Innovative Financing
Expected outcome
- Increased level of finance and investment in adaptation and resilience through the AAAP financing facilities
- Increased number of funding proposals approved
- Adaptation and resilience mainstreamed in the Bank’s and other financial intermediaries lending and investment policies
- New and innovative financing and investment tools, mechanisms, and instruments developed and in use
- Capacity built of officials to identify, manage and disclose climate related risk and integrate climate risks in investment and lending
to drive adaptation at a much greater scale
2025 Goal
To build the capacity of African countries to drive adaptation at a much greater scale by planning differently and accessing the key sources of adaptation finance. In addition, this AAAP pillar will support the design of innovative public and private financial instruments, ranging from resilience bonds and debt-for-resilience swaps to aggregation mechanisms for adaptation investment assets and monetization of adaptation benefits.
Description
The AAAP’s innovative financial initiatives pillar is developing and implementing financial instruments and mechanisms to support the implementation of adaptation actions by raising finance from various public and private financiers. This pillar answers the pressing need to address the steep deficit in reliable and sustainable sources of funding for adaptation in Africa today.
Compared with the various types of financing instruments and grants that are available for climate change mitigation, there are few places where private- and public-sector project developers can get the necessary resources for adaptation. Further, most of the currently available funds come from the public sector. To support the development of resilient green growth in Africa, there needs to be a step change by developing a deeper understanding of the needs and capabilities of the private sector.
The technical assistance programme to access and leverage climate adaptation finance is helping countries to:
- build capacity for adaptation finance planning and decision making
- support the accreditation of new and existing African direct-access entities
- develop and submit a paradigm-shifting portfolio of adaptation projects and programmes to international climate funds.
The programme is currently supporting 14 countries. The programme on financial tools instruments and mechanisms offers technical assistance for structuring blended finance and capital markets solutions such as green bonds and private debt and equity funds, or for adopting an adaptation taxonomy for traditional green lines of credit. AAAP is supporting the upcoming sustainable sovereign bond of the Government of Côte d’Ivoire to increase the share of adaptation investments in the use of bond proceeds. It is also supporting the launch of the Invesco climate adaptation action fund, the first 100% adaptation debt fund that targets the most vulnerable countries. The African green financing facilities fund is designed to help to create and capitalize national green banks and national climate change funds in African countries. The African Development Bank has identified a pipeline of at least six countries that have a clearly stated desire to create a green bank or a national climate change fund to help to finance their adaptation needs.
