carbon finance, these startups display finance, tech, and business model innovations that will help communities better adapt to climate impacts and grow their resilience.”
Each of the 10 startups will be offered $100K of equity investments as well as $100K of hands-on venture-building support.
These ten companies will join Catalyst Fund’s portfolio of 61 startups across emerging markets and receive capital, bespoke and expert-led venture-building support.
They will also receive direct connections with investors, corporate innovators, and talent networks that can help them scale.
The Fund’s portfolio companies have raised more than US$640 million in follow-on funding to date, and currently serve more than 14 million individuals and MSMEs globally.
The ten companies joining this next cohort of Catalyst Fund are Agro Supply (Uganda), Assuraf (Senegal), Bekia (Egypt), Eight Medical (Nigeria), Farm to Feed (Kenya), Farmz2U ( Nigeria, Kenya), Octavia Carbon (Kenya), PaddyCover (Nigeria), Sand to Green Morocco and VAIS (Egypt).
FSD Africa Digital Economy director Juliet Munro said that these companies are strong examples of the innovation needed to enhance the resilience of vulnerable communities across the continent.
“At FSD Africa, we believe that by harnessing the power of tech, and specifically fintech innovation, we can help to spur the development of climate resilience solutions for Africa, thereby helping deliver on COP27’s core themes of adaptation and implementation,” Juliet said.
Catalyst Fund Partner Aaron Fu said that COP27 in Egypt called for more private sector financing to fill the $330B funding gap for adaptation and resilience by 2030.
Aaron also said that it called for more local innovations to support communities in building resilience to climate impacts.
“The Catalyst Fund’s new cohort exemplifies what these innovative climate solutions for the most vulnerable could look like,” he added.
He also said that they are also thrilled to be backing companies in Francophone Africa and Northern Africa for the first time.
Catalyst Fund intends to back many more startups like them across the African continent in the years to come.
