At the current rate, Africa will receive a meagre $182 billion from developed countries by 2035 for climate adaptation, less than one-tenth of the up to $1.7 trillion by 2035, hence the need to look for new sources of green financing
By Edward Githae
Africa is at a turning point. With one of the fastest-growing populations and economies, the continent still faces a substantial financing gap in realising sustainability.
According to the African Development Bank (AfDB), the continent needs at least $2.8 trillion by 2030 to meet its climate and sustainability goals, yet current investments fall far short.
Research by the Global Centre on Adaptation shows that Africa is receiving a tiny fraction of the climate finance it needs.
“Africa only received $11.4 billion in adaptation finance in 2019-2020 and the increase in 2021-2022 is likely to be modest,” reads the report.
“At this rate, Africa will receive $182 billion by 2035 for climate adaptation, less than one-tenth of the up to $1.7 trillion by 2035. Loans were the most utilised instrument to deliver adaptation finance in 2019-2020, which combined with surging interest rates, is contributing to Africa’s poorest countries falling into a debt trap.”
As the industrialised nations prove inconsistent in supporting Africa, the continent continues to explore alternate methods to manage its mounting climate bill. A 2024 meeting of African Finance ministers in Zimbabwe resolved to find alternative “innovative, home-grown” funding models to meet their climate financing needs, noting with disillusionment that very little is materialising from the promises of donor countries in the advance economies.
The Finance ministers baulked that climate change inflicts an additional oversized financial burden on a continent that is already struggling to fund its development programmes.
As the continent impatiently awaits potential increased funding from the West, the impacts of climate change continue to deplete budgets and push countries into debt.
With that in mind, what sort of “innovative” and “homegrown” possibilities could be available? Ethical Business explores numerous ways Africa can navigate the financing gap and accelerate its transition to a green economy.
Scaling up Green bonds and blended finance models
Green bonds have become an inflection point in financing sustainability projects. Some African nations are already making strides.
South Africa, for instance, issued a $200 million green bond in 2022 to fund clean energy and sustainable water projects while Nigeria became the first African country to issue a sovereign green bond in 2017, raising $30 million for renewable energy.
In East Africa, Kenya is exploring a green sukuk (Islamic green bond) to attract ethical investors. Its East African Community partner state, Rwanda is currently preparing to issue its first sovereign green bond to finance sustainable projects, including renewable energy and climate-smart agriculture.
“Green bonds provide us with an opportunity to finance sustainable projects while attracting investors committed to climate action,” says Uzziel Ndagijimana, Rwanda’s Minister of Finance and Economic Planning.
However, the challenge is expanding these instruments across the continent.
“The demand for green bonds is there, but we need more transparency and better regulatory frameworks to scale them up,” says Nisha Pillai, an investment analyst at the Climate Bonds Initiative.
Blended finance—which combines public and private funds to de-risk investments—offers another solution. The Global Environment Facility (GEF) and African Risk Capacity (ARC) are already using blended finance to support climate adaptation projects in Africa.
Strengthening policy and regulatory frameworks
Many investors hesitate due to policy uncertainty, corruption, and weak legal protections. Countries with clear, stable regulations attract more sustainable investments.
Morocco has set a renewable energy target of 52% by 2030, backed by strong policies that have attracted billions in foreign investment.
In 2021, Rwanda became the first African country to pass a Climate Change Law, creating a legal framework for carbon trading, green investments, and climate finance. In 2012, the country also launched the Rwanda Green Fund (FONERWA), which has mobilized over $216 million for green projects.
“We have positioned Rwanda as a leader in climate finance by creating policies that encourage investments in sustainability,” says Jeanne d’Arc Mujawamariya, Rwanda’s immediate former Minister of Environment.
On her part, Egypt has introduced tax incentives for companies investing in green projects.
“What investors need is policy certainty. Once governments commit to long-term sustainability goals, the private sector will follow,” says Ngozi Okonjo-Iweala, Director-General of the World Trade Organization.
By adopting predictable tax incentives, green investment policies, and strong enforcement mechanisms, Africa can create an investor-friendly environment for sustainable finance.
Meanwhile, Kenya introduced tax incentives and regulatory support to attract investors in clean energy and electric mobility, thereby becoming among the top global leaders in renewable energy, with over 90% of its electricity coming from renewables like geothermal, wind, and solar power.
Mobilising domestic capital and institutional investment
Senior Advisor for Africa at Climate Policy Initiative (CPI), Jonathan First, is skeptical about the prospects of a climate finance windfall coming from advanced countries.
“We, Africans, continue to hope this will come from donors, governments, development finance institutions and international investors, when experience and research tells us otherwise,” First was quoted in a media interview.
First points out that African countries, with a few exceptions, have the local capital markets – including established private sector banking networks and pension funds – to increase domestic investment in impactful infrastructure that reduces emissions, improves sustainability and builds stronger adaptation and resilience to climate change.
“We have a mountain to climb, but part of the solution is a far greater use of domestic investment capital and developing inter-regional investment,” he said.
Accordingly, African countries must mobilise domestic resources. Pension funds, sovereign wealth funds, and insurance companies in Africa manage over $1 trillion in assets, yet only a tiny fraction is invested in sustainable projects.
“We cannot continue depending on external aid. Africa’s pension and sovereign wealth funds should be leading the charge in financing green projects,” says Vera Songwe, former Executive Secretary of the UN Economic Commission for Africa.
