BY BAMIDELE FAMOOFO
Developing countries will require an additional $1 trillion in external financing to meet the challenges posed by the climate crisis, according to a report commissioned by the current and previous Conference of the Parties hosts, Egypt and Britain.
Speaking at the World Economic Forum High-Level Nature & Climate Dinner, during COP27, President and CEO at Africa Finance Corporation, Samaila Zubairu, stressed that “being serious about closing the climate funding gap for the developing world, and particularly for Africa, requires recognition of the distorted global financial architecture made in the US and Europe, which causes a tragic irony when it comes to climate action. Those countries suffering, through no fault of their own, the most extreme ravages of climate change, and therefore, the places most in need of finance to pay for resilient building and infrastructure, are also the ones with the least access to capital and the highest cost of borrowing.”
Expanding on the scale of the challenge that African economies face when accessing finance, Zubairu explained how contrary to popular belief “Africa’s default rate on project financing is lower than every region in the world, below the US, Europe, Asia, and Latin America. Only the Middle East has a lower default risk and yet most African countries pay more to borrow than a country like Greece at the height of the financial crisis of 2008.”
Zubairu closed with a note of optimism stating that organisations like the Africa Finance Corporation are executing solutions. “We have developed the tools to de-risk climate investments and offer strong returns that incentivise funding from institutional investors. With financial institutions having pledged at COP26 to align portfolios worth US$130 trillion to achieve net zero emissions, dedicated funding is limited only by our ability to work together and innovate.”