eBusiness Weekly
Business Writer
Zimbabwe has received nearly US$1 billion in private funding for climate change projects between 2010 and 2020, according to the African Development Bank (AfDB), but significantly falls short of what the country needs annually to build resilience.
The southern African country is a signatory to the Paris climate change accord of 2015 seeking to hold the increase of the global average temperature to below 2 degrees Celsius.
Studies have shown that Zimbabwe emits an estimated 26 000 giga grammes of carbon dioxide, equivalent to about 0,05 percent of the global emissions.
Zimbabwe submitted a conditional 33 percent energy sector per capita greenhouse gas emission reduction target. The submission was conditional on the means of implementation namely technology development and transfer, relevant training, and financial support.
The country needs US$90 billion to meet its climate goals. In the latest African Economic Outlook 2023, the AfDB said Zimbabwe received US$990 million in climate finance between 2010 and 2020, averaging US$90 million per year.
“This leaves a financing gap of US$440 to US$500 million a year, thus greatly limiting the country’s ability to build climate resilience,” said the AfDB report.
Zimbabwe has prioritised private financing to achieve its climate change targets in transitioning to green and inclusive growth and is in the process of developing the National Climate Change Fund (NCCF) and Climate Finance Facility (CFF) to crowd in the private sector through blended finance and results-based approaches to de-risk markets, scale up investment as well ramping up climate actions.
The Infrastructure Development Bank of Zimbabwe (IDBZ) is developing the CFF expected to go a long way in bridging the existing funding gap. It will promote blended finance targeting different stakeholders such as Government, Development Finance Institutions (DFIs), and the Green Climate Fund to provide seed capital. The facility will initially focus on energy, water, and agriculture sectors as well as projects that will come under Low Emission Development Strategy (LEDS).
The LEDS is embedded in a broader framework that will enable the country to issue financial instruments to fund projects with a less negative impact on the climate and help the country meet its greenhouse emission target reduction by 2030. The IDBZ is the only local financial institution accredited to the Green Climate Fund.
The GCF is a global platform created to respond to climate change by investing in low-emission and climate-resilient projects. It was established by 194 governments to limit or reduce greenhouse gas emissions in developing countries, and to help vulnerable societies adapt to the unavoidable impacts of climate change.
With nearly US$11 billion in approved climate funding and a total portfolio of over US$40 billion, GCF is the world’s largest climate fund supporting developing nations.
Accredited entities are institutions licensed by the GCF to carry out a range of activities, including developing and submitting funding proposals and overseeing the management and implementation of climate-friendly projects and programmes. They range from private, public, non-governmental, national, or international entities that partner with GCF to implement projects.
Guided by the GCF investment framework and the priorities of developing country governments. Africa received just US$29,5 billion in climate finance flows between 2019 to 2020, with private funding accounting for 14 percent — the lowest proportion of any region.
This is despite “the trillion-dollar” investment opportunities the continent offers to the private sector, according to the AfDB. The opportunities range from climate-smart and low-carbon technologies to energy-efficient buildings, climate-resilient infrastructure, improved dryland agriculture crop production, or electric vehicles. However, demand- and supply-side barriers continue to inhibit the full potential of private investments.
These bottlenecks include, among others, the lack of green growth and long-term strategies or their effective implementation, weak regulatory structures and institutions, perceived high investment risk profile, and lack of bankable project pipelines.
Private climate finance flows in Africa — at US$4,13 billion between 2019 and 2020 are six times lower than US$25,3 billion mobilized under the public climate finance program.
“By contrast, US$242,4 billion are needed on average annually until 2030 – US$2,7 trillion in total — to implement African countries’ latest submitted Nationally Determined Contributions (NDCs),” the bank said.
“To close the prevailing Africa’s climate financing gap by 2030, approximately US$213,4 billion need to be mobilised annually from the private sector to complement already-strained public resources.”
Private investments need to increase annually by about 36 percent from their current level to reach this objective, said the bank while several transformative policy actions can be leveraged to mobilise more private sector financing for climate and green growth in Africa.
These include, among others, the development of green growth and long-term strategies that clearly set up regulations, standards, and policies to guide potential investors. Strengthening domestic financial institutions, tapping into the expanding global and domestic private equity and venture capital appetite for African markets, and cautiously engaging with the emerging carbon markets and debt-for-climate swaps are also options to explore.
While Africa has about a fifth of the world’s population, it produces less than 3 percent of its carbon dioxide emissions, according to the International Energy Agency. Rich nations are facing criticism for failing to meet a pledge made in 2009 to provide US$100 billion annually to help poor countries invest in greener technologies and adapt to the effects of climate change.
According to Climate Policy Initiative, harnessing climate investment opportunities in Africa will require innovation in financing structures and strategic deployment “of public capital to crowd-in private investment at levels not yet seen,” the CPI report said.
The report cited a lack of skills, infrastructure, data and financial markets depth, governance issues and currency risks as holding back climate investment to varying degrees in Africa.
“While these barriers are real, the perception of risk linked to investments in the African continent is often aggravated by a limited understanding of national contexts by private investors,” it said.
“(This) may end up steering their capital toward other markets — perceived as safer — hence missing potentially profitable investments opportunities.”
