Remarks by Minister of Forestry, Fisheries and The Environment, Ms Barbara Creecy, at the parallel session on scaling international climate finance for Africa, at the Africa Climate Summit in Nairobi, Kenya
H.E. Situmbeko Musokotwane, Minister of Finance of the Republic of Zambia;
H.E. Chrysoula Zacharopoulou, Minister for State Development of the Republic of France;
H.E. Dr Ndagijimana Uzziel, Minister of Finance of the Republic of Rwanda;
Ms Bogolo Kenewendo, Special Advisor and Africa Director of the UN Climate Change High Level Champions;
Ms Mimi Alemayehou, Senior Advisor, Allied Climate Partners;
Ms Katherine Stodulka, Director of the Blended Finance Taskforce;
Mr Ruurd Brouwer, CEO of the TCX Fund;
Mr Alain Ebobissé, CEO of Africa50;
Ladies and Gentlemen;
It is a pleasure to participate in this panel discussion on Scaling International Climate Finance for Africa.
Despite the clear provisions in the Paris Agreement that make the level of ambition by developed countries contingent on the support provided by developed countries, we continue to witness a decline in the delivery of public climate finance in real terms.
Developed countries have not met the US$ 100 billion per year mobilization goal by 2020 and have indicated that this goal may potentially be met later this year (2023). The goal of doubling adaptation finance from 2019 levels by 2025 is an undertaking in paper only.
With an estimated annual infrastructure financing requirement in the range from USD 130 to USD 170 billion according to the African Development Bank, implementing urgent measures to improve the resilience of Africa’s infrastructure investments must become the main occupation for us as decision-makers. Planning new infrastructure for climate resilience and adapting existing infrastructure to reduce risks should be a priority as there is a high probability that climate change will offset or reduce the economic and developmental benefits of these investments.
Climate change impacts will be genuinely felt during the life span of the planned and future infrastructure within the coming decade. If the impacts of climate change are not taken into account now, there is a considerable risk that the current and potentially the next generation of infrastructure in Africa will be locked into designs that could be inadequate for the future climate and costly or impossible to modify later.
The Global Commission on Adaptation estimates that climate change will lead to an equivalent of 2% to 4% annual loss in GDP in the continent by 2040. The Stern/Songwe High Level Expert Report, commissioned by the COP27 President, found that while “estimates for future loss and damage are subject to great uncertainty, but recent events suggest they could be as high as US$150–300 billion by 2030 to cope with immediate impacts and for subsequent reconstruction.”
Various other reports demonstrate the enormous climate change needs of developing countries and how present public climate finance flows are unforthcoming, inadequate and lack in quality. In addition, the current financial architecture features an unfortunate reality where developing countries, those that have least contributed to the climate problem, continue to shoulder climate costs albeit their very limited fiscal space and constrained economies.
Question 1: As we think about where the Global South stands in the Global Stocktake, what are examples of successful deployment of blended finance and credit enhancement tools that can help it meet its targets?
African countries need a new suite of financing instruments, with a set of favourable terms and conditions that are not merely debt generators, or our efforts and actions of mobilising the trillions of dollars required for significantly scaled up climate action will be actions in futility.
Local currency lending is an imperative to support climate action in Africa. In this regard, recent efforts by the Green Climate Fund and the New Development Bank offer rays of hope.
We need to urgently address the need for liquidity in fiscally constrained African countries. We further need to address the form of the finance available to developing countries and, in particular, put in place measures that climate finance does not lead to the increased debt burden of African and other developing countries. Credit enhancement approaches are readily available to the private sector, but the urgent reforms are needed in the public sector.
We need access to scaled-up new and additional and predictable grant and highly concessional finance which could be deployed effectively to create enabling environments by beginning to buy down risks and create new asset classes for clean investments that would allow for greater mobilization and leveraging of public and private finance and hence access the illusive and unseen trillions.
Question 2: Specifically, which two or three can help us overcome the massive climate finance gap?
In South Africa’s view, we must pioneer the deployment of new financial instruments, particularly non-debt instruments, policy-based guarantees, and options that do not require sovereign guarantees. These instruments should focus on the economic costs of transition risk by taking first loss risks on investments in technologies that are not yet commercially available. In addition, we need approaches that facilitate scaling-up through interventions that help bridge the gap to commercial project viability, mitigate risks, finance first-of-its-kind projects and support technical assistance work.
In the Communique adopted at the Meeting of African Ministers of Finance, Economy and Environment held in Cairo, Egypt in September 2022, Ministers agreed to advocate for a climate change focused review, and reform, of the multilateral development banks and international financial institutions.
Part of this agreement was the need for meaningful debt for sustainable investment and/or debt refinancing where the maturity of debts be extended and affordable interest rates be applied to support urgent and effective climate resilient investment; increasing the risk appetite of the MDBs to focus on the economic costs of transition risk by taking first loss risks on investments in technologies that are not yet commercially available; and mandating new and urgent capital increases for the MDBs.
In conclusion, it should also be recognised that Africa’s financial institutions are well placed as key stakeholders in the evolving global climate finance landscape, and well placed to design solutions and mobilise private capital for climate action.
I thank you.
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