39 Leveraging climate finance and mobilizing public and private sector resources for climate action and green growth Lack of access to climate finance is the biggest impediment to comprehensively addressing climate change in Africa. Recognizing the importance of climate finance, the Bank has historically set demanding internal climate finance targets and disbursing increasing volumes of climate finance under CCAP-I and CCAP-II. The Bank’s previous targets included the allocation of the relative measure of 40% of project approvals to climate finance by 2020, and the commitment to mobilize $25 billion in climate finance between 2020 and 2025. The Bank was well positioned to reach the 40% threshold in 2020, until the onset of the COVID-19 pandemic. This strongly suggests that the Bank can meet this target by 2025 and raise its ambition in the second half of the decade, in tandem with the enhanced ambitions of African countries’ NDCs and the Paris Agreement. Under CCAP-II, the Bank also set targets for the proportion of climate finance it would allocate to its ‘High Five’ priorities out of the 40% total climate finance target. The stated targets were as follows: 22% of annual climate finance to ‘Light Up and Power Africa’; 8% to ‘Improve the Quality of Life for the People of Africa’; 6% to ‘Feed Africa’; 3% to ‘Industrialize Africa’; and 1% to ‘Integrate Africa.’ Climate finance allocated during CCAP-II certainly reflected this heavy tilt towards energy and power. At the time the current strategic framework was developed, the Bank did not have a climate finance tracking mechanism calibrated to the High Fives, with the consequence that the High Five–specific breakdown of climate finance allocations was not recorded. A key takeaway is that the Bank’s planned development of a more sophisticated climate finance Monitoring, Evaluation, Reporting, and Learning (MERL) system is a critical step to better understanding climate finance flows (including sources and destinations). Amongst other elements, the MERL system will offer more granular insights on the Bank’s climate finance portfolio at the sector and project levels. Beyond finance targets, the Bank also made significant contributions to the development of innovative finance mechanisms for climate change action. For instance, the Africa Disaster Risk Financing (ADRiFi) programme, in collaboration with African Risk Capacity (ARC), approved in 2018, promotes disaster response mechanisms such as sovereign parametric index based insurance, for which pay-outs will be disbursed automatically and promptly when a pre-defined risk threshold is exceeded. It is estimated that every $1 spent on exante intervention through the programme will save $4.40 in ex-post disaster relief measures for a response carried out six months after the event. The ADRiFi programme has already provided grant financing to Zimbabwe, The Gambia, Madagascar, Niger, and Mauritania. Commitments under the new strategic framework: Global climate finance has trended upwards reaching ~$610-620 billion in 2019, compared with $472 billion in 2015 prior to the start of CCAP-II. While the trend is optimistic (barring COVID-related shocks in 2020), this level of global climate finance is still markedly less than the estimated global needs of ~$1.6-3.8 trillion (CPI, 2020). This shortfall is particularly acute in Africa, which — as a continent — currently accesses approximately ~3% of global climate finance. The Bank’s existing dual pledge to mobilize $25 billion in climate finance by 2025 and ensure that it meets its climate finance commitment target of 40% of total allocations reflect the widespread realization that efforts must be scaled up significantly to help advance African countries’ NDCs and LTSs. The bulk of the Bank’s climate finance comes from the ADB and the African Development Fund (ADF) financing windows. External climate funds for which the Bank is an implementing entity and internal trust funds hosted at the Bank accounted for 26% of total Bank climate finance in 2020. As the Bank raises its climate finance ambitions for the coming decade of action — a decade that is pivotal to the achievement of the Paris Agreement’s goals — it will scale up climate finance from current sources, including the ADB and ADF, as well as external sources. To meet the challenge of increased climate finance, the Bank will strive to raise the proportion of global climate finance coming to Africa to 10% by 2030 (from 3% in 2018). The Bank will achieve this goal by mobilizing successively increased amounts of funding from external climate funds including the Climate Investment Fund (CIF), the Green Climate Fund (GCF), and the Global Environment Facility (GEF); developing and capitalizing more thematic funds and instruments, which will bring funds to Africa for further investment; promoting and increasing domestic investment; and developing and implementing new partnerships, initiatives, and programmes to increasingly recognize the value of adaptation, resilience, nature, and biodiversity. Notably, the Bank aims to mobilize increased private sector finance for both adaptation and mitigation projects Climate change —core to the African Development Bank’s strategy
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