By Gift Briton
Investment in climate resilience is still below the threshold, particularly in Africa, despite the United Nations Framework Convention on Climate Change (UNFCCC) technical report rightfully stating that climate goals will not come to life without significant investment.
For developing nations, it is well documented that climate resilience investments will need to grow more than 10 times per year to put countries on track.
Accordingly, to close this finance gap, experts say that private investments are a viable solution to compliment public efforts in achieving climate goals.
They were speaking during the ongoing civil society organizations (CSOs) Forum held at the African Development Bank (AfDB) offices in Nairobi between October 18th -19th.
In Africa, however, the current private climate finance flow is still insufficient and even six times lower than the public finance, yet there are trillions of potential money in the private sector that could be channelled to climate resilience.
Among other factors, structural barriers were found to be among the key issues deterring private sectors from bringing in their financing into climate resilience and hinders delivery of money to where it is needed.
Africa’s Untapped $200 Trillion Potential
The experts highlighted some innovative finance mechanisms that can be leveraged to mobilise private institutional finance for climate resilience including de-risking investments.
Pauline Kalunda, the Executive Director of ECOTRUST- a leading Ugandan CSO specializing in mobilising private sector financing for smallholder-led investments in climate resilience, says that there is approximately $200 trillion in the private sector in Africa that has not found its way into climate resilience.
In order to allow these finances to flow to where they are intended to reach, Kalunda mentioned that de-risking the investments is a major mechanism that could help accelerate private climate finance.
She adds that civil society organizations play an important role in removing these barriers through, inter alia, creating awareness and building the capacity of grassroots community to level of readiness where they work with private sector.
For instance, a private sector working with tens of thousands of scattered smallholder’s farmers around climate resilience, would find it to be a daunting experience for them to aggregate these farmers into a platform or a group that can be worked with.
“From the experience that has been shared by some of the private sectors, it is possible to aggregate these actions of farmers around value chain,” she pointed out.
“Get them to be part of a group that populates a specific value chain and agree on what constitutes collateral within that value chain or even using the projected cashflows from the off-taking agreements to guarantee for example if it is loan financing but also for other things like provide private financial institutions with guarantees and also other forms that will attract off-takers.”
Kalunda continued: “CSOs need to help with those de-risking interventions to able to attract private investors because the private sector makes their investment choices based on how risky the business is so when you remove the risk, you make it attractive for the private sector.”