AfDB falls short on climate finance targets, but pledges to hit the gas pedal on its climate funding initiatives

AfDB annual meeting concludes: The African Development Bank’s (AfDB) five-day annual meeting of the board of governors concluded in Sharm El Sheikh on Friday, with the release of the Annual Development Effectiveness Review (pdf) and the African Economic Outlook report (pdf). Egypt’s International Cooperation Minister Rania Al Mashat and Irrigation and Water Resources Minister Hani Sewilam held a marathon of meetings on the last two days, and saw the UK’s announcement of a EUR 80 mn guarantee for Egypt’s El Gabal El Asfar water treatment plant. Egypt’s Central Bank Governor Hassan Abdalla handed over the chairmanship of the bank’s Board of Governors at the closing ceremony, according to a statement released on Friday.

AfDB financed 113 MW of Africa’s renewable projects, falling short of its 560 MW target, the bank’s 2023 Annual Development Effectiveness Review revealed. While the bank achieved only 20% of its renewable funding target compared to a 2015 baseline, it managed to exceed its emission reduction target which reached some 2.6 mn tons CO2 in 2022. 75% of Africa’s electricity is still generated by fossil fuels, despite efforts from Kenya and Morocco who generate more than 10% of their energy through renewables — a higher percentage than China, India, and the US. The report also noted that the continent will play a critical role in global EV expansion as it holds over 40% of the world’s cobalt, manganese, and platinum reserves.

But it’s putting the pedal to the metal on its climate financing initiatives: The annual review outlined some of the bank’s crucial climate initiatives, including its partnership in the COP26 Energy Transition Rapid Response Facility, the Africa Hydropower Modernisation Programme and flagship Desert to Power G5 Sahel Financing Facility — both supported by the AfDB’s Sustainable Energy Fund for Africa, and finally its 2016-2025 Strategy for the New Deal on Energy for Africa (pdf).

Some USD 27.2 bn in annual private climate financing could close the gap for climate needs in North Africa by 2030, the African Economic Outlook 2023 report calculated. This is based on the scenario that the residual climate finance needs will fully come from the private sector.

The numbers: Countries have identified the annual private sector investment required taking into account what the public sector can contribute. Algeria needs USD 2.4 bn a year, Egypt will require USD 19.8 bn a year, Morocco needs USD 93.9 bn a year, and Tunisia USD 24.4 bn per year, the report finds.

Blended finance is crucial, but North Africa falls short: Blended finance — finance that combines official development assistance with private funding to leverage funds and reduce risks — is crucial in unlocking the needed climate financing, the report suggests. North Africa has failed to tap into the de-risking tool, having one of the smallest proportions of climate blended finance compared to East and South Asia, Latin America, and Sub Saharan Africa. The rate in North Africa has not changed in the last 5 years.

Meetings dominated the final day: On Friday, Egypt’s Al Mashat met with the UK’s Minister of State for Development and Africa Andrew Mitchell to discuss progress on the Climate Finance Accelerator, and with Norway’s Development Minister Bjorg Sandkjaer to discuss pathways to increasing bilateral cooperation in the renewable energy sector, according to a statement. A meeting with German Parliamentary State Secretary in the Ministry for Economic Cooperation and Development Barbel Koffler was also held to review the debt swap program to support Egypt’s Nexus of Water, Food and Energy program of which two tranches worth EUR 160 have been implemented. Al Mashat also touched on the debt swap program with Assistant Secretary of the US Treasury for international markets Alexia Latortue amidst a discussion on stimulating private sector participation.

Water issues made an appearance: Egypt’s Sewilam met with the Vice President of the African Bank Beth Dunford on Friday to discuss Egypt’s presidency of the African Ministers’ Council on Water and its efforts to enhance climate adaptation and the use of renewable energy in water pumping and treatment, according to a statement. The irrigation minister also sat with the Assistant Secretary-General and Director of the Regional Bureau for Arab States for the UN Development Programme to discuss the Green Climate Fund, and the joint project, “Promoting Adaptation to Climate Changes in the Northern Coast and the Nile Delta,” another statement added.

The UK provided a guarantee of EUR 80 mn to the AfDB to support phase 3 of Egypt’s ElGabal El Asfar water treatment plant under its Room2Run initiative, the bank’s website reported. The Room2Run guarantee was announced in 2021 during COP26 to enable the AfDB to give out USD 2 bn of climate finance in Africa by 2027, with a 50-50 split between adaptation and mitigation, the website notes. The UK also allocated EUR 37 mn to a water sanitation project in Senegal.