Africa’s portion of the worldwide green bond market in 2021, as stated by Dr. Akinwumi Adesina, leader of the African Development Bank (AfDB) Group, was 0.26%.
This assertion was made during a discourse at the Alliance for Green Infrastructure in Africa’s COP 27 inauguration (AGIA). AGIA is a newly minted platform designed to accelerate the development of green infrastructure in Africa as part of our collective endeavor to attain net-zero emissions. The AfDB, alongside Africa50, is launching the alliance for green infrastructure in partnership with the African Union Development Agency, the European Investment Bank, the European Bank for Reconstruction and Development, and the Rockefeller Foundation.
In February 2022, the AfDB announced its intention to collaborate with global partners to establish an Alliance for Green Infrastructure in Africa, in conjunction with Africa50, the African Union Commission, and the African Union Development Agency.
During his address at the COP 27 inauguration, Dr. Adesina pointed out that Africa has minimal green infrastructure, which is reflected in the continent’s share of the globe’s green bonds for infrastructure. From 2007 to 2018, Africa attracted merely $2 billion, or approximately 0.4%, of the $522 billion allocated to green bonds—a trivial sum. As of 2021, Africa’s stake in the $623 billion green bond issuance was the lowest among all continents, at just 0.26%. The same applies to green loans, where Africa holds only 1.9% of the total loans. Additionally, Africa’s portion of global issuances related to sustainability bonds, along with loans and bonds associated with sustainability, is 1%.
Jean-Paul Adam, director for technology, climate change, and natural resource management at the United Nations Economic Commission for Africa (UNECA), noted in June 2022 that Africa experiences limited private sector investment and significant capital costs for environmental, social, or other sectors. He stressed that while Africa receives 23% of official climate finance, it issues less than 1% of the world’s green bonds and pays twice as much to access markets compared to peers with similar credit ratings.
At the AGIA launch, Dr. Adesina also addressed the ambition of AGIA, which is to construct low-carbon, climate-resilient infrastructure for Africa. He asserts that the establishment of AGIA is aimed to:
- Bridge Africa’s infrastructure financing deficiency
- Create enduring, sustainable infrastructure for Africa.
- Encourage institutional investors within Africa and globally to finance high-quality, eco-friendly infrastructure
- Augment the scale required to expedite Africa’s journey toward net zero emissions.
- Boost the influx of private sector funds to enhance Africa’s green infrastructure.
Infrastructure financing deficiency
Dr. Adesina emphasized that Africa can only create a transformative effect and establish a clear trajectory toward achieving net zero emissions and combating climate change by collaborating with partners and investors. An estimated $130 to $170 billion annually for infrastructure financing is necessary for Africa, leading to a shortfall of up to $108 billion. The opportunity to develop Africa’s infrastructure correctly is vast since much of it remains unfinished. Prioritizing the construction of environmentally sustainable, climate-smart, and climate-resilient infrastructure in Africa is essential.
How this can be realized
Dr. Adesina stated that if Africa could secure just 0.03 to 0.04 percent of the $103 trillion in global assets under management, it would fulfill all its infrastructure requirements. He mentioned that AGIA will utilize its resources to green the continent’s existing brown infrastructure. This includes converting heavy fuel and diesel plants to gas hybrid models and enhancing non-power infrastructure, particularly the continent’s transport systems with compressed natural gas, along with capturing flared gas and transforming it into liquefied petroleum gas, necessary for cooking, gas-to-power, and fertilizer production.
As emphasized by Adesina, the push toward hastening the creation of green infrastructure will present excellent chances for the introduction of more green bonds and the appeal to institutional investors whose investment preferences are increasingly shaped by environmental, social, and governance (ESG) criteria.
By focusing on the enhancement of green infrastructure, Africa can raise its share of green bonds, currently constituting about 2.5% of global bonds, attracting at least $14 billion in green financing to augment Africa’s green infrastructure assets.
