Pillar: Adaptation and Resilience

MAURITIUS: $45 million in green bonds to finance 13 solar power plants

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Envolt, a subsidiary of the Mauritian conglomerate ENL, is launching a $45 million green bond programme in Mauritius. The aim is to finance the construction of 13 photovoltaic solar power plants in this island country off the coast of East Africa.

The green bond market is gathering pace in Mauritius. This is thanks to Envolt, a subsidiary of the Mauritian conglomerate ENL, which is launching a 2 billion Mauritian rupee ($45 million) programme. Envolt’s first green bond issue is for 510 million Mauritian rupees, or $11.5 million.

The programme is expected to run until 2028. The proceeds of the green bonds will be used to finance the construction and operation of 13 solar photovoltaic parks with a combined capacity of 14.4 MWp. The plants in Mauritius will be completed over a period of 10 to 17 months. According to the UK-based finance company FSD Africa, which is backing the deal, the issue represents an important milestone for the Mauritian renewable energy sector, as well as for the country’s capital markets, as it is the first green bond issue to finance clean energy in Mauritius.

In addition, “these green bonds will be the first of their kind issued in Mauritius under the 2021 Green Bond Principles (as devised by the International Capital Market Association [ICMA]), which are aligned with global standards and combat greenwashing by requiring rigorous assessment of projects and their respective environmental or emissions claims,” says FSD Africa.

The Envolt transaction is being advised by MCB Capital Markets, an investment bank based in Port Louis, Mauritius. It is part of the Southern African Development Community (SADC) Green Bond Programme supported by FSD, which runs until March 2024. Mauritius’ participation in this programme will accelerate the maturity and expansion of the Mauritian capital markets and advance the country’s efforts to attract private investment.

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For insurance industry, poor awareness slows growth

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The Nigeria’s insurance industry has recorded moderate growth in business expansion but still has low penetration when compared with other African countries, NIKE POPOOLA reports

As of the end of June 2023, the insurance industry’s total assets rose by 10.7 per cent to N2.7tn from 2.4tn reported in the corresponding period of 2022, according to the National Insurance Commission.

NAICOM’ statistics department revealed in its Bulletin for Q2, 2023, that the insurance industry’s balance sheet showed assets of non-life business was N1.63tn, while assets of life business stood at about N1.07tn.

The industry generate N551.4bn gross premium written in the first six months of 2023; It had generated N726.2bn gross premium written in the whole of 2022 financial period.

However, despite improvement in the industry’s businesses, the penetration was still below one per cent, according to industry figures.

On contribution to the larger economy, figures obtained from the Nigerian Bureau of Statistics reveal that the finance and insurance sector consists of the two subsectors, financial institutions, and insurance; the former accounted for 90.78 per cent and the latter, 9.22 per cent of the sector respectively in real terms in Q2, 2023.

As a whole, the sector grew at 28 per cent in nominal terms (year-on-year), with the growth rate of financial institutions at 30.41 per cent and 8.29 per cent growth rate recorded for insurance.

The sector’s contribution to the nominal GDP was 4.01 per cent in Q2, 2023, higher than the 3.63 per cent it represented a year previous, and lower than the contribution of 4.11 per cent it made in the preceding quarter.

The contribution of finance and insurance to real Gross Domestic Product totalled 5.26 per cent, higher than the contribution of 4.25 per cent recorded in the second quarter of 2022 by 1.01 per cent points, and lower than 5.35 per cent recorded in Q1, 2023 by 0.08 per cent points.

Perception

According to Mrs Augustina Steve of NAICOM, lack of trust and confidence in Nigerian insurance industry resulting from non-settlement of claims, constitute one of the biggest challenges of the industry.

“Non-settlement of claims has negatively impacted confidence in the industry,” she says.

In Nigeria, she notes, the problem of insurance industry is bad image.

This, according to her, for decades, perception stood as bane of the industry’s growth.

Steve says, “The bad image problem of the industry dates back to early 19th century when Nigerians took over insurance business from the early British managers.

“The way the then Nigerian managers carried out insurance business transactions especially in the area of claims payment made the public to see insurance as a scam.”

Ability to pay claims is the real test of a solvent insurance company, she notes.

She says that the quality of claims administration can make or mar an insurance company.

The NAICOM staff says, “Ideally, insurance business is all about claims payment, since claim is the main reason a policyholder takes up an insurance policy.

“Without claims being paid by insurance companies, people are not likely to take up insurance policies, and insurance company will not maximise profits, thus claims payment in insurance contract serves as spice that attracts potential policyholders to insurance patronage.”

She observers that experience has shown that some policyholders are dissatisfied with how they are treated by the insurers when loss occurs.

Some of the complaints by claimants about insurance claims management, she notes, are insurance companies’ request for too much evidence and documentations to prove a loss; some claims are not settled because the insurer refuses to admit liability; when claims are settled, they are not paid in full.

Other complaints, she says include that some claims are rejected on purely technical grounds; claims are generally unduly delayed; the insurer argues that the claims are fraudulent, among others.

Challenges

According to the President/ Chairman Of Council, Lagos Chamber Of Commerce & Industry, Dr. Michael Olawale-Cole, the insurance industry has experienced minimal growth in real terms over the years due to various challenges faced by stakeholders.

“These challenges include limited awareness among the general population regarding the significance of insurance, low purchasing power, disruption from technology, unfavourable economic conditions, apathy toward filing claims for damages, and diverse religious and cultural sentiments, among other factors,” he says.

