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Access to financial resources is essential in the fight against climate change. Given that Africa receives an insufficient share of the funding required for its climate initiatives, experts stress the urgent need for more innovative, localized mechanisms to raise and distribute the financial resources vital for the continent.
In his opening remarks, Ibrahima Cheikh-Diong, executive director of the Fund for Responding to Loss and Damage, underscored the increase in extreme weather events, which disproportionately impact the most vulnerable communities, necessitating immediate action to enable African nations to tackle the climate crisis effectively. He emphasized the importance of incorporating climate considerations into both public policy and private sector strategies, commending UDB for establishing a climate finance facility. “In the current landscape, every institution must stay relevant in the realm of climate finance,” he underlined.
Cheikh-Diong asserted that financing should be available, accessible, and affordable for African nations, pointing out that cumbersome processes can impede the ability of some countries to fully leverage climate funds. “Based on our experiences with climate finance, we are committed to ensuring that the processes are agile, flexible, and equitable – allowing individuals to obtain the funding they require,” he stated.
He also highlighted the need to balance climate and development, which could open up opportunities for African countries to innovate, thereby improving access to social services and infrastructure while remaining attuned to climate considerations.
Green finance
Dr. Francis Mwesigye, chief economist at UDB, revealed that the bank established a green finance unit in 2019, which has since evolved into a fully operational department. “In 2022, the bank developed a green finance policy, along with a green finance and investment strategy, guidelines, monitoring indicators, and a scorecard,” he explained. The bank’s methodology includes evaluating proposed projects for clarity and identifying areas for improvement. “In industrial projects, we pursue energy-efficient technologies from alternative energy sources. In agriculture, we concentrate on resilience and adaptation strategies,” he elaborated.
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 totaling UGX309 billion (around $85 million), with green manufacturing accounting for 82% of approvals in 2024. He also disclosed that approximately 56% of its climate funding is dedicated to mitigation projects, with adaptation efforts making up the remaining share. Mwesigye expressed the bank’s desire to enhance its capitalization and called for support in mobilizing more funds for green and climate initiatives.
Where capital will go
In the panel discussion, Joseph Nganga, vice president for Africa at the Global Energy Alliance for People and Planet, stated that capital typically flows toward the most favorable risk-return ratios. Consequently, public and philanthropic investments often need to pave the way for substantial private sector funding.
Nganga emphasized that to attract significant investments, nations should adopt regional strategies. “Not every country needs to develop their own generation assets, for example. Some may benefit more from focusing on distribution while directing their limited resources elsewhere.” He contended that small-scale, localized projects might restrict the types of investments feasible. Ultimately, he stressed the need for African nations to create an enticing policy environment for investors. “Investors must be confident that their capital in your country will not encounter political risks and that policies and regulations will remain consistent,” Nganga insisted.
Marco Serena, chief sustainable impact officer at the Private Infrastructure Development Group, urged a shift in mindset to fundamentally integrate climate considerations into investment and credit assessments. With the increasing frequency of extreme weather, infrastructure projects, for instance, must be chosen and designed with resilience in mind. He recalled an example from Rwanda: “We invested in the Kigali water project that serves half a million people; thanks to our decision to elevate the control room above the flood line, the facility stayed operational during last year’s floods,” he noted. He also highlighted the importance of recognizing the potential within renewable energy, electric mobility, and battery storage to harness the opportunities posed by climate challenges.
Juvenal Muhumuza, Commissioner for Development Assistance & Regional Cooperation at Uganda’s Ministry of Finance, Planning and Economic Development, shared the country’s efforts to integrate climate objectives into policymaking. Uganda has introduced tax incentives for businesses involved in green technology and sustainable energy, is considering issuing green bonds, and is weaving climate issues into its national planning process to ensure green elements are incorporated.
Despite the perception of risk being a significant obstacle to financing availability, Lanre Shasore, senior adviser for energy transition planning (Africa) at Sustainable Energy for All, outlined strategies to overcome these challenges. She mentioned her organization’s collaboration with the Association of Pension Funds in Nigeria to establish a local currency base for financing clean energy initiatives. “Several of Nigeria’s largest pension funds have committed 11 billion naira, which will be combined with a World Bank energy access initiative to create a $2 billion fund aimed at catalyzing further investments,” she revealed. The organization plans to replicate this model in other African countries, such as Kenya and Ghana.
Olympus Manthata, head of climate and environmental finance at the Development Bank of Southern Africa, stated that the bank committed 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, DBSA has not only met but surpassed its targets while continuing to expand climate investments. He highlighted the necessity of accessing finance from the Green Climate Fund, the Global Environment Facility, and other organizations, alongside leveraging limited resources to attract private sector funding. Manthata advocated for greater collaboration among development finance institutions to share experiences related to facilities developed, thus simplifying 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 enabled the bank to effectively pursue its initiatives. Building on this foundation, UDB has created a robust internal policy framework to guide its interactions with the government, partners, funders, and other stakeholders. “This serves as our launching point, as stakeholders often question our climate agenda when discussing funding and climate change issues. Therefore, we must exhibit intent and knowledge in our actions,” she stated.
UDB’s climate finance facility focuses on mobilizing capital while ensuring the capability for effective deployment. A key aspect of this strategy is demonstrating the readiness of a pipeline of viable projects and the ability to deploy funds efficiently and effectively. Ojangole explained that the bank’s approach encompasses the entire project lifecycle, from pipeline development to evaluation, deployment, and reporting. “This all-encompassing strategy enables us to effectively communicate our actions, illustrating that mobilization and deployment can occur simultaneously,” she concluded.
