Pillar: Development Impact

The Social and Economic Impacts of Carbon Markets

Commissioned by FSD Africa and the UK Foreign, Commonwealth & Development Office (FCDO); authored by Agora Global in collaboration with the Institute of Development Studies, University of Sussex

This landmark publication presents a comprehensive realist systematic literature review examining carbon market participation on social and economic effects on local communities in low- and middle-income countries (LMICs). Carbon trading, particularly voluntary carbon markets, is gaining prominence in global climate mitigation efforts, raising concerns about its impact on local communities.

The report, based on 52 empirical studies in Africa, Asia, and Latin America, examines the impacts of carbon projects on community livelihoods, highlighting systemic challenges and potential risks. These include delayed payments, lack of inclusion in governance, land tenure inequalities, and increased workload for women, often without commensurate compensation.

The findings reveal a stark reality: while carbon markets hold potential to generate co-benefits alongside emissions reduction, this promise is highly contingent on project design, governance structures, and enabling policy environments. For example, agricultural and clean energy projects demonstrate more substantial positive community impacts than many forest conservation efforts, which may restrict access to vital natural resources and exacerbate social tensions.

The study explores factors enabling carbon markets to foster inclusive development, including transparent benefit-sharing models, high-integrity standards, premium pricing, and community engagement. It also highlights critical knowledge gaps, such as equity outcomes and the scalability of community benefits.

This review provides a balanced perspective on the carbon market’s sustainability, emphasising the need for reimagining carbon projects, particularly in low-income countries, to promote equitable, locally owned development. It is valuable for stakeholders in the carbon market.

FSD Africa Annual Impact Report 2024

The 2024 Development Impact Report by FSD Africa highlights the organisation’s progress in mobilising and allocating finance for Africa’s sustainable future. This report underscores the efforts of FSD Africa and FSD Africa Investments (FSDAi) in driving capital into under-served sectors, promoting innovative financing solutions, and addressing key challenges such as climate change, economic inclusivity, and gender equity.

In 2024, FSD Africa marked several milestones, including the issuance of sustainability bonds, deployment of de-risking instruments, and support for early-stage businesses. The report also emphasises the importance of partnerships with governments, financial institutions, and international organisations in strengthening Africa’s financial markets.

What to expect from the report:
  • Sustainability Bonds: Learn about FSD Africa’s role in supporting the issuance of over £491 million in sustainability bonds across multiple African countries.
  • De-risking Instruments: Discover how FSD Africa deploys de-risking instruments to attract more capital to Africa’s financial markets.
  • Nature-Based Solutions: Explore initiatives aimed at financing nature-based solutions to enhance Africa’s climate resilience.
  • Clean Energy Transition: Understand FSD Africa’s contributions to Africa’s transition to clean energy through strategic investments and partnerships.
  • Gender-Inclusive Financing: See how FSD Africa promotes gender equity by supporting women-led businesses and issuing gender bonds.
  • Early-Stage Business Support: Learn about the organisation’s role in strengthening early-stage businesses through capital allocation and technical assistance.
  • Clean Mobility: Find out about projects supporting clean mobility in sub-Saharan Africa to reduce greenhouse gas emissions.
  • Climate Adaptation and Resilience: Explore FSD Africa’s investments in climate adaptation to support vulnerable communities.
  • Lessons and Insights: Engage with the lessons and insights gained from FSD Africa’s initiatives and consider how finance can work better for Africa’s future.

Forecasting Green Jobs in Africa

Read our first of its kind report that forecasts the new direct job creation potential of 12 green sub-sectors by 2030. The report predicts the creation of up to 3.3 million new green jobs across the continent, with the majority in renewable energy, particularly solar.

More about the report

By 2050, expert projections suggest jobs created within the green economy could well approach 100 million. The pioneering study provides detailed forecasts for five focus countries, Democratic Republic of Congo, Ethiopia, Kenya, Nigeria and South Africa, which together account for more than 20% of new jobs, and in key sectors such as e-mobility, agriculture, construction and manufacturing.

