Africa: Climate Finance for Africa Needs to Grow From U.S.$30 Billion to U.S.$277 Billion – Reseach Reveals
A research by the Climate Policy Initiative has revealed that total annual climate finance flows in Africa for 2020, domestic and international, were only USD 30 billion, just 11 per cent of the USD 277 billion needed annually.
According to the research, while the financing gap was significant, Africa’s rapid urbanisation, expanding infrastructure, and energy-access needs offered significant investment opportunities.
Commissioned by FSD Africa, the Children’s Investment Fund Foundation, and UK Aid, the Landscape of Climate Finance in Africa is a first-of-its-kind analysis to map climate finance flows in Africa by region, by sector, and by source.
By improving the understanding of the volume, sources, thematic uses, and sectoral allocation of these flows, the research will help investors and climate negotiators identify entry points, financing gaps, and opportunities for new investments. Crucially, the research also provides a baseline against which to measure progress on climate finance and the success of particular interventions.
The study revealed that private sector financing remained too low as it contributed only 14 per cent (USD 4.2 billion) of total climate finance in Africa, much lower than in other regions like South Asia (37 per cent), East Asia and Pacific (39 per cent), and Latin America & Caribbean (49 per cent).
“CPI estimates that Africa requires $277 billion dollars annually to implement its Nationally Determined Contributions (NDCs) and meet its 2030 climate goals. However, the most recent data shows annual climate finance stands at only $30 billion. This gap is likely even greater. Countries often underestimate their climate finance targets, especially in relation to adaptation, due to data and methodological problems in costing their NDCs,” the study said.
According to the report, investment gaps vary between countries, but all regions receive significantly less finance than they need. The Southern African region bears the largest financing gap in absolute terms. This is mainly attributed to high climate finance needs of South Africa alone, estimated at USD 107 billion, combined with one of the lowest regional levels of climate investment.
“Climate finance is concentrated with 10 countries accounting for more than 50% of Africa’s climate finance. These include Egypt, Morocco, Nigeria, Kenya, Ethiopia and South Africa,” it said.
It said “Africa strikes a better balance between adaptation and mitigation than other regions. Mitigation accounted for 49 per cent (USD 14.6 billion) of climate finance flows in Africa, followed by 39 per cent (USD 11.4 billion) towards adaptation, and 12 per cent (USD 3.5 billion) to dual benefits. This is a positive trend, given Africa’s disproportionately high vulnerability to climate change. Yet funding for both adaptation and mitigation must still increase by at least six and 13 times, respectively.”
The report said there was huge potential to translate Africa’s sustainable energy needs into investment opportunities and reduce investments in fossil fuels.
“Africa will need around USD 133 billion annually in clean energy investment to meet its energy and climate goals between 2026-2030 (IEA, 2022). However, annual investment in renewable energy — arguably the most attractive sector for commercial investors — stands at a mere USD 9.4 billion,” it said.
CPI’s Global Managing Director Barbara Buchner said: “Africa offers a wealth of climate-related investment opportunities. New value chains are taking root as the continent’s industrial mix extends beyond extractives and other traditional sectors. However, public and private actors must act with scale and speed to help bring Africa’s climate goals to fruition. While the investment opportunities are substantial, the social, economic, and environmental benefits which could be realised are even greater.”