african development bank - finance instruments for north … · 2020-02-12 · • promoting...
TRANSCRIPT
African Development Bank -Finance instruments for North African countries
• 12 February 2020, Technical Workshop on Climate Finance, Cairo, Egypt
• Mr. Gareth Phillips
• Manager Climate and Environment Finance (PECG1)
• African Development Bank
1
OUTLINE
• Climate vulnerability of North African countries
• AfDB strategic framework and response to Climate Change
• Data collection
• Key climate funds, financial instruments and initiatives
• Examples of projects
2
Climate vulnerability of the North African Region
• Africa is the continent most vulnerable to climate change. However, it receives only about 3% of the global climate finance.
• Most African Arab countries are in the Bank’s North African region.
• Regional members states include: Algeria, Egypt, Libya, Mauritania, Morocco and Tunisia. Djibouti falls under the East-African region.
• Most North African countries are middle income countries and contribute collectively to about one third of continental GDP.
• Mauritania and Djibouti are least developed countries.
• North Africa experiences a high degree of climate vulnerability (UNDP), while higher temperatures and increasing drought are expected (IPCC).
• Climatic challenges include limited water resources, heat waves, coastal degradation, deforestation, land degradation and desertification. Health, agriculture, tourism, forestry, infrastructure and urban developments are under threat. Security, migration and gender are issues
• Some countries have significant GHG emissions; all have high renewable energy potential
3
4
Bank strategy for Climate Change and Green Growth for North Africa
• Continental AFDB Ten-year Strategy (2013-2022)
and High 5s: climate change intervention is
crucial to achieving the objective of
transitioning to green growth
• 2nd AfDB Climate Action Plan (2016-2020),
• Regional Integration Strategy Paper• Promoting regional connectivity infrastructure; and
• Promoting private sector industrial development and trade.
5
AfDB’s unique approach
• The Bank is the largest financial institution in the region. Its prime objective is to mobilize financial resources to support sustainable economic and social development in Africa.
• The Bank is the MDB with the highest percentage of climate finance, and is on course of achieving its target to allocate 40% of its funding to climate finance by 2020.
• The Bank has an ambitious climate finance target of 25 billion USD by 2020 - 2025.
• The Bank is the only MDB that has achieved balance between mitigation and adaptation finance. The Bank is committed to maintaining this balance in the future.
• The Bank is the only MDB piloting cooperative approaches for Adaptation under Article 6 of the Paris Agreement
6
AfDB collects information on climate change needs and priorities• The Bank is an important actor in collecting information at national,
regional and global level on climate finance and support provided to North African countries.• AfDB data portal
• Africa Information Highway
• Annual African Economic Outlook
• Annual Compendium Of Statistics
• Regional and sectoral information
• Tailored data, particularly in the energy sector
• Data on “needs” is captured in annual plans with regional member states, country profiles, funding proposals and can be collected via special initiatives
7
Examples of AfDB financial data at continental, regional and country level• Annual approvals and commitments of finance
• Approvals by financing instrument
• Loan and grant approval & disbursement by sector
• Public/private sector finance
• Climate finance for mitigation and adaptation
8
AfDB financing instruments (examples)
• Lending: project; policy-based
• Grants (to ADF countries, not middle income): project; structural adjustment; budget support; technical assistance; special relief fund; special dept relief
• Loans: technical assistance; institutional capacity; commercial and concessional
• Project preparation facility
• Equity participation: public; private
• Guarantees: public; private
• Special funds
9
Examples of data for North Africa
10
• Total commitment: UA 20,775,820,014
• Top 5 sources of finance in UA mln. : African Development Bank (20,061), African Development Fund ( 497), the Japan International Cooperation Agency (103), Middle Income Countries Fund (44), MENA Transition Fund (21)
• Total number of projects since 1967: 542, 424 completed, 95 on-going
• Top 5 sectors in UA mln.: Multi-sector (3,970), Finance (3,919), Power (3,305), Transport (2,617), Social (2,369)
• High 5 priority “Light up Africa”: UA 3,293 mln.
AfDB’s response to climate change
• The Bank has a key role to play in addressing the climate finance needs of African countries in the region.
• Nmitigation is important to a number of North African countries with relatively high emissions – Algeria, Egypt, Morocco, Tunisia. All have high RE potential.
• The African Development Bank has played a critical role in building Africa’s clean energy capacities in the region.
• Climate Change adaptation is a priority for Africa and the region. The African Development Bank has a range of initiatives and funds to finance adaptation – Feed Africa, Improve quality of life
11
AfDB Mobilizes Climate Change Funds• External funds: Climate Investment Funds, Global Environmental
Facility (GEF), Green Climate Fund (GCF), Adaptation Fund
• Multilateral Climate Funds hosted by the Bank:• African Climate Change Fund (ACCF)• African Climate Technology Center (ACTC)• African Water Facility (AWF) • Agriculture Fast Track• ClimDev Special Fund (CDSF)• Rural Water Supply and Sanitation Fund (RWSSI)• Sustainable Energy Fund for Africa (SEFA)• Urban Municipal Development Fund (UMDF)
• Bilateral Climate Funds: eg. Korea, Japan, foundations
12
AfDB Launches Climate Initiatives
• African Financial Alliance for Climate Change (AFAC) – aims to link all stock exchanges, pension and sovereign wealth funds, central Banks and other financial institutions of Africa to mobilize and incentivize the shift of their portfolios towards low carbon and climate resilient investments.
• African NDC Hub - a resource pool for African countries together with local and international support institutions - public and private, to deliver on the Paris Agreement commitments in an effective and efficient manner.
