8 March 2025
By Niall Murphy
Last week’s Finance in Commons Summit (FiCS) – the annual meet-up of public development banks hosted by Development Bank of Southern Africa (DBSA) and the Asian Infrastructure Investment Bank (AIIB) along with Agence Française de Développement (AFD) – was revealing if somewhat paradoxical. The majesty of Cape Town provided a beautiful stage for a creative discussion on primarily African development finance, with climate adaptation and nature-as-infrastructure headline themes. The juxtaposition with Washington DC’s daily climate pull-backs and development finance cancellations was stark. The sense of worldviews tearing apart and heading in different directions was palpable, making the conundrums of Africa’s opportunities and challenges in a climate shaped world all the clearer to see.
Whilst Africa is responsible for less than 4% of global emissions today, the big question is how growth happens for the continent without boosting emissions and accelerating negative climate impacts. Current performance is not encouraging. Africa has 4x-to-5x Europe’s emissions per US$ of GDP today at 0.5-0.8kg CO₂ per US$ of GDP for Africa. How does Africa turn that around and drive growth on a declining emissions per GDP dollar basis, like China is accomplishing? What’s more, the continent faces huge climate impacts to agriculture and food security, water scarcity, energy system strain, health and biodiversity loss. International institutional insurance providers are already pulling-back market engagement. These are direct threats to industrial productivity, undermine infrastructure, drive migration within and from the continent, escalate resource conflicts, and increase costs of financing. African leadership is 100% right to focused on how investing in adaptation can become both an economic engine for growth and a path to a more resilient and secure future.
For the rest of the world, how Africa manages its biodiversity and emissions is pretty important too. Africa today hosts 25% of the world’s biodiversity and accounts for about 1/5th of the world’s land areas. The Congo Basin alone stores over 60 billion metric tons of carbon, helping regulate the global climate. Major river systems – the Nile, Congo, Niger, Zambezi – sustain millions of people and influence global hydrological cycles the whole planet is dependent upon. And Africa is home to key pollinators and wild relatives of crops – including coffee, millet, yam – crucial for global agricultural resilience. The whole world has a vested interest in Africa’s climate resilience both for how effectively it can continue to provide ecosystem services to the planet, and how its positive economic development can bolster global security.
The criticality of preemptively investing in adaptation to mitigate climate impacts, enhance resilience and forge a development path that is clean and nature-aligned seems both accepted and assumed by African country leadership as the only viable course to steer. What is less clear is how it’s going to be accomplished, both technologically and financially.
Africa’s renewable resource opportunities are tremendous – solar, wind, geothermal, nuclear. What’s more, Africa holds 30% of mineral deposits needed for the energy transition globally. African countries are pushing for the recognition of this value, and exploring how to gain greater benefit for their economies from this wealth. Why export electricity, raw materials and resources from the continent when you could be powering industry for processing and manufacture on the continent? The continent is rich with opportunity, and seems primed to exploit it.
Listening to the debates at FiCS, the Gordian Knot holding things back is Africa’s debt burden and lackluster economic performance, investment market confidence in governance and real commitment to improving accountability, and the ability for African public finance institutions and governments to collaborate more effectively. South Africa, the first to agree a Just Energy Transition Partnership (JETP) deal to accelerate its move away from coal, is struggling simply because it’s not delivering the economic growth to fund it. Sources of finance in the global north are tightening and retreating as the US pulls back and Europe prioritises defence investment.
New opportunities are emerging. The AIIB’s climate-based loans to Brazil highlight models where public development finance is applied alongside private capital and focused on investments that boost climate resilience and adaptation. The International Advisory Panel on Biodiversity Credits (IAPB) framework is garnering a lot of attention across African markets as a pathway to draw investment into nature through compliance or regulation policies that can also de-risk infrastructure and boost local economies. The opportunities for financial innovation are increasing, and the appetite amongst African public finance institutions and governments to engage more creatively appears to be strengthening quickly as the declining opportunities for concessionary capital at scale become clear. Necessity is the mother of invention.
Africa has the world’s youngest population. By 2030 young Africans are expected to make up 42% of the world’s youth and account for 75% of those under age 35 in Africa. Africa’s dependency ratio is dropping rapidly, increasing the working-age population. With a population expected to surpass 1.7-billion by 2030, 1-billion are expected to be living in urban areas by 2035. No other continent offers that market growth opportunity. And Africa’s youthful population and young entrepreneurs are demonstrating increasing engagement in response to climate change impacts.
Despite the challenges, the drivers for Africa to emerge as the innovation hub of climate adaptation seem strong. Climate impacts are manifesting today, and increasingly prescient. There are huge greenfield opportunities for infrastructures of all sorts to meet the needs of an increasingly economically productive population that are also seeking a sustainable and climate resilient future. Development and the financing of development is therefore going to be inherently climate adaptation aware and informed. The withdrawal of traditional financing sources is driving innovation. And Africa has so much the rest of the world needs. Notwithstanding the climate pullbacks going on elsewhere in the world, African leaders in Cape Town seemed clear about the critical role climate adaptation will play in securing future growth, optimistic in their ability and opportunity to leverage Africa’s resource and nature wealth in that context, and seriously engaged in rethinking financing and market models to access these opportunities.