Tapping local sources for Africa's climate financing

The African Development Bank is making strides towards enhancing climate finance at the local level to propel sustainable development in Africa. In an exclusive interview with CNBC Africa, Audrey-Cynthia Yamadjako, the Principal Climate Finance Officer for Environment and Climate Trust Funds at the AfDB, shed light on the pivotal role of the African Greenback initiative in fortifying Africa's climate architecture. The African Development Bank has set an ambitious target to elevate the percentage of climate finance directed to the region from a meager 5% to a formidable 10%, aiming to overcome the significant hurdle that climate finance poses in the pursuit of actualizing the Nationally Determined Contributions (NDCs) of the 51 member countries by 2030, demanding a substantial investment amounting to $2.8 trillion. Yamadjako articulated the transformative perspective of viewing this financing as an investment opportunity, emphasizing the commitment of the African Development Bank to allocate $25 billion towards climate finance by 2025. The focus is on cultivating conducive environments to harness climate finance locally, thereby amplifying direct access and fostering the development of pipelines for NDCs implementation. The launch of the African Greenback initiative at COP27 aligns seamlessly with this mission, with its core objective being the establishment of green financial intermediaries, a missing link in the existing climate finance landscape dominated by entities such as the Green Climate Fund, the Climate Investment Fund, and others. The initiative aims to extend financial support to SMEs, micro-entrepreneurs, agricultural ventures, and sovereign operations, key players in the tangible execution of climate action. By fostering an ecosystem of green financial facilities through collaboration with governments, commercial banks, public and private financial institutions at various levels, the initiative seeks to nurture self-sustaining green investments at the grassroots, ensuring autonomy and longevity of sustainable projects. The substantial backing from global entities like Amundi, renowned for its asset management expertise, and the Climate Investment Fund, coupled with Canada's support through the Canada Climate Action platform, bolsters the strategic vision of the African Greenback initiative. The inception of this initiative, merely months ago, has already marked significant progress by providing technical assistance to public financial institutions in Benin and Côte d'Ivoire, laying the foundation for the creation of country-specific climate finance facilities aligned with the investment strategies of NDCs. Empowering these institutions with financial and legal acumen, facilitating the development of initial green investment pipelines, and enhancing monitoring and reporting capabilities are crucial components of the support framework to ensure effective implementation of the envisioned projects. Amid the ambitious agenda set forth by the African Development Bank and its partners, the journey towards mobilizing climate finance encounters several challenges that warrant attention. The urgency of the climate crisis, evident through escalating climate impacts, underscores the pressing need for resilient infrastructure and sustainable agricultural practices to mitigate adverse effects and secure essential resources. Africa, as the continent most vulnerable to climate change, necessitates proactive measures to bolster adaptive capacity and build resilience among its populace. While there is growing recognition among commercial investors and financial institutions regarding the green investment potential, enhancing their capacity is imperative to catalyze the development of robust project pipelines capable of attracting diverse funding sources, both domestic and international. The pivotal role of blended finance, essential for structuring climate and environmental transactions, underscores the importance of integrating grant resources, risk guarantees, and concessional loans within finance facilities to de-risk investments and facilitate project viability. By fostering an ecosystem of blended finance vehicles at national and local levels, bolstered by capacity-building initiatives, the pathway to realizing NDCs and facilitating a just transition towards sustainable practices becomes clearer. Equipped with the necessary resources and support mechanisms, local green finance facilities serve as catalysts for channeling critical funding towards initiatives that foster sustainable development, ensure climate resilience, and promote a seamless transition to a greener future. Audrey Cynthia Yamadjako's insights illuminate the transformative potential of the African Greenback initiative, underscoring the imperative of collaborative efforts and innovative financial mechanisms to drive climate action and sustainable development across Africa.