Creating African markets for global climate action

Africa is one of the most vulnerable regions to the impacts of climate change. While the continent is responsible for only 4 per cent of global greenhouse-gas emissions, far reaching repercussions of climate-related shocks directly impact 65 per cent of its population.

Urban households have particularly endured the devastating punchbowl of climate impact, and efforts to build resilience and mitigate this impact hinge on cities.

Africa’s urban population is estimated to swell up to 1.2 billion by 2050, and its global share of urban residents will rise to over 20 per cent in the same period. The concentration of people, industries, and infrastructure leaves African cities especially vulnerable to climate change, and at the same time uniquely placed to combat it.

Amid ever-increasing clouds of climate-related challenges, Africa embodies a silver-lining – a unique opportunity to implement innovative solutions for investment in green, resilient infrastructure and services. It’s not a secret that the magnitude of investment required to fulfill growing commitment of cities to climate action far exceeds public budgets.

African cities must create an enabling environment that will crowd in the required private sector innovation, management know-how and financing to invest in climate-smart infrastructure and services. This approach will not only fill the existing financing gap, but also turn climate-related challenges in to opportunities.

Turning challenges into opportunities

Africa has an important role to play, as a global partner, in efforts to meet the commitment of the 2015 Paris Agreement to limit global warming. In addition, the continent can leapfrog historical approaches to urbanisation by investing scarce resources in climate resilient, sustainable development projects to meet the United Nations (UN) Sustainable Development Goal (SDG) 11 on sustainable cities and communities.

However, cities in Sub-Saharan Africa, like many others in emerging markets, struggle with accessing financing for low-carbon, resilient infrastructure and services. Globally, more than 70 per cent of low-emission and climate-resilient infrastructure will be built in urban areas, at a cost of $4.5 – $5.4 trillion per year.

However, only 3 per cent of this amount is available through official development assistance. To address this challenge, cities in Sub-Saharan Africa must be ready to embrace innovative ways to scale up financing to build climate-smart cities.

One way of doing this is by embracing the Maximizing Finance for Development approach – a World Bank Group initiative aimed at helping emerging markets to leverage private financing and sustainable private sector solutions for growth and sustainable development.

Successful pilots of innovative debt financing instruments like green bonds and climate insurance have yielded results that show great potential to expand capital markets for climate-smart investment. The financial sector has shown interest by providing investment funds targeting smart cities.

Sub-Saharan African cities can strategically position themselves to benefit from efforts to increase investment in sustainable urban infrastructure from commercial financing sources, as this will free up the scarce public funds to be deployed where they are needed the most.

In 2018, Kenya diversified its capital markets when the Nairobi Securities Exchange launched a legal framework to pave the way for issuing of green bonds to implement energy efficient, pollution-free and sustainable infrastructure plans in priority sectors.

Climate investment opportunities in cities in sub-Saharan Africa

Bridging the existing gap in financing climate efforts is an essential component towards building urban resilience and achieving mitigation targets.

A recent analysis by IFC, a member of the World Bank Group, estimates that cities in emerging markets around the globe have the potential to attract more than $29.4 trillion in cumulative climate-related investments in six key sectors by 2030. Sub-Saharan Africa region accounts for $1.5 trillion of this investment opportunity.

The highest share in the region is in green buildings ($768 billion) covering new constructions and retrofits as cities race to accommodate their growing populations.

The other five sectors include electric vehicles ($344 billion), public transportation ($159 billion), climate smart water ($101 billion), renewable energy ($89 billion) and waste ($13 billion).

For these markets to be realized, it is essential for cities in Sub-Saharan Africa to create the necessary space to leverage existing private sector interest to innovate and invest in sustainable climate-smart cities, while driving growth and fighting poverty.

The successes or failures of these global efforts to address the burden of climate change hinge on cities. Most cities in sub-Saharan Africa have responded by setting urban planning goals that emphasize climate-related targets.

Kenya has set up the Nairobi Integrated Urban Development Master Plan that juxtaposes urban planning and environmental impact to guide adaptation and mitigation efforts in key sectors (i.e. transport, water, power, solid waste and telecommunications). Implementation of this plan will help Nairobi to avoid the “domino-effect” of climate change by breaking silos.

Prioritising coalitions for climate action

The good news is that cities don’t have to work on climate change issues in silos, the strength lies in coalitions. The One Planet Summit, taking place for the first time on African soil in Nairobi, Kenya on March 14, is one such coalition. It will bring together global climate leaders, including Heads of State, CEOs, youth, civil society and other key actors to showcase achievements and innovative approaches that contribute to turning climate-related challenges in to opportunities.

The objective of the summit is to help accelerate and focus attention on climate investments in line with the Paris Agreement.

Other global support networks exist, such as the 100 Resilient Cities – a platform to assess shared vulnerability, develop mutually beneficial strategies and share technical knowledge on how cities can achieve their climate-related aspirations and find financing.

Nine Sub-Saharan Africa cities are members of this network; Nairobi, Accra, Addis Ababa, Cape Town, Durban, Dakar, Kigali, Lagos and Paynesville.

Today’s city-level decision-making and infrastructure investments will have long-term impacts that shape the direction of urban growth and development for decades.