How to Finance Africa’s Climate Resilient Infrastructure
Jan 26, 2025
The unfortunate reality of climate change is that the parts of the world that are most affected are often not the biggest emitters of greenhouse gases.[1] This is particularly the case for Africa, which has emitted only 3.8 percent of global emissions, but lacks the regulatory environment, financing, infrastructure, and technology to tackle the effects of climate change.
Among these challenges, financing for climate resilient infrastructure remains a key constraint to preparedness. Debt levels inflated from rising pandemic-related expenditure, currency depreciations, higher interest rates, and low growth rates have made it increasingly difficult for African countries to access capital in debt markets. According to the AfDB, financing for Africa’s infrastructure remains perhaps upwards of $100 billion per annum below what it needs to be.[2] The cost to ill-preparedness is real: climate change is expected to cost African economies 5-15 percent of their GDP growth per year in the years ahead.[3]
What can be done?
In a recent edited volume titled, “Bridging the Ingenuity Gap: Ideas for a Vibrant G20”, we recommend three ways the G20 can partner with Africa to mobilize capital to finance climate resilient infrastructure. These are: 1) Providing grant funding and technical assistance to the Programme for Infrastructure Development for Africa (PIDA) to expand high-quality bankable projects and galvanize financiers; 2) Strengthen coordination of climate financing from the G20 countries to the continent; and 3) Unlocking financial entrepreneurship and technology to mobilize additional financing for bankable projects.
We argue that the G20 is a natural partner to support these pathways to financing. Representing 85 percent of global GDP and 75 percent of global trade, the G20 has the economic might to realize these objectives. And accounting for 80 percent of the world’s greenhouse gas emissions, G20 countries may well have the motivation to incorporate these objectives into the international agenda.
1) Empowering PIDA
PIDA is an Africa-wide initiative that generates a promising pipeline of bankable cross-border projects. It uses priority action plans, or PAPs, to identify immediate steps to realize the continent’s strategic vision for infrastructure. Infrastructure projects in Africa are often constrained by project preparation milestones, including feasibility studies, fiduciary assessments, environmental safeguards, and financial analyses, which can be costly for individual firms or governments. The G20, however, can provide grant funding to conduct feasibility studies and other project preparation for strategic projects upfront, serving to de-risk high-impact climate-related projects and attract private finance.
2) Tackling donor fragmentation
Fragmentation characterizes Africa’s climate financing landscape, which consists of four primary groups, each with their own complex mix of incentives and strategic objectives: 1) Bilateral government climate funds, 2) The European Union, 3) Multilateral Development Banks, and 4) Multilateral climate funds. The dispersed nature of Africa’s climate finance results in bureaucratic inefficiency, overlapping mandates and initiatives, limited accountability, and difficulties measuring and evaluating funded projects.
There is thus a great benefit to improving coordination among financiers. The G20 is uniquely positioned to act in several ways. First, it can capacitate a single institution as the focal point for climate donor funds and project development, as well as encourage reciprocal centralization in recipient country governments to manage incoming funds. Second, the G20 can improve donor information exchange by steadily raising reporting requirements, harmonizing procedures and standards in recipient countries, and finally by making this information available to donor bodies.
3) Unlocking financial entrepreneurship
Financial entrepreneurship is a vital source of domestic capital in countries across the world. While financial entrepreneurship in many low-income countries (LICs) and lower-middle-income countries (LMICs) is not robust enough to mobilize the capital that is needed for successful climate adaption and climate mitigation efforts, it is rapidly expanding in Africa, particularly in the form of financial technologies or fintech. In 2021, there were roughly 600 fintech startups in Africa that raised more than half of financing mobilized by African start-ups.[4] It is important for Africa to build on this momentum by creating an enabling policy environment with key stakeholders and by fostering human capital development and strengthening infrastructure.