The Nigerian insurance industry, despite its enormous potential, he observes, is still at the infant stage and far behind its African peers judging by key indicators.

According to the global insurance market report, he says, the insurance penetration rate for Nigeria and South Africa is 0.5 and 12.2, respectively. While other leading emerging economies, kenya (2.9) and ghana (1.2) have low insurance penetration rates, Nigeria has the lowest figure comparatively, despite being the largest economy in Africa, he says.

Undoubtedly, the LCCI boss says, the insurance sector has potential for development due to various alterations in the regulatory framework, necessitating future modifications in the operational practices.

He says, “It has the potential to achieve enhanced success in the aftermath of the pandemic via the adoption of novel strategic approaches by its stakeholders aimed at growing the sector.

“The future of the insurance business hinges on the extent and speed of digital transformation since it has the potential to enable industry participants to secure a significant market share. Digitalisation will provide a streamlined and efficient experience for clients entering the insurance sector.”

Awareness

The President, Chartered Insurance Institute of Nigeria, Mr Edwin Igbiti, says insurance plays a pivotal role in safeguarding the financial well-being of individuals, businesses, and even governments.

It serves as a safety net in times of unexpected circumstances or unforeseen events, he says.

Igbiti says, “Our aim as insurance practitioners is to educate and provide peace of mind to our clients, ensuring that they are adequately covered and prepared for any risk that may arise.

“We face certain challenges that hinder the growth and effectiveness of the insurance industry in our community. Lack of awareness about the benefits of insurance and its role in economic development is prevalent among our people.”

The CIIN boss seeks the support of the government and other organisations in creating awareness campaigns to educate the public and promote a culture of insurance, emphasising its importance in mitigating risk and protecting their assets.

“We request assistance in advocating for policies and regulations that promote transparency, fairness, and sustainability within the insurance sector,” he says

Service delivery

Head SERVICOM, Adeyemi Abubakar, attributes poor insurance penetration in Nigeria to the peculiar market environment, limited public awareness and negative public perception by those who are aware of insurance.

“But in the reality, inadequate service delivery is a major challenge to why insurance acceptance has been very low,” he says.

According to him, building confidence and promoting public understanding on the insurance mechanism, effective consumer protection and education will build consumer trust and confidence, consumer trust builds the insurance market through insurance premium volume.

He says that insurance market growth generates savings, investment and employment.

Insuretech

Mr Ibrahim Ngaski of Information Technology Department, NAICOM, says digital technology has taken the world by storm affecting, changing and improving the way things are done.

The insurance industry, he notes, is currently lagging behind and needs to reassess its business model, re-evaluate its strategy and make the digital agenda a high priority.

It is time for insurers to evolve and respond to these changes in order to meet up with customers’ expectations; and that requires a different set of skills, culture and operating model, he notes.

He explains that, “The term ‘Insurtech’ is coined from the combination of two words ‘Insurance’ and ‘technology’.

“Insurtech is the use of technological innovations designed to make the current insurance model more efficient. People in modern society want to be able to buy travel insurance, life insurance, health insurance, property insurance, and other products with the tap of a finger on their devices, rather than having to sift through stacks of forms.

“Insurtech start-ups are aware of this and have developed a method, for people to obtain easily accessible and ultra-customised insurance policies.”

NAICOM, he says, recently partnered with FSD Africa 2022 to launch the BimaLab Insurtech initiative in Nigeria, which will enable the implementation of ideas for improving insurance in the country.

He says, “BimaLab Nigeria aims to close insurance market gaps by educating, nurturing, and promoting innovations and Insurtech start-ups.

“The innovators were selected to participate in the 10-week programme that provide them with the expertise, resources and support to develop and scale market-ready solutions that bring social and or commercial value to Nigeria’s Insurance sector by bringing creative ideas to the table.”

According to him, insurance companies can maintain a competitive edge by automating, improving and optimising their business processes without compromising efficiency, quality, and response time.

This will enhance employee productivity, speed-up processes, raise customer service levels, improve customer experiences, reduce operational expenses and increase operational efficiency, he says.

He adds that there is an urgent need for the insurance industry to adopt technologies to provide digital solutions.

When this is done, he says, it will improve access to insurance by providing digital channels of distribution, enhancing easier access to insurance products and coverage, speedy issuance of coverage and claims payment and provides Innovative products to their customers.

Growth initiatives

The Commissioner for Insurance, NAICOM, Sunday Thomas, says, the commission has shown a positive attitude to market development by the release of the Soundbox guidelines which is an instrument to test ingenuities in the market.

He says the commission seeks to facilitate and promote innovative insurance solutions that will address the gaps in current insurance offerings.

He adds that, “there is the urge to intensify the ongoing drive to facilitate platforms that address the demand-supply gap; encourage specialised products that addresses the needs of the oil and gas industry; Address all potential regulatory impediments; support the development of human capacity and ensure technical capacities of insurance suppliers; ensure adequate risk pricing and comprehensive coverages and risk management

“As the regulator, we are committed to creating an enabling environment that will consistently enhance increased capacity of the Insurance Institutions both financially and technically.”

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African alliance targets financial instrument for mangroves

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Financial instruments supporting mangroves and forestry are under consideration by members of the African Natural Capital Allliance (ANCA), an executive at the organisation has said.

