The African Development Bank is boosting the promotion of resilient, green and sustainable growth, with the launch of the African Green Bank Initiative.
The scheme is a model for deploying green financing across the continent.
The initiative, which was presented at the just-concluded UN Climate Change Conference (COP27) in Egypt, will support the implementation of African countries’ Nationally Determined Contributions (NDCs).
Part of the African Financial Alliance on Climate Change (AFAC), the Green Bank Initiative will be supported by the African Green Finance Facility Fund (AG3F). AG3F will provide technical assistance to governments and financial institutions in creating and capitalising green facilities, co-invest alongside those in green projects and provide de-risking instruments to increase private sector mobilisation.
Launching the initiative, African Development Bank vice president for Energy, Power, Climate and Green Growth, Kevin Kariuki, said the African Green Bank model would help increase the continent’s access to global climate finance.
“The Green Bank Initiative is a powerful tool for reducing financing costs and mobilising private sector investments in climate action in Africa,” Kariuki said.
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He said multilateral development banks and international financial institutions had a crucial role in enabling local financial institutions to develop a green pipeline of projects and ease their access to resources.
The African Green Bank initiative, which will be endowed with a trust fund of $1.5 billion, was conceived as part of measures to facilitate access to global finance from the current three per cent to 10 per cent annually by 2030.
Kariuki said the initiative was based on an assessment by the African Development Bank and the Climate Investment Funds on the potential of Green Banks in six African countries, namely Benin, Ghana, Mozambique, Tunisia, Uganda, and Zambia.
“The assessment revealed that green banks have significant potential for attracting new sources of catalytic funds when supporting low-carbon, climate-resilient development through blending capital and mobilising local private investment for green investments in Africa,” he said.
Kariuki said the initiative would bolster the capacity of local financial institutions to build a robust pipeline of bankable green projects, while de-risking investments and entrenching long-term investor confidence toward climate-resilient and low-carbon projects in Africa.
“It will do so through investing in sectors such as energy efficiency and renewable energy, climate-smart agriculture, resilient infrastructure, and nature-based solutions,” he said.
African countries still face significant challenges in financing their climate transition. While investment needs resulting from NDCs are estimated at $2.8 trillion by 2030, funds invested on the continent still represent a limited share of global green finance flows, and the share covered by the private sector remains limited.