View the data set here

A Deep Dive Study on the Impact of Regulatory Interventions

Introduction

Despite their potential in driving development, Africa’s capital markets remain underdeveloped. They are narrow and illiquid, with few listed and tradable securities, too few issuers, investors, intermediaries and a lack of financial product diversity, often dominated by government bond markets.

In response to the challenges that African capital markets face, FSD Africa has been providing technical assistance to regulators since 2016, particularly by assisting in strengthening regulatory frameworks and through capacity building. This learning brief presents some key lessons from the some of  FSD Africa regulatory efforts on strengthening capital markets in Africa.

A rapid analysis of the gender intentionality of Africa’s Nationally Determined Contributions (NDCs)

Introduction

As countries gather at UN Climate Change Conference (COP28) in the UAE, where the highly anticipated first-ever global stocktake is expected to conclude. We are pleased to share – A rapid analysis of the gender intentionality of Africa’s Nationally Determined Contributions (NDCs).

This paper investigates gender intentionality using several dimensions including gender-responsive budgeting in African NDCs. More importantly, the paper explores whether countries are mobilising and allocating climate finance with a gender lens, and it makes recommendations for governments, financiers, and investors to ensure climate finance is not gender neutral.

African countries are called upon to reflect on key gaps articulated in this paper, and work towards accelerating gender-responsive climate finance actions.

Ethiopia jobs protection facility learning brief

In 2020, we partnered with FCDO Ethiopia and KfW (on behalf of BMZ) to implement an emergency jobs protection facility for manufacturers in various industrial parks in Ethiopia. The main objective of this intervention was to ensure continuity of employment for workers and the post-Covid sustainability of Ethiopia’s textile and garment manufacturing sector.

Following the conclusion of the Facility, we also undertook a review of the programme’s performance in line with specific objectives on behalf of the funders. This learning brief summarises the findings of the report and highlights the challenges, lessons and impact of the programme.

Compendium of FSD indicators

This Compendium has been developed to address the challenge that FSD Network members face in the identification/design and application of indicators that measure financial market system changes and resultant FSD outcomes and impacts . As part of a broader effort to address the need for tools that support the practical application of impact oriented measurement (IOM) principles, the Compendium is aimed at serving as a resource with a bespoke set of quality indicators appropriate for FSDs to measure outcome and impact level results in a more harmonised manner.

The Untold story of women and sovereign debt in Africa

Posted on by Kihingu Inc

In January 2024, Kenya found itself in the grip of an economic crisis. The government’s high debt levels, coupled with a heightened risk of default, triggered an economic downturn. The ripple effects were felt across the economy: the Kenyan shilling depreciated at an unprecedented rate, fuel prices soared and the cost of living skyrocketed, leaving many struggling to make ends meet. This situation was not unique to Kenya. Similar debt crises in Ghana and Zambia had already plunged those nations into economic distress, illustrating how unsustainable sovereign debt can devastate economies and, by extension, the lives of ordinary citizens. But there’s a side to this story that is often overlooked: the disproportionate impact of these economic downturns on women. While sovereign debt crises affect entire populations, women often bear the brunt of the consequences due to their unique socio-economic vulnerabilities.

The hidden burden on women

Women in Africa, especially in rural areas, already face significant challenges. They are more likely to be employed in low-paying jobs, have fewer savings and possess less wealth compared to men. Many women and girls work in the informal sector, where job security is negligible, and incomes are unstable. Additionally, women are often responsible for unpaid care and domestic work, which limits their time and opportunities to engage in income-generating activities.
A study by Action Aid revealed that rural women in Africa typically work up to 16 hours a day, balancing multiple tasks often simultaneously. Women typically work 12 hours more per week than men. In countries like Ghana and Rwanda, rural women spend at least six hours daily on unpaid care work alone. This heavy burden leaves them with little time for paid work, further constraining their financial independence. When a country faces a debt crisis, the government is often forced to implement austerity measures, such as cutting public spending and increasing taxes. Women are affected most by cuts in public spending particularly in sectors like education, health and agriculture where women are disproportionately represented. For example, when subsidies for fertilisers and agricultural extension services are slashed, it is often women who must find an alternative means to support their families, further diminishing their economic prospects.