ANCA is in conversation with financial institutions looking to create innovative instruments that support mangroves and forests, according to Dorothy Maseke, head of ANCA’s secretariat.

“ANCA and FSD Africa are looking towards supporting a number of specialised financial instruments in mangroves and forestry,” Maseke told Carbon Pulse.

These could combine elements of bonds, guarantees, and insurance, she said. Established in 2022 by non-profit FSD Africa, ANCA is an African-led initiative whose members – including the likes of Standard Chartered, KCB, and Equity Bank – together manage assets of $390 billion.

Conservation bonds could be a key area of expansion for ANCA members, Maseke said.

“The discussions on opportunities are real. We are doing a lot in terms of connecting our partners, to support them on this journey, because many are interested. They just don’t know where to start,” Maseke said.

Regulation needs to change to support conservation-related bonds as “capital market structures in Africa do not necessarily support them,” she said.

“When the regulator supports capital market structures that will support this kind of investment, then it gives financial institutions, investors, and private equity the confidence to put their money on the table,” she said.

“It also enables fund managers or advisory firms to actually develop these bonds. Those are some of the things that ANCA will be pushing for.”

The only conservation-related bond on the continent to have been issued so far was the World Bank’s ‘rhino bond’, a $150 million issuance in 2022 in support of black rhinos in South Africa.

AFRICAN BIODIVERSITY CREDITS?

Development agencies and small project owners are driving discussion on the topic of biodiversity credits in Africa, another novel way of financing nature, Maseke said.

“Those developers who for years have been working on small projects, now all of a sudden are starting to pay attention,” she said.

“You may find some financial institutions who decide to develop the [biodiversity] credits market. Some may want to put up a biodiversity credits exchange.”

When governments drawing up nature strategies turn to private financing, they will eventually begin to work with these smaller actors on biodiversity credits, she predicted. “At some point, they’re going to converge. In some countries, they’re already converging.”

“Strong discussions” about biodiversity credits from market actors in countries including Rwanda, Ghana, Kenya, and nations around the Congo Basin are underway, she said.

“Kenya wants to go into the green economy and the bioeconomy is a key part of that. There’s a whole discussion of bioeconomies from biodiversity-rich African nations. Building a bioeconomy is the next frontier.”

However, lessons on biodiversity credits have been learned from the carbon credits market, she said. “It’s still a developing concept. It’s also coming on the backdrop of very negative press from the carbon credit side.”

“There’s still a lot of research that needs to be done in terms of, is the African market ready to go fully into it? That needs to be done fast.”

One advantage a voluntary biodiversity credits market would have over its carbon equivalent is that the former already has Indigenous Peoples and local communities at the centre, she said.

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Mark Napier: Africa’s leaders seize the climate initiative

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As international headlines chart the terrible suffering caused by flooding, earthquakes and wildfires, a less headline-grabbing, but nonetheless hugely significant, good news story has emerged from Nairobi, Kenya. The African Climate Summit, which concluded on September 6, was a huge success story for Africa and for Kenyan President William Ruto.

Pledges directed to African climate change adaptation and litigation amounting to $26bn have emerged from the summit. That’s not enough to solve Africa’s climate challenges, but even if only a fraction of this sum materialises, it will have a real impact on the ground.

Even more consequential in the long term is the consensus that emerged from the conference around the need for economic growth that delivers both prosperity and environmental benefits. The fact that a consensus was achieved is significant, because it strengthens Africa’s position for the forthcoming COP28 conference in Dubai in November. Furthermore, the admission of the African Union to the G20 means the African voice is getting louder and clearer on the world stage.

Importantly, the summit’s adoption of the Nairobi Declaration, which commits African countries to develop and implement “policies, regulations and incentives aimed at attracting local, regional and global investment in green growth and inclusive economies”, is also a signal that Africa will look for other strategies to support climate action, alongside the $100bn a year promised by developed nations in 2009.

Indeed, the summit was most of all an assertion of African self-determination and specifically the need to mobilise Africa’s domestic private capital in the continent’s climate efforts. Relying on international finance creates a dependency that Africa does not want. Put simply, Africa has determined that its own resources must be channelled, supported by a financial market architecture which ensures that states can absorb climate finance effectively, distributing it where it is most needed.

But if it is to do this, the current situation – in which less than 0.5% of domestic institutional assets under management are invested in alternative assets – cannot continue. As was argued powerfully at the launch of the Pan-African Fund Managers’ Association at the beginning of the summit, we need to think about how we can put in place not only the policy and regulatory incentives but also the instruments and the financial architecture to drive much more of the$1.4tn of institutional capital in Africa towards climate and nature-positive projects.

Crucially, this will mean more use of de-risking strategies such as credit guarantees to persuade pension funds to de-emphasise the easy but less safe option of government securities and to invest in green assets. It will also require sources of donor and philanthropic capital to step up their support for project development, for example through the use of challenge funds or by investing in intermediaries that are closer to the market as a way of reaching the more innovative start-ups and entrepreneurs who will drive the new green economy.

[Current] global prudential regulations can make it economically impossible for large institutional investors to allocate capital to African projects.

Moreover, the summit underlined an important issue that has seen Africa’s financing needs neglected, namely the need for reform of the global prudential regulations, which can make it economically impossible for large institutional investors to allocate capital to African projects. There should be a global review of these constraints, perhaps led by the G20.