The G20 can support African economies in fostering such a policy environment in four key ways. First, it can provide technical assistance in the development of public-private partnerships for the deployment of ICT infrastructure, the lack of which has severely constrained fintech expansion in Africa. Second, the G20 can work with country governments to enact initiatives that prevent talent flight. Third, it can coordinate with African countries and countries across the world to develop harmonized regulatory environments for digital financial services. And finally, the G20 is well positioned to facilitate financial integration, both regionally and globally, in line with initiatives like the African Continental Free Trade Area (AfCFTA) and the Pan-African Payment and Settlement System (PAPPS).
Looking ahead
While global interest rates have started to fall, liquidity constraints may be heightened for the foreseeable future. Debt servicing costs in Africa remain at their highest level in recorded history.[5] It is therefore necessary that Africa enacts creative solutions to solve climate issues, and the G20 will be an important partner in this regard. This blog post outlines key ways that the G20 can support Africa in financing infrastructure resilient to climate change. More details on these solutions can be found in the full-length book chapter.
[1] : Callahan, C.W., Mankin, J.S. National attribution of historical climate damages. Climatic Change 172, 40 (2022)
[2] “African Economic Outlook 2022,” (African Development Bank, 2022).
[3] IBID.
[4] Forbes, “Fintech in Africa: Overcrowded, Just Enough or Not Enough?” (2022). McKinsey, “Fintech in Africa: The End of the Beginning,” (2022).
[5] WDI databank
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About the Authors
Ms. Mma Amara Ekeruche is a Senior Research Fellow at the Centre for the Study of the Economies of Africa (CSEA) and a columnist for Stears Business. She holds a Master’s in Economic Policy from University College London (UCL) and a Bachelor's in Economics from Kwame Nkrumah University of Science and Technology (KNUST). Her research focuses on public finance, debt management, and macroeconomic policy, with work featured by Think20, Brookings, and the UN. She was an IMF Youth Fellow in 2020.
Chris Heitzig is an economist specializing in inequality and Africa. He is pursuing a PhD at the Institute of Development Studies while working at the World Bank on social protection and impact evaluations. Previously, he managed a $1.5 million research grant at the Brookings Institution. He has consulted for the UN, FCDO, IFC, and others and holds an MPhil from Oxford and a BA from Saint John’s University.
Gracelin Baskaran is a mining economist and Director of the Critical Minerals Security Program at Center for Strategic and International Studies (CSIS), specializing in critical minerals and trade. She previously worked at the World Bank in South Africa and co-authored Africa’s Resource Future. A Fulbright Scholar, she has held academic positions at Cambridge, London, and Cape Town universities. Her expertise is widely cited in major media, and she regularly speaks at global forums. She holds a doctorate from the University of Cambridge.
Aloysius Uche Ordu is a nonresident senior fellow with the Africa Growth Initiative at Brookings and former director of the program. He previously served as vice president at the African Development Bank and spent over two decades at the World Bank in various leadership roles. His expertise spans trade policy, regional integration, governance, and infrastructure financing. He has advised global institutions, including the UN and AfDB, and has published extensively on African affairs. Dr. Ordu holds a Ph.D. in economics from Sussex University.
Prof. Lemma W. Senbet is the Dean’s Chaired Professor Finance, University of Maryland. Prior to Maryland, he held the Albright Chair in Finance at the University of Wisconsin. More recently he served as Executive Director/CEO of African Economic Research Consortium (AERC), 2013-18. Senbet is internationally recognized for his contributions to corporate and international finance, which have appeared in the leading finance and economics journals. He has received numerous recognitions for his impact on the profession. He was elected (twice) Director of the American Finance Association, and elected President of the Western Finance Association. He was inducted Fellow of the Financial Management Association (2006) and Academy of International Business (2022). Senbet has advised the World Bank, IMF, UN, and African Development Bank. He is a member of Brookings AGI Distinguished Advisory Group and serves on the Advisory Panel of the G20 Compact with Africa. Moreover, Senbet has substantial governance experience, such as serving on the Board of Hartford mutual funds.
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