78 African Development Bank — Advancing Climate Change Action and Green Growth in Africa both the ambition in CCAP2 and the need for finance. The Bank’s funds The Bank has 8 internal funds that it manages and 4 external funds that RMCs can apply for through the Bank. Each fund has a specific purpose and process for funds to be accessed. In addition to these funds, the Bank has a set of initiatives designed to help RMCs mobilize finance for climate projects. These initiatives include: the Africa NDC Hub, which helps RMCs develop and implement NDCs; the African Financial Alliance on Climate Change (AFAC), which raises awareness in the financial sector of the need for climate-resilient low-carbon investments; and the Adaptation Benefit Mechanism (ABM), which promotes investments in adaptation by the private sector. The Bank’s climate finance Given that all finance eventually needs to align with low-carbon climateresilient development, the Bank’s goal of having 40% of all projects tagged as being climate finance by 2020 is a very important step towards fulfilling the Paris Agreement. In fact, the Bank had been meeting or exceeding the target until the COVID-19 pandemic impacted the Bank and its priorities in 2020. The percentage of projects tagged as being climate finance peaked at 35% in 2019 before dropping to 34% in 2020, missing the 40% target. The Bank has also achieved the target of parity between adaptation and mitigation finance, which is a rare phenomenon. In fact, the Bank exceeded parity, with adaptation finance accounting for 63% of climate finance in 2020. Investment in agriculture, water, sanitation, and the environment are the major drivers of adaptation finance. Finance needed While it is difficult to estimate the total financial needs for development to be climate resilient and low carbon, NDCs include unconditional and conditional finance estimates. As mentioned before, unconditional finance is the finance pledged by countries themselves towards adaptation or mitigation. Conditional finance is the finance needed from outside the country, for conditional NDCs to be acted upon and implemented (hence they are conditional on finance or other forms of support). Even if African countries are making significant domestic contributions to the global response, it is going to take a lot more finance for RMCs to fulfil both conditional and unconditional parts of their NDCs, although long-term finance of $100 billion per year under the Copenhagen Accord could cover most of what is required if it were forthcoming. The Bank has worked out the annual cost of adaptation required by RMCs to fulfil the adaptation component of their NDCs. This totals a little over $3 per person in Africa each year, with a total of $3.853 billion per annum. While the Bank and other financial institutions each have a role, and bring finance to projects that would not otherwise be able to go ahead, it is important to note RMCs invest their own tax revenues into addressing climate change. Furthermore, individuals and groups from within RMCs also make investments that contribute to climate resilience and low-carbon development. Mobilising private sector investment in climate-resilient low-carbon development is an important role for the Bank. This includes the Private Sector Investment Initiative for African NDCs. Sources of finance A key part of Pillar 3 is the mobilization of finance including external sources of climate finance. The $682 million external finance mobilized in 2019 compares with internal finance of $3.6 billion (i.e. Bank approvals attributed to adaptation and mitigation). Internal finance dropped to $2.2 billion in 2020. Volumes of funding are important, but CCAP2 noted the Bank’s intention of “supporting investment activities that promote women’s economic activities” as well as “empower women”. The Private Sector Investment Initiative for African NDCs includes steps that will help get funds to women and other groups. Enabling environment Introduction Climate change can impact many aspects of life, society, economy, and ecosystems. Likewise, socioeconomic behaviours generate GHG emissions while also influencing vulnerability and exposure to climate changerelated hazards. Given these complex interactions and the wide range of issues that need to be considered when designing and delivering climate-resilient low-carbon operations and projects, it helps if policies and processes are aligned with climate change goals, guidance is available, and capacity is in place. Collectively, these components create an enabling environment, addressing cross-cutting issues. This enabling environment forms Pillar 4 of CCAP2.
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