Even with such reforms, African governments, many of which are battling with high levels of debt, will need to be both agile and visionary if they are to compete at a time when the world’s biggest economies are offering big incentives to attract green investment. Though deeply political, carbon taxes could be one way to go, but would need to be sensitively introduced. Other green fiscal incentives, balancing out tax breaks for green investment by removing subsidies for dirty industries, are also essential for governments to be able to direct their economies towards a greener future.

The UN Framework Convention on Climate Change has just released its first global stocktake report, highlighting yet again that, despite a major global effort, progress since the Paris Agreement has been inadequate. The report recommends greater commitment to transformation across all sectors and recognises the need for more access to climate finance for developing countries in line with the key recommendations from the Nairobi Summit.

If we get this right, the prize is very significant and the message from the summit is that Africa will not wait. Instead, it is determined to grab the opportunities of a new green growth pathway now, as are an increasing number of investors, and that has to be good for us all.

Project accelerator launches to drive investments in African biodiversity

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A group of five companies and organisations has launched an accelerator to attract investment in high-quality biodiversity projects across Africa, with a first call for proposals open until late next month.

Biodiversity Investments – Researcher & Accelerator (BIRA) will be hosted by the African Leadership University School of Wildlife Conservation and co-funded by global entrepreneur firm Dalberg and FSD Africa Investments, with contributions from biodiversity specialist firms CreditNature and Xilva.

The initiative will work to develop ecosystem measurement frameworks suited to the African reality, including user-friendly investor metrics, as well as offer grants to organisations that provide comprehensive assessments and monitoring systems to understand the environmental impact of pipeline companies, according to Dalberg’s website.

“Further, BIRA will engage investors through the grant which will be used to co-develop financing propositions and facilitate investment memoranda and marketing to promote credits,” it said.

“Through such a structured approach, the funding can prepare project developers to be investor ready whilst developing a pipeline of biodiversity deals in Africa and attract investors to the sector.”

In a comment on LinkedIn, CreditNature CEO and founder Cain Blythe said BIRA has been designed to “develop a credible approach to accelerating biodiversity and ecosystem measurements as a core offering for investable nature-based solution projects in Africa”.

One of CreditNature’s contributions to BIRA will be to apply its Natural Asset Recovery Investment Analytics (NARIA) framework.

“We’re offering African projects a high integrity, science-based, and scalable approach to measuring ecosystem integrity,” said Blythe.

“For projects in Africa, this means setting robust ecosystem baselines and forecasting unique recovery and rewilding strategies, all while preparing for potential investors.”

BIRA will be accepting applications for its first round of grants until Oct. 20, without specifying the amount available.

“Applicants must have biodiversity projects in Africa, have completed a business plan or feasibility study, and look to attract investors/buyers,” Dalberg said.

“BIRA will support select projects in conducting assessments of their biodiversity impact and investor readiness, and it will help showcase investor-ready projects to potential funders.”

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The African Leaders Nairobi Declaration on Climate Change and Call to Action

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PREAMBLE

We, the African Heads of State and Government, gathered for the inaugural Africa Climate Summit (ACS) in Nairobi, Kenya, from 4th to 6th September 2023; in the presence of other Global Leaders, Intergovernmental Organizations, Regional Economic Communities, United Nations Agencies, Private Sector, Civil Society Organizations, Indigenous Peoples, Local Communities, Farmer Organizations, Children, Youth, Women and Academia:and Government in the presence of global leaders and high-level representatives on 6 September 2023 in Nairobi Kenya

