An event titled “Innovating Finance for Climate Change” provided some of the most insightful discussions during the US-Africa Leaders Summit, held in Washington DC on December 13-15.
The 50 participants were a highly curated group with expertise across a wide range of disciplines, who all play a critical role in finding creative funding solutions to Africa's huge power demands. They included senior representatives from the US government, the AU, bankers, development financiers, power companies, investors and civil society.
The event was sponsored by the Africa Finance Corp (AFC) and Bank of America (BofA), and was produced by Africa.com.
Until clean energy is readily and cheaply available, African mothers will continue to chop down trees for firewood to boil water for their babies to drink
The conversation covered much ground. A lively debate ensued between a Western climate change activist and several African practitioners about the pace at which Africa can move towards clean energy — the point being that until clean energy is readily and cheaply available, mothers will continue to chop down trees for firewood to boil water for their babies to drink.
Another probing discussion took place with a representative of US equity investors, who manage more than $300bn in assets. In exploring what's needed to get more of these US investors to the table, the point was made that consultants to US pension funds are critical gatekeepers to unlocking that pool of capital, and there are few among them who understand the Africa investment environment.
The AFC and BofA were also given the opportunity to present examples of innovative financing structures that their institutions have developed to bring much-needed climate finance funding to Africa.
As a multilateral financial institution established through a public-private partnership, the AFC makes investments to help Africa adapt and mitigate climate change through renewable energy generation, with an emphasis on hydropower and wind, in addition to sustainable transport and other low-emissions projects.
In fact, having invested over $10bn in 37 African countries, it's one of the largest investors in clean power on the continent. The event highlighted AFC's recent joint acquisition of Lekela Power, the largest renewables independent power producers in Africa, as well as its strategic investment as the lead developer of a $63m project to construct and operate a 60MW wind project in Djibouti.
Through its Infrastructure Climate Resilient Fund, established in 2021, the AFC also intends to raise up to $2bn over the next three years to enhance the quality of African ports, roads, bridges, rail, telecommunications, clean energy and logistics in the face of rising temperatures and sea levels due to climate change.
The BofA leverages its expertise in finding creative solutions to green finance through its extensive experience having done so in the US and emerging markets around the globe. It takes an intentional approach to deploying sustainable finance capital focusing on transforming markets and accelerating a global shift to a low-carbon, sustainable economy.
At the event, the BofA discussed its recent commitment, announced during COP27, to structure blended finance to fund commercial and industrial renewable energy and energy transition solutions across Africa.
Its intention is to explore financing solutions with CrossBoundary Energy (CBE), in an effort to scale investment in renewable energy solutions for commercial and industrial businesses across the continent. Such solutions will support CBE’s delivery of over 200MW of projects.
On a global scale, BofA has a goal of mobilising and deploying $1.5-trillion in sustainable finance capital by 2030 that is aligned with the 17 UN sustainable development goals. Of this, $1-trillion is dedicated to supporting the transition towards a low-carbon economy and $500bn for social inclusive development.
The “Innovating Finance for Climate Change” event took full advantage of the right people being in the same place at the same time to identify tangible ways to drive more global capital to address Africa’s enormous need for funding renewable energy.
The event was helpful in showcasing blended finance structures, the role of development finance institutions in derisking projects, and what is needed to access US pension fund capital for Africa.
This article was paid for by Africa.com.
This article is adapted from one originally published on the Africa.com website.