Consequently, some success stories have been recorded. Kenya’s Equity Bank has committed $6 billion in green financing by 2030, focusing on agriculture and renewable energy, while Kenya’s pension funds, which manage over $14 billion, have started directing a portion of their assets into green investments.
South Africa’s Government Employees Pension Fund (GEPF) has pledged 5% of its portfolio to sustainable investments. On her part, Nigeria’s Sovereign Investment Authority (NSIA) has launched a solar infrastructure fund to finance off-grid energy solutions. Rwanda’s FONERWA is Africa’s largest climate fund and has financed over 45 green projects, including eco-friendly housing, clean energy solutions, and climate-smart agriculture.
The fund supports small and medium-sized enterprises (SMEs) working on sustainable projects, bridging the gap between financing and implementation.
“Financing sustainability is not just about big projects; it’s about empowering local entrepreneurs who can drive green innovation,” says Hubert Ruzibiza, former CEO of FONERWA.
By creating incentives for African institutional investors, the continent can reduce dependence on foreign debt and build long-term sustainability.
Capitalising on fintech solutions
Digital financial platforms and blockchain technology offer new ways to unlock sustainable finance.
M-KOPA Solar in Kenya uses a pay-as-you-go (PAYG) model, allowing low-income households to access solar energy for a small daily fee via mobile money. M-KOPA Solar has provided over 2 million homes with solar energy using a pay-as-you-go (PAYG) mobile payment system. Sun King and d.light have expanded off-grid solar financing through mobile money platforms like M-Pesa, allowing rural communities to access clean energy affordably.
“Technology is revolutionizing how we finance and deliver sustainable energy solutions, ensuring that even the most remote households benefit,” says Jesse Moore, CEO of M-KOPA.
Africa GreenCo, a Zambia-based energy trading platform, uses blockchain-based smart contracts to increase transparency in green energy financing.
Sun Exchange in South Africa uses crowdfunding and cryptocurrency to finance solar projects for schools and businesses.
“Technology can democratize access to finance, making it easier for small businesses and rural communities to access sustainable funding,” says Tayo Oviosu, CEO of Paga, a Nigerian fintech company.
Rwanda is exploring blockchain technology to track and verify carbon credits, ensuring transparent and efficient climate finance transactions. The government is working with global partners to create a digital carbon trading platform, allowing businesses to offset emissions and invest in green projects.
“Digital finance can make climate action more efficient by increasing transparency and reducing transaction costs,” says Paula Ingabire, the country’s Minister of ICT and Innovation.
By embracing fintech innovations, Africa can attract new investors, reduce financing costs, and speed up the flow of capital into sustainability projects.
Consolidating Global partnerships and climate finance commitments
Although Africa contributes less than 4% of global greenhouse gas emissions, it suffers disproportionately from climate change. Global climate finance commitments must be fulfilled and expanded.
The Green Climate Fund (GCF) has allocated over $3 billion for African projects, but access remains slow due to bureaucratic hurdles.
On its part, the African Climate Change Fund (ACCF), backed by AfDB, is helping African nations develop climate finance strategies.
Meanwhile, the European Union’s Global Gateway Initiative is investing €150 billion in Africa to support green energy, digital transformation, and infrastructure.
“Africa is not asking for aid; we are asking for fair financing terms and the removal of barriers to access climate funds,” says Mohamed Adow, Director of Power Shift Africa.
By advocating for fair financing terms, debt restructuring, and direct access to climate funds, Africa can ensure it gets the resources needed to build climate resilience.
Maximising Africa’s Green Potential
Deputy chairperson of the African Union, Monique Nsanzabaganwa,told the African ministers at the Zimbabwe conference that another option for Africa is to fully capitalise on its green potential.
“From 2011 to 2020, African forests increased carbon stock by 11.6 million kilotonnes of CO2- equivalent net emissions, while carbon stocks in forests outside Africa declined by 13 million kilotons,” said Nsanzabaganwa.
“The Congo Basin forests have now become the world’s largest sink of CO2 emissions. But the continent only received 2.7 per cent of promised financing. Achieving the green transition requires bold action, innovative financing and partnerships between governments, the private sector and the civil society.”
Many African countries, especially those rich in forests, are already generating revenue by selling voluntary carbon credits and aim to increase these sales in the coming years.
Call to Act
Africa’s sustainable future depends on venturesome action today. The continent has the resources, talent, and opportunities to become a global leader in green growth—but unlocking finance at scale requires coordinated efforts from governments, investors, financial institutions, and global partners.
According to Professor Ademola Adenle from the Technical University of Denmark, the failure of developed nations to fulfill their climate financing promises offers African countries an opportunity to develop national and regional frameworks that align their interests to tap into domestic or regional funds.
He argues that innovative instruments, including regional blue bonds, regional carbon markets and natural capital accounting, will not be effective in Africa without a clear and integrated framework that addresses both domestic and regional greenhouse gas emissions.
With the right mix of green bonds, blended finance, policy reforms, domestic capital mobilization, fintech innovations, and strong global partnerships, Africa can bridge its financing gap and fast-track toward a thriving, sustainable future.
As climate risks soar and sustainable investments become the new global standard, Africa must seize this moment to drive green growth—not just for itself, but for the world.