  1. Recall the Assembly Decisions (AU/Dec.723(XXXII), AU/Dec.764 (XXXIII) and AU/Dec.855(XXXVI)) requesting the African Union Commission to organize an African Climate Summit and endorsing the offer by the Republic of Kenya to host the Summit;
  2. Commend E Dr. William Samoei Ruto, President of the Republic of Kenya, and Chair of the Committee of African Heads of State and Government on Climate Change (CAHOSCC) for providing the political leadership of an African vision that simultaneously pursues climate change and development agenda;
  3. Commend also E Moussa Faki Mahamat, the Chairperson of the African Union Commission (AUC), for his dedication and commitment towards the convening of the Summit;
  4. Further Commend the Arab Republic of Egypt for the successful COP27 and its historic outcomes, particularly regarding loss and damage, just transition and energy, and call for the full implementation of all COP27 decisions;
  5. Acknowledge that climate change is the single greatest challenge facing humanity and the single biggest threat to all life on Earth, demanding urgent and concerted action from all nations to lower emissions and reduce the concentration of greenhouse gases in the atmosphere;
  6. Take Note of the 6th Assessment Report (AR6) of the Intergovernmental Panel on Climate Change (IPCC), stating that the world is not on track to keeping within reach the 1.5°C limit agreed in Paris and that global emissions must be cut by 43% in this decade;
  7. Underscore the IPCC confirmation that Africa is warming faster than the rest of the world and if unabated, climate change will continue to have adverse impacts on African economies and societies, and hamper economic growth and wellbeing;
  8. Recognise that Africa is not historically responsible for global warming, but bears the brunt of its effects, impacting lives, livelihoods, and economies;
  9. Reaffirm the principles set out in the United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Agreement, namely equity, common but differentiated responsibilities and respective capabilities;
  10. Express concern that many African countries face disproportionate burdens and risks arising from climate change-related unpredictable weather events and patterns, including prolonged droughts, devastating floods, out-of-season storms, and wildfires, which cause massive humanitarian crisis with detrimental impacts on economies, health, education, peace and security, among other risks;
  11. Recall that only seven years remain to achieve the Sustainable Development Goals of the 2030 Agenda, and note with concern that 600 million people in Africa still lack access to electricity while about 970 million lack access to clean cooking;
  12. Further note that extreme weather events and changes in water cycle patterns are making it more difficult to access safe drinking water, resulting in about 400 million people in Africa having no access to clean drinking water and 700 million without good sanitation;
  1. Further recognise that African cities and urban centres are growing rapidly, and by 2050 would be home to over 1.0 billion people. Cognisant of the fact that rapid urbanization, poverty, and inequality limit planning capacities and other urban dynamics which increase people’s exposure and vulnerability to hazards and have thus turned cities into disaster hotspots across the continent;
  2. Concerned that despite Africa having an estimated 40 percent of the world’s renewable energy resources, only $60 billion or two percent of US$3 trillion renewable energy investments in the last decade have come to Africa;
  3. Reiterate Africa’s readiness to create an enabling environment, enact policies and facilitate investments necessary to unlock resources to meet our own climate commitments, and contribute meaningfully to decarbonisation of the global economy;
  4. Recognise that Africa’s vast forests, especially the Congo Basin rainforest are the largest carbon sinks globally, and the important ecosystem services provided by Africa’s vast savannahs, Miombo woodlands, peatlands, mangroves, and coral reefs, it is time that Africa’s natural capital wealth is properly measured by recognizing its contribution to reducing global carbon emissions;
  5. Further recognise the critical importance of the oceans in climate action and commitments made on ocean sustainability in multiple fora such as the Second UN Oceans Conference in 2022, and the Moroni Declaration for Ocean and Climate Action in Africa in 2023;
  6. Emphasise that Africa possesses both the potential and the ambition to be a vital component of the global solution to climate As home to the world’s youngest and fastest-growing workforce, coupled with massive untapped renewable energy potential, abundant natural assets and an entrepreneurial spirit, our continent has the fundamentals to spearhead a climate compatible pathway as a thriving, cost-competitive industrial hub with the capacity to support other regions in achieving their net zero ambitions;

Now hereby identify the following to be critical agendas for urgent collective action at the continental and global level:

  1. We call upon the global community to act with urgency in reducing emissions, fulfilling its obligations, honouring past promises, and supporting the continent in addressing climate change, specifically to:
      • Accelerate all efforts to reduce emissions to align with goals of the Paris Agreement
      • Honour the commitment to provide $100 billion in annual climate finance, as promised in 2009 at the UNFCCC COP15 in Copenhagen, Denmark
      • Uphold commitments to a fair and accelerated process of phasing down unabated coal power and phase out of inefficient fossil fuel subsidies while providing targeted support to the poorest and most vulnerable in line with national circumstances and recognizing the need for support towards a just transition.
  2. We call for climate-positive investments that catalyse a growth trajectory anchored in the industries poised to transform our planet and enable African countries to achieve stable middle-income status by
  3. We urge global leaders to join us in seizing this unprecedented opportunity to accelerate global decarbonization, while pursuing equality and shared prosperity.
  4. We call for the operationalization of the Loss & Damage fund as agreed at COP27 and resolve for a measurable Global Goal on Adaptation (GGA) with indicators and targets to enable assessment of progress against negative impacts of climate change.

In recognition of the scale, urgency and importance of these collective actions, we commit to:

  1. Develop and implement policies, regulations and incentives aimed at attracting local, regional and global investment in green growth, inclusive of green and circular economies;
  2. Propel Africa’s economic growth and job creation in a manner that reflects our commitments to the Paris Agreement and also aids global decarbonization efforts, by leapfrogging the traditional progression of industrial development and fostering green production and supply chains on a global scale;
  3. Focus our economic development plans on climate-positive growth, including expansion of just energy transitions and renewable energy generation for industrial activity, climate smart and restorative agricultural practices, and essential protection and enhancement of nature and biodiversity;
  4. Promote clean cooking technologies and initiatives as a just energy transition and gender equality for African rural women, youth, and children;
  5. Strengthen actions to halt and reverse biodiversity loss, deforestation, and desertification, as well as restore degraded lands to achieve land degradation neutrality; and implement the Abidjan declaration on achieving gender equality for successful land restoration;
  6. Strengthen continental collaboration, which is essential to enabling and advancing green growth, including but not limited to regional and continental grid interconnectivity, and further accelerating the operationalization of the Africa Continental Free Trade Area (AfCFTA) Agreement;
  7. Advance green industrialization across the continent by prioritizing energy-intense industries to trigger a virtuous cycle of renewable energy deployment and economic activity, with a special emphasis on adding value to Africa’s natural endowments;
  8. Promote investments in reskilling to unlock the human capital that will power for Africa’s inclusive green transition;
  9. Redouble our efforts to boost agricultural yields through sustainable agricultural practices, to enhance food security while minimizing negative environmental impacts;
  10. Contribute to the development of global standards, metrics, and market mechanisms to accurately value and compensate for the protection of nature, biodiversity, socio-economic co-benefits, and the provision of climate services;
  11. Finalise and implement the African Union Biodiversity Strategy and Action Plan, with the view to realizing the 2050 vision of living in harmony with nature;
  12. Provide all the necessary reforms and support required to raise the share of renewable energy financing to at least 20 percent by 2030;
  13. Promote the production of green hydrogen and hydrogen derivatives such as green fertilizer and synthetic fuels;
  14. Integrate climate, biodiversity and ocean agendas into national development plans and processes to increase resilience of local communities and national economies;
  15. Promote regenerative blue economy and support implementation of the Moroni Declaration for Ocean and Climate Action in Africa, and the Great Blue Wall Initiative, whilst recognising the circumstances of Africa’s Island States;
  16. Support smallholder farmers, indigenous peoples, and local communities in the green economic transition, given their key role in ecosystems stewardship;
  17. Identify, prioritize,  and  mainstream  adaptation  into development policy-making and planning, including in the context of Nationally Determined Contributions (NDCs);
  18. Build effective partnerships between Africa and other regions, to meet the needs for financial, technical and technological support, and knowledge sharing for climate change adaptation;
  19. Promote investments in urban infrastructure including through upgrading informal settlements and slum areas to build climate resilient cities and urban centres;
  20. Strengthen early warning systems and climate information services, as well as taking early action to protect lives, livelihoods and assets and inform long-term decision-making related to climate change risks. We emphasise the importance of embracing indigenous knowledge and citizen science in both adaptation strategies and early warning systems;
  21. Support implementation of the Africa Water Investment Programme (AIP), which aims to close the Africa water investment gap by mobilising US$30 billion by 2030;
  22. Enhance drought resilience systems to shift from crisis management to proactive drought preparedness and adaptation, to significantly reduce drought vulnerability of people, economic activities, and ecosystems;
  23. Further enhance our inclusive approach including through engagement and coordination with the children, youth, women, persons living with disabilities, indigenous people, and communities in climate vulnerable situations;
  24. Accelerate implementation of the African Union Climate Change and Resilient Development Strategy and Action Plan (2022-2032)