The intersection of debt, gender and climate change

Climate change and related challenges add another layer of complexity to the issue of gender and sovereign debt. Women, particularly those in agriculture, are already vulnerable to the effects of climate change. Unsustainable debt exacerbates these challenges by reducing government spending on essential services that could help women adapt to changing environmental conditions. For instance, cuts in agricultural support services make it harder for women to sustain their livelihoods, perpetuating the cycle of poverty and gender inequality.

A gender-sensitive approach to sovereign debt management

Given the significant impact of sovereign debt on women, it is crucial for African countries to adopt a gender-sensitive approach to debt management. This approach should include gender-responsive budgeting (GRB), which ensures that the needs and priorities of all segments of the population, particularly women, are considered in the budget-making process. There is also an opportunity for countries to leverage innovative financial instruments like gender bonds to mobilise and channel funds to close the gender finance gap. FSD Africa has been a forerunner in supporting the issuance of gender bonds in Tanzania and Morrocco and we have also supported the development of a toolkit for Africa-focused gender bonds. Such initiatives can stimulate economic growth by empowering women financially, boosting domestic resource mobilisation, and ultimately leading to more sustainable debt management strategies in the region.

Empowering women through strategic resource management

By embedding gender-inclusive strategies in initiatives like the African Continental Free Trade Area (AfCFTA), countries can create more opportunities for women to participate in the formal economy. AfCFTA, the world’s largest free trade area by population, holds significant potential to address the gender dynamics of sovereign debt. By promoting intra-African trade, AfCFTA can stimulate economic growth and diversification, creating employment opportunities for women, many of whom are engaged in informal and small- scale trading. Gender inclusive strategies under AfCFTA can enable women entrepreneurs to expand their businesses and access new markets, contributing to national revenue and reducing deficits that necessitate significant borrowing . Africa has a rich natural resource base, strategic and inclusive management of these resources can help address the gender dynamics of sovereign debt in the region. By ensuring that women have economically meaningful participation in sectors like manufacturing and agriculture especially in value addition, African countries can generate additional revenue streams while promoting gender equity. Policies that support women’s access to trade capital, training and technology can further strengthen their economic resilience, and increase their contribution to national resources. This will enhance domestic resource mobilisation and reduce the need for external borrowing.

The path forward

As African nations navigate the complexities of sovereign debt, it is imperative that they adopt policies that recognise and address the unique challenges faced by women. Governments should integrate gender-sensitive approaches into their debt management strategies and leverage broader synergies to empower women through strategic resource management. This will enable them to not only mitigate the adverse effects of debt on women but also harness their potential as key drivers of economic growth. In doing so, Africa can move towards a more equitable and sustainable future, where the burden of debt is shared more fairly and where women have the opportunity to thrive and actively contribute to economic growth.

New research suggests Africa’s Green Economy could create more than 3 million direct jobs by 2030

Posted on by Kihingu Inc

Nairobi, 24th July 2024 – Shortlist and FSD Africa, with analysis from the Boston Consulting Group, today published “Forecasting Green Jobs in Africa,” a first of its kind report that forecasts the new direct job creation potential of 12 “green” sub-sectors by 2030. The report predicts the creation of up to 3.3 million new direct green jobs across the continent by 2030, with the majority in the renewable energy sector, particularly solar. The study, the first in-depth analysis of workforce needs within major green value chains over the next five years, provides detailed forecasts for five focus countries, Democratic Republic of Congo (DRC), Ethiopia, Kenya, Nigeria and South Africa, which together account for more than a fifth (22%) of new jobs, and in key sectors such as renewable energy, e-mobility, agriculture, construction and manufacturing.

