Access to financial resources is vital in the fight against climate change. With Africa receiving a disproportionately small share of necessary funding for its climate initiatives, experts emphasize the urgent requirement for more innovative, localized methods to raise and allocate the financial resources that are crucial for the continent.

In his opening remarks, Ibrahima Cheikh-Diong, the executive director of the Fund for Responding to Loss and Damage, underscored that the increase in extreme weather events, which adversely impacts the most vulnerable populations, demands immediate action to empower African nations in tackling the climate crisis. He highlighted the necessity of incorporating climate considerations into both public policy and private sector strategies, commending UDB for creating a climate finance facility. “In today’s world, every institution must stay relevant within the climate finance sphere,” he asserted.

Cheikh-Diong insisted that financing must be available, accessible, and affordable for African nations, noting that burdensome procedures can restrict some countries from fully utilizing climate funds. “Drawing from our climate finance experiences, we are dedicated to ensuring that processes are nimble, flexible, and equitable – facilitating individuals in securing the necessary funding,” he commented.

He also stressed the importance of balancing climate and development, which could create opportunities for African countries to innovate, thereby improving access to social services and infrastructure while considering climate concerns.

Green finance

Dr. Francis Mwesigye, chief economist at UDB, revealed that the bank established a green finance unit in 2019, which has since developed into a full department. “In 2022, the bank introduced a green finance policy, alongside a green finance and investment strategy, green finance guidelines, monitoring indicators, and a green finance scorecard.” The bank’s approach focuses on evaluating suggested projects for clarity and identifying enhancement prospects. “In industrial projects, we pursue energy-efficient technologies from alternative energy sources. In agriculture, we emphasize resilience and adaptation strategies,” he explained.

Mwesigye noted that “the sectors we support include climate-smart agriculture, low-carbon industry, climate-resilient infrastructure, clean energy, ecotourism, and sustainable waste management.” To date, the bank has approved projects amounting to UGX309 billion (approximately $85 million), with green manufacturing constituting 82% of approvals in 2024. He further disclosed that about 56% of its climate funding is allocated to mitigation projects, with adaptation efforts making up the remainder. Mwesigye pointed out that the bank aims to enhance its capitalization and has sought assistance in mobilizing more capital for green and climate initiatives.

Where capital will go

During the panel discussion, Joseph Nganga, vice president for Africa at the Global Energy Alliance for People and Planet, remarked that capital tends to flow toward the most favorable risk-return ratio. Consequently, public and philanthropic investments often need to pave the way for large-scale funding from the private sector.

Nganga suggested that to attract substantial investments, countries should adopt regional strategies. “Not all countries need to create their own generation assets, for example. Some might be better served by concentrating on distribution while utilizing their limited resources elsewhere.” He argued that small-scale, localized projects are likely to limit the types of investments possible. He emphasized the need for African nations to establish a favorable policy environment to entice investors. “Investors must be assured that their capital in your country will not face political risks and that there’s consistency in policies and regulations,” Nganga asserted.

Marco Serena, chief sustainable impact officer at the Private Infrastructure Development Group, advocated for a fundamental shift in mindset to incorporate climate considerations into investment and credit assessments. With extreme weather events becoming more common, infrastructure projects, for instance, must be selected and designed with resilience in mind. He recalled an example from Rwanda: “We invested in the Kigali water project serving half a million people; thanks to our decision to elevate the control room above the flood line, the facility remained operational during last year’s flooding,” he noted. He also highlighted the importance of recognizing the potential within renewable energy, electric mobility, and battery storage to leverage the opportunities presented by climate challenges.

Juvenal Muhumuza, Commissioner for Development Assistance & Regional Cooperation at Uganda’s Ministry of Finance, Planning and Economic Development, shared insights into the country’s efforts to integrate climate objectives within policymaking. Uganda has enacted tax incentives for businesses involved in green technology and sustainable energy, is exploring the issuance of green bonds, and is incorporating climate issues into its national planning process to ensure that green elements are embedded.

Despite the perception of risk being a significant barrier to financing availability, Lanre Shasore, senior adviser for energy transition planning (Africa) at Sustainable Energy for All, outlined strategies to address these challenges. She noted that her organization has partnered with the Association of Pension Funds in Nigeria to create a local currency base to support clean energy initiatives. “Some of Nigeria’s largest pension funds have committed 11 billion naira, which will be combined with an energy access initiative from the World Bank to establish a $2 billion fund aimed at stimulating additional investments,” she revealed. The organization intends to replicate this model in other African nations, such as Kenya and Ghana.

Olympus Manthata, head of climate and environmental finance at the Development Bank of Southern Africa, indicated that the bank committed several years ago to allocate 35% of its investments to climate-related projects, with 30% of those funds designated for adaptation and 70% for mitigation strategies. Since this commitment, the DBSA has not only met but exceeded its targets as it continues to grow its climate investments. He emphasized the significance of accessing funding from the Green Climate Fund, the Global Environment Facility, and other organizations, alongside leveraging limited resources to attract private sector investment. Manthata advocated for greater collaboration among development finance institutions to share experiences related to developed facilities, thereby streamlining the pathway to funding access.

Uganda’s supportive environment

In her concluding remarks, Patricia Ojangole, managing director of UDB, commended the Ugandan government for cultivating a supportive environment that has allowed the bank to effectively pursue its initiatives. Building on this foundation, UDB has created a robust internal policy framework to navigate its interactions with the government, partners, funders, and other stakeholders. “This serves as our starting point, as stakeholders often inquire about our climate agenda when discussing funding and climate change matters. Therefore, we must show intent and knowledge in our actions,” she stated.

UDB’s climate finance facility is focused on mobilizing capital while ensuring the ability for effective deployment. A key component of this strategy is demonstrating the readiness of a pipeline of viable projects and the capacity to deploy funds efficiently and effectively. Ojangole expressed that the bank’s strategy encompasses the entire lifecycle of projects, from pipeline development to evaluation, deployment, and reporting. “This comprehensive strategy enables us to clearly communicate our actions, illustrating that mobilization and deployment can occur simultaneously,” she concluded.