CALL TO ACTION:

  1. We call upon world leaders to recognise that decarbonizing the global economy is an opportunity to contribute to equality and shared
  2. We invite Development Partners from the global north and south to align technical and financial support to Africa for sustainable utilization of Africa’s natural assets for low carbon development that contributes to global decarbonization.
  3. To accomplish this vision of economic transformation in harmony with our climate needs, we further call upon the international community to contribute to the following:
    • Increase Africa’s renewable generation capacity from 56 Giga Watts (GW) in 2022 to at least 300 GW by 2030, both to address energy poverty and to bolster the global supply of cost-effective clean energy for industry.
    • Shift exports of energy intensive primary processing of Africa’s raw material back to the continent, to serve as an anchor demand for our renewable energy and a means of rapidly reducing global
    • Access to, and transfer of environmentally sound technologies, including technologies to support Africa’s green industrialisation and transition.
    • Design global and regional trade mechanisms in a manner that enables products from Africa to compete on fair and equitable
    • Request that trade-related environmental tariffs and non-tariff barriers must be subject to multilateral discussions and agreements and not be unilateral, arbitrary or discriminatory measures.
    • Accelerate efforts to decarbonize the transport, industrial and electricity sectors through the use of smart, digital and highly efficient technologies such as green hydrogen, synthetic fuels and battery storage.
    • Design industry policies that incentivize global investment to locations that offer the most and substantial climate benefits, while ensuring benefits for local communities.
    • Implement a mix of measures that elevate Africa’s share of carbon markets.
  4. Reiterate the decision 1/COP27 that states that global transformation to a low-carbon economy is expected to require investment of at least USD 4 – 6 trillion per year and delivering such funding in turn requires a transformation of the financial system and its structures and processes, engaging governments, central banks, commercial banks, institutional investors and other financial actors.
  5. We call for collective global action to mobilise the necessary capital for both development and climate action, echoing the statement of the Paris Pact for People and the Planet, that no country should ever have to choose between development aspirations and climate action.
  6. Call for concrete, time-bound action on the proposals to reform the multilateral financial system currently under discussion specifically to:
    • Build resilience to climate shocks, including better deployment of the Special Drawing Rights (SDRs) liquidity mechanism and disaster suspension clauses.
    • Re-channeling of   at   least   $100billion   of SDRs to Africa, including through institutions such as the African Development Bank which will be able to leverage the SDRs by three to four times. We also call for the formation of a group of SDR donors to expedite this re- channeling ahead of COP28.
    • Propose for consideration a new SDR issue for climate crisis response of at least the same magnitude as the Covid19 issue (US$650 billion).
    • Better leverage of the balance sheets of MDBs to scale up concessional finance to at least $500b per year.
    • Improve debt management, including:
      • the inclusion of ‘debt pause clauses’, and
      • the proposed expert review of the Common Framework and the Debt Sustainability Analysis.
    • Provide interventions and instruments for new debt relief to pre-empt debt default to:
      • extend sovereign debt tenor, and
      • include a 10-year grace
    • Decisively act on the promotion of inclusive and effective international tax cooperation at the United Nations with the aim to reduce Africa’s loss of US$ 27 billion annual corporate tax revenue through profit shifting, by at least 50% by 2030 and 75% by 2050.
      1. Put additional measures to crowd in and de-risk private capital, such as blended finance instruments, purchase commitments, partial foreign exchange (FX) guarantee and industrial policy collaboration, which should be informed by the risks that drive lack of private capital deployment at
      2. Redesign MDB governance, to ensure a “fit for purpose” system with appropriate representation, voice, and agency of all countries.
  1. Note that multilateral finance reform is necessary but not sufficient to provide the scale of climate financing the world needs to achieve 43 percent emission reduction by 2030 required to meet the Paris Agreement goals, without which keeping global warming to 1.5 degrees celsius will be in serious jeopardy.
  2. Further note that the scale of financing required to unlock Africa’s climate-positive growth is beyond the borrowing capacity of national balance sheets, or at the risk premium that Africa is currently paying for private capital.
  3. Draw attention to the finding that inordinate borrowing costs, typically 5 to 8 times what wealthy countries pay (the “great financial divide”), are a root cause of recurring debt crises in developing countries and an impediment to investment in development and climate action.
  4. We call for adoption of principles of responsible sovereign lending and accountability encompassing credit rating, risk analysis and debt sustainability assessment frameworks and urge the financial markets to commit to eliminate this disparity by 2025.
  5. Urge world leaders to consider the proposal for a global carbon taxation regime including a carbon tax on fossil fuel trade, maritime transport and aviation, that may also be augmented by a global financial transaction tax (FTT) to provide dedicated, affordable, and accessible finance for climate-positive investments at scale, and establish a balanced, fair and representative global governance structure for its management, with an assessment of the financial implications on socio- economic impacts on Africa.
  6. Propose to establish a new financing architecture that is responsive to Africa’s needs including debt restructuring and relief, and the development of a new Global Climate Finance Charter through UNGA and COP processes by 2025.
  7. We call for revaluation of the Gross Domestic Product of Africa through the proper valuation of its abundant natural capital and ecosystem services including but not limited to its vast forests that sequester carbon to unlock new sources of wealth for Africa. This will entail the use of natural resource accounting and development of national accounting standards.
  8. Note that the first Global Stocktake which will conclude at COP28 offers a pivotal opportunity to correct course by including a comprehensive outcome, both backward and forward looking.
  9. Resolve to establish the Africa Climate Summit as a biennial event convened by African Union and hosted by AU Member States, to set the continent’s new vision, taking into consideration emerging global climate and development issues.
  10. Resolve also that this Declaration will serve as a strong contribution from the African continent to the global climate change process including COP 28 and beyond.
  11. Welcome the pledges and commitments made at the Summit to a tune of USD 26 billion from Development Partners including the European Union, the United Arab Emirates (UAE) as COP28 President- Designate, the Government of the United States, MDBs, Philanthropic Foundations, and Private Sector, to support Africa especially in the areas of renewable energy and adaptation.
  12. Appreciate the efforts of the United Arab Emirates as the COP28 President-Designate in the preparation of COP28 and affirm Africa’s full support for a successful and ambitious outcome of COP28.
  13. Request African Union Commission to develop an implementation framework for this Declaration and to make Climate Change an AU theme for the Year 2025 or 2026.
  14. Thank the Government and People of the Kenya for successfully hosting the inaugural Africa Climate Summit, and the warm hospitality accorded to all delegations to the Summit.