“Forecasting Green Jobs in Africa” underscores the critical importance of a skilled workforce as an input accelerating African green industries, emphasizing the need for substantial investment in skills development and workforce mobilization. Moreover, the millions of jobs created in the green revolution will also contribute to the formalization of African economies, and the inclusion of whole populations in stable systems of remuneration, social security and taxation for the first time.

Based on the findings, the report also outlines key strategies required to cultivate Africa’s green jobs ecosystem: from targeted investments in high-potential sectors and value chains, the fostering of cross-sector collaboration among governments, private sector, educational institutions and investors, to the development of comprehensive support policies for green sectors. The report also calls for further analysis and granularity to labour demand key value chains to identify Africa’s current skilled labour supply and any potential gaps.

While some experts have suggested that up to 100 million green jobs may be created by 2050, this report takes a more near-term, sober, and realistic look at the job creation potential of just 12 specific sub-sectors or value chains and only until 2030. This more conservative analysis is intended to guide near-term investments and policy decisions among universities, workforce development actors, and government as we ensure the mobilization of the right skills and workforce to meet demand.

Significantly it predicts that 60% of the employment generated by the green economy over the coming six years will be skilled or white collar in nature. Within this, 10% constitute “advanced jobs” (highly skilled, requiring university degrees to fulfil), whilst a further 30% are projected to be “specialized” (requiring certification or vocational training) and 20% will be administrative in emphasis. Crucially, these job types tend to attract higher salaries and will, therefore, play a central role in spurring the growth of the middle class in countries hosting these high-growth sectors. Important also is the stability of the unskilled jobs created – which will offer ladders up the employment scale for candidates, whose employability will be enhanced by access to training and experience.

“There is a cross-sector effort across Africa to spur employment and sustainable development,” said Mark Napier, CEO of FSD Africa, “but stakeholders lack a shared, granular understanding of where the green jobs are going to come from. This report offers a methodology for forecasting green jobs which allows us to get practical about where we need to invest to make these jobs happen.”

“This is the first public report that takes seriously the notion that human capital and talent is important as both an input to green economic growth, and as a positive outcome – in the form of millions of new, direct jobs.” says Paul Breloff, CEO of Shortlist. “Now policymakers, and funders, and workforce developers need to step up to meet this near-term demand with effective training, apprenticeships, and job/skill matching, in hopes of achieving Africa’s green promise.”

Other key findings include:

  • South Africa, Kenya and Nigeria represent the highest job creation potential (16%) due to population, gross domestic product (GDP) and industry maturity
  • The renewable energy sector alone is expected to generate up to 2m jobs (70% of the total) of which 1.7m will be in solar
  • Solar is the most important contributor to green jobs in South Africa (140,000 jobs) and Kenya (111,000 jobs)
  • Hydroelectric is forecast to be the leading employer in both DRC (16,000 jobs) and Ethiopia (33,000)
  • Agriculture and nature are forecast to produce up to 700,000 jobs (25% of total), of which more than half (377,000) will come from climate smart agriculture technology

Jobs created by country

South Africa

  • South Africa: between 85,000 to 275,000 new green jobs are forecast by 2030 – mainly in energy and power production, and agriculture and nature
  • The solar sector leads job creation in South Africa with 140,000 jobs projected

Nigeria

  • Nigeria predicted to put on between 60,000 and 240,000 new green jobs by 2030
  • Aquaculture and poultry lead job creation, with 69,000 jobs projected

Kenya

  • Kenya predicted to put on between 40,000 to 240,000 green jobs by 2030
  • The solar sector leads this job creation, with estimates that it will generate 111,000 jobs in the country by the decade’s end

Ethiopia

  • Ethiopia will see between 30,000 and 130,000 new green jobs by 2030, mainly in energy and power production
  • Hydropower generation leads as a job-creating sector, with 33,000 jobs projected

Democratic Republic of Congo (DRC)

  • The DRC is predicted to put on between 15,000 to 45,000 new green jobs by 2030; mainly in energy and power production and distribution
  • Again, hydropower is expected to lead job creation as a sector with 16,000 jobs expected

Click here to download a copy of the report