Africa’s share of the global green bond market in 2021, according to Dr. Akinwumi Adesina, president of the African Development Bank (AfDB) Group, was 0.26%.
He made this statement during a speech at the Alliance for Green Infrastructure in Africa’s COP 27 launch (AGIA). AGIA is a brand-new platform that has been developed to hasten the growth of green infrastructure in Africa as part of our shared effort to achieve net zero emissions. In collaboration with the African Union Development Agency, the European Investment Bank, the European Bank for Reconstruction and Development, and the Rockefeller Foundation, the AfDB and the Africa50 are launching the alliance for green infrastructure.
In February 2022, the AfDB declared that it was looking into working with international partners to establish an Alliance for Green Infrastructure in Africa, in collaboration with Africa50, the African Union Commission, and the African Union Development Agency.
Dr. Adesina stated during his speech at the COP 27 launch that Africa has very little green infrastructure, which is evident in the continent’s share of the world’s green bonds for infrastructure. Africa received only $2 billion, or roughly 0.4%, of the $522 billion invested in green bonds between 2007 and 2018, which is a small amount. Africa’s share of the $623 billion in green bond issuance as of 2021 was the lowest of any continent, at 0.26%. The same can be said for green loans, where Africa accounts for 1.9% of total loans. Africa’s share of global issuances of sustainability bonds, as well as loans and bonds linked to sustainability, is 1%.
The United Nations Economic Commission for Africa (UNECAJean-Paul )’s Adam, the division’s director for technology, climate change, and natural resource management, noted in June 2022 that Africa has low private sector investment and high capital costs for investing in the environment, society, or other social sectors. He emphasized that although Africa receives 23% of official climate finance, it only issues less than 1% of the world’s green bonds and pays twice as much to access markets as peers with comparable credit ratings.
Dr. Adesina also discussed the goal of AGIA, which is to build low-carbon, climate-resilient infrastructure for Africa, at the AGIA launch. Dr. Adesina claims that the establishment of AGIA is being done to:
- Close Africa’s infrastructure financing gap
- Create resilient, long-lasting infrastructure for Africa.
- Encourage institutional investors in Africa and around the world to fund high-quality, environmentally friendly infrastructure
- Increase the scale required to hasten Africa’s move toward net zero emissions.
- Increase the amount of money coming from the private sector to help green Africa’s infrastructure.
Infrastructure financing gap
Dr. Adesina emphasized that Africa can only have a transformative impact and put the continent on a clear path to achieving net zero emissions and mitigating climate change by cooperating with partners and investors. An estimated $130 to $170 billion in annual infrastructure financing is required for Africa, leaving a gap of up to $108 billion. The opportunity to build Africa’s infrastructure correctly is enormous because the majority of it has not yet been completed. Building environmentally friendly, climate-smart, and climate-resilient infrastructure in Africa should be prioritized.
How this can be achieved
According to Dr. Adesina, if Africa can receive just 0.03 to 0.04 percent of the $103 trillion in assets under management worldwide, it will be able to fund all of its infrastructure needs. According to him, AGIA will use its resources to green the continent’s already-existing brown infrastructure. This includes converting heavy fuel and diesel plants to gas hybrid and power industries, greening non-power infrastructure, particularly the continent’s transportation systems using compressed natural gas, and capturing flared gas and turning it into liquefied petroleum gas, which is required for cooking, gas-to-power, and the production of fertilizers.
As Adesina stressed, the move toward accelerating the creation of green infrastructure will present excellent opportunities for the introduction of more green bonds and the crowding in of institutional investors, whose investment choices are increasingly influenced by environmental, social, and governance (ESG) considerations.
Africa can increase its share of green bonds, which currently accounts for about 2.5% of global bonds, by concentrating on the development of green infrastructure, bringing in at least $14 billion in green financing to increase Africa’s green infrastructure asset.