In witness of which we the African Heads of State and Government assembled in the (venue) of the Kenyatta International Convention Centre in Nairobi now make this declaration in the presence of global leaders and high-level representatives on this 6th day September 2023, in Nairobi, Kenya

African financial institutions pledge to protect and restore nature in landmark statement

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“Nature Voices Pledge” will be launched at a Presidential Panel on nature at the Africa Climate Summit

Nairobi, September 5th, 2023: Some of Africa’s largest financial institutions are backing a call to conserve and restore nature amid a biodiversity crisis that threatens the wellbeing and livelihoods of tens of millions of its people.

The landmark “Nature Voices Pledge” is being launched by the African Natural Capital Alliance (ANCA), a collaborative membership organisation whose collective assets total US$390 billion. Among its members are major financial institutions such as Standard Chartered, KCB, Equity Bank, Ecobank, Access Bank, DBSA, Zanaco, FirstRand, Investec, Sanlam, Old Mutual, CalBank, ICEA LION and Fidelity Shield.

The Pledge commits the ANCA membership, which also includes governmental organisations such as the Ghana Ministry of Environment, Science, Technology and Innovation (MESTI) and civil society organisations including the African Wildlife Foundation, to support conservation and restoration efforts, integrate nature into their decision-making and promote sustainable financing solutions.

It comes amid growing evidence that the natural capital on which tens of millions of Africans depend is being lost due to factors including overexploitation, overpopulation, land-use changes and climate change. The value of the natural capital lost to Africa every year is estimated to be $195 billion according to the United Nations Environment Programme (UNEP).

The “Nature Voices Pledge” is to be announced at a Presidential Panel titled “Pioneering the Future of Nature in Africa” which is being hosted by the Africa Climate Summit 2023 on 5th September 2023

The event, which is being supported by ANCA, brings together leaders from several African nations including the Presidents of Rwanda, Republic of Congo and Burundi, to engage in a high-level dialogue on the future of nature in Africa. It will provide a platform for African leaders to discuss key challenges, opportunities, and policy interventions aimed at promoting nature and biodiversity for sustainable development across the continent.

