Financing climate adaptation in Africa

Africa, despite contributing less than 4% of global emissions and being home to 15% of the world's population, continues to bear the brunt of climate change consequences. With nine out of the most vulnerable countries to climate change located in Africa, the continent is facing a significant challenge in securing the necessary financing for climate adaptation. At COP27, leaders have been discussing the urgent need to mobilize funding for adaptation and mitigation efforts. Hannah Morsey, Deputy Executive Secretary at the U.N. Economic Commission for Africa, highlighted the substantial financing gap, stating that the continent requires approximately $203 billion for climate financing, but currently only receives a minimal share of global climate finance. Morsey emphasized that the current financing flows do not align with the pressing needs outlined in IPCC reports. While global climate finance is increasing, particularly for adaptation, the gap between adaptation needs and available funding continues to widen. The UN Adaptation Fund, established in 2010, has received around $850 million in commitments, falling short of the $86 billion needed annually for Africa alone. Efforts to scale up adaptation finance include the need to involve the private sector, which currently contributes less than 14% of total climate finance in Africa. Morsey stressed the importance of utilizing instruments such as credit enhancements to attract more private sector investment. The goal is to increase the private sector's role in financing climate projects, as seen in other regions where private sector investment comprises a larger share. Despite some actions taken by countries, particularly those most impacted by climate change like those in Africa, Morsey stated that more must be done in terms of implementation and driving the climate adaptation agenda forward. The urgency of the situation necessitates increased efforts to mobilize financing for climate projects in the continent. During the conference, discussions focused on strategies to crowd in private sector financing through measures such as de-risking and utilizing credit enhancement instruments. Addressing the Africa risk premium, which sees African countries paying higher interest rates compared to countries with similar fundamentals, is crucial in attracting more private sector investment. Instruments like debt-for-nature and climate swaps can help create fiscal space by refinancing expensive debt with commitments to climate actions. As part of their efforts, the U.N. Economic Commission for Africa has been organizing regional forums to showcase green finance projects and connect them with potential investors. By demonstrating the returns on green investments and improving the bankability of projects, these initiatives aim to bridge the financing gap for climate adaptation in Africa. The focus is on moving from millions to billions in funding to support critical climate projects on the continent.