The ‘Nature Voices Pledge’ encapsulates the shared commitment of ANCA’s member institutions to prioritise nature-positive practices and integrate environmental considerations into their core operations. It highlights three key principles that underline ANCA’s dedication to shaping a more sustainable and resilient Africa:

  • Acknowledging the Importance of Nature
  • Emphasizing the African Context
  • Assuming Responsibility

The Pledge also sets out a set of concrete actions ANCA members will take to achieve their nature-centred goals:

  • Support Nature Conservation and Restoration
  • Integrate Nature into Decision-Making
  • Promote Sustainable Financing Solutions
  • Strengthen Transparency and Reporting
  • Support Alignment of Policies and Regulations
  • Foster Collaboration and Knowledge Sharing

This historic commitment underscores the group’s urgency and conviction in driving transformative change toward a sustainable future for Africa.

Dorothy Maseke, Head of ANCA Secretariat and Lead of Nature Finance at FSD Africa, said:

“We in Africa are privileged to live on a continent so rich in natural capital but we must also recognise that our economy and our well-being depends on using it sustainably. This landmark pledge signifies that the members of ANCA are determined to play our part by putting nature at the heart of decision-making, so we reflect its true value and drive investment into activities which conserve and enhance nature rather than destructive activities for short term gain.”

Kaddu Sebunya, CEO, African Wildlife Foundation, said:

“As we stand on the cusp of the Africa Climate Summit, we come with a resounding message of hope, unity, and action. We support the Nature Voices Pledge and believe unity is essential to ensure the realisation of nature’s conservation in Africa for prosperity and future generations. At the African Wildlife Foundation we believe that biodiversity stands as a powerful ally in the face of our pressing climate challenges. We understand that acknowledging biodiversity’s pivotal role is the key to a harmonious future for both nature and humanity.”

Conceptual Framework of Contingent Liabilities and Guidelines for Managing Loan Guarantees and On-Lending in The MEFMI Region

1.1. Purpose of the Guidelines

The purpose of these Guidelines is to help countries build frameworks for managing loan guarantees and on-lending, by outlining standard structures and processes driven from sound
practices, at regional and global level. A secondary purpose is to provide key information on identifying and monitoring selected sources of contingent liabilities.

The MEFMI member countries are expected to adapt the Guidelines to develop their own frameworks, considering their specific circumstances.

1.2. Managing contingent liabilities

Contingent liabilities are sources of fiscal risks due to the uncertainty that is structurally embedded in them. History has shown that if governments do not manage fiscal risks arising from contingent liabilities and take necessary measures in a timely manner, they can be caught unprepared for their fiscal burden. Therefore, the objective of contingent liability management is to mitigate and manage fiscal risks arising from these liabilities both at the instrument and portfolio level.

Contingent liability management also aims to ensure that the decision makers are well informed about the costs and risks of the contingent liabilities they are considering beforehand. The information assists in the assessment of the contingent liability against other forms of government financing modes, such as on-lending, capital injections and direct subsidies. This objective is applicable for contingent liabilities that are explicitly issued by the government, e.g. loan guarantees. To achieve this objective, the costs and risks of the contingent liabilities should be assessed ex ante.

Study on Managing Sovereign Debt in Times of Crisis: Governance and Operational Risk Management Frameworks for Public Debt

Introduction

The COVID-19 pandemic has caused devastating economic and social disruption across the world. It has especially affected developing countries, which were not fully prepared and had limited leeway to take the required preventive measures.

As seen in previous chapters of this study, not only was the impact of COVID-19 historic and unusual in its severity for developing countries, it caused immense debt stresses and put fiscal pressure on governments’ economic and financial fortunes. Faced with increasing requirements to spend on health and other essential services at a time when economic activity had all but stalled and revenue streams dried up, the need to resort to additional government borrowing became inevitable. That pushed the average general government gross debt-to-GDP ratio to 57.8 per cent at the end of 2020 for the 45 countries in the sub-Saharan Africa region, from 51.5 per cent in 2019. This was the highest level in almost 20 years, and an increase of more than six percentage points in just one year (IMF, 2021).

The fact that developing economies were already facing different vulnerabilities before the pandemic made it more difficult for them to manage the level of sovereign debt. Pressures particularly came from issues such as fast-growing interest expenses as a share of revenue, rollover risks due to shorter debt maturities, a narrowing of the differential between the real interest rate and growth, expanding contingent liabilities and, in some countries, debt collateralisation with limited transparency (AfDB, 2021). As seen in Chapter One of this study, the region entered the crisis with significantly less fiscal space than it had at the onset of the global financial crisis of 2008/09, with 16 countries either at high risk of debt distress or already in distress in 2019. At the same
time, the funding conditions of these countries were vulnerable to global risk sentiment and therefore historically more volatile than in advanced economies (OECD, 2020).

NAICOM, FSD Africa partnership yields dividend

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THE partnership entered into by the National Insurance Commission (NAICOM) with FSD Africa has yielded the desired result as the latter has embarked on capacity building for the staff of NAICOM.

Already, sequel to the NAICOM’s collaboration with FSD Africa, a two-week training on Risk Based Capital (RBC) for 70 members of staff of the Commission has been concluded.

The training was facilitated by the principal in charge of innovation at FSD Africa, Mr Elias Omondi.

According to NAICOM, other benefits of the partnership will spill over to the Nigerian Insurance Industry, and they include, the development of Risk Based Capital framework and toolkit and the incorporation of Economic, Social and Governance (ESG) Principles into their operations.

The commission added that the partnership will also lead to the development of Innovation portrait which would facilitate innovation for the regulator and insurance operators amongst others.

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