• Affirmative Action for Women in Africa (AFAWA) - pan-African initiative to bridge the $42 billion financing gap facing women in Africa.
13
AfDB develops innovative climate change instruments• Adaptation Benefits Mechanism (ABM) - proposes a new business
model for adaptation - rewarding adaptation actions for their benefits. ABM is an innovative, cooperative non-market-based mechanism for mobilizing public and private finance for adaptation action to implement NDCs.
• Green Banks and National Climate Change Funds – key instruments in mobilizing local private sector finance
• Green Bonds – critical for national and international private finance
14
Getting Africa’s Financial Industry at the Centre of Climate Action
Source: The AFAC Secretariat
Egypt’s Abu Rawash Wastewater Treatment Project • Faced with a growing population and development, Egypt has already
used almost 100% of its available renewable water resources.
• USD 95 million in Bank financing is working to enhance the quality of wastewater treatment and treating wastewater to make it suitable for irrigation, produce sludge for fertilizer and collect methane for electricity generation to reduce GHG emissions.
• The project is expected to reduce emissions by more than 600,000 tCO2e per annum and create more than 500 jobs.
16
Solar Power and Clean Transportation in Morocco• The African Development Bank has co-financed the 510 MW Ouarzazate Solar Complex
in Morocco, one of the largest solar complexes in the world.
• Concentrated solar power technology enables solar energy to produce energy well into the night
• Approved in 2016, the Railway Infrastructure Reinforcement Project aims to enhance the competitiveness of the Casablanca-Marrakech railroad as well as the living conditions of project area communities.
• Activities include reinforcement of existing tracks, construction of 327km new railroad and of modern railway stations.
• The project will contribute to climate mitigation through reduced road transport.
• The project received an ADB loan of USD 112.3 million combined with co- financing of USD 290.8 million from the Government of Morocco for a total project size of USD 403.1 million.
17
Desert to power in the Sahel
• The “Desert to Power” program, a $10 billion initiative to build a 10 GW solar zone across the Sahel—the largest in the world.
• Will provide electricity for 250 million people in off grid, mini-grtidand grid connected installations
• Together with partners such as the Green Climate Fund and the EU, the Bank has now financed the first project under this Initiative: The Yeleen Rural Electrification Project in Burkina Faso. This initiative can be extended to other Sahel countries.
18
19
US $32 billion per annum renewable energy investment potential by 2030.
1000GW Solar350GW Hydro-electric110GW Wind15GW Geothermal
Investment Opportunities in Africa – Energy
Driving Change: Opportunities for Investments
Source: The AFAC Secretariat
Climate Change Action Plan II (2016-2020)
• Adopted in November 2017, the Action Plan is our roadmap to:
Support the implementation of Africa’s Nationally Determined Contributions (NDCs)
Mainstream Climate Change in the delivery of the Bank’s H5 priority areas
Scale up climate finance accessed and channelled to African countries from public (multilateral/bilateral) and private sources.
Achieve the Bank’s target of tripling its climate financing to allocate 40% of its approvals as climate finance by 2020
Reach parity between adaptation finance and mitigation
The Bank is currently implementing its second Climate Change Action Plan (2016-2020) focusing on four (4) key pillars: Adaptation; Mitigation; Climate Finance; and Enabling Environment
Mainstreaming Climate Change: Our Toolkit
• Climate Risk Screening Tool
• Adaptation Review and Evaluation ProceduresAdaptation
• Greenhouse Gas (GHG) accounting and reporting Tool
• Other mitigation tools (e.g. Transport emission tool, …)Mitigation
• Joint MDB Methodology for tracking adaptation finance
• Joint MDB Methodology for tracking mitigation financeClimate Finance
AFAC – Delivering Action
25
AFAC – Principles
Principle 1 Commit to Urgent
Climate Action
Principle 2 Manage Climate Action
and Risks
Principle 3 Develop Tools to Monitor
Climate Action
Principle 5 Disclose climate action and risk
Principle 4 Integrate Climate Action in
Strategic Decisions
26
AFAC - Benefits
ONE
Enabling information on and understanding of risk-returns profile, pricing and opportunities across asset
classes
TWO
Assuring business continuity and reduced volatility by capturing impacts across investment
portfolios
THREE
Lowering financial and reputational risks through better
public disclosure and managementof climate-related risks
FOUR
Capitalizing opportunities to attract global climate
finance and ‘stranded capital’ by offering transparency on
low-carbon portfolios
FIVE
Upscaling to deploy innovative technologies
supporting the low-carbon and climate-resilient transition
Some Background
27
There are two responses to climate change –mitigation and adaptation
Mitigation is relatively well covered – we have targets (net zero by 2050 / 40 or 30), commitments (NDCs, pathways), policies and regulations (ETS, standards) and tools (GHG accounting, carbon pricing, two new mechanisms under Article 6 of the Paris Agreement)
Adaptation is not so well covered – there is a clear gap in the toolbox and finance for addressing adaptation. While most NDCs in Africa have prioritized adaptation, Africa has received least climate finance.
What are some of the key
responses to strengthening
resilience?
Developed / wealthy countries
• Infrastructure design – build bigger, stronger, in better places
• Insurance – loss and damage, weather
• Manage transition risks –future policies that will result in stranded assets
• Manage physical climate risk through design, diversification and divesting
• Help developing countries become resilient to the negative impacts of climate change by implementing their NDCs
Under-developed / African countries
• Transforming the lives of people by strengthening livelihoods, ecosystems and infrastructure, such as through:
• Climate-smart agriculture
• Potable water supplies
• Coastal protection
• Land restoration / Ecosystem protection / Biodiversity preservation
• Access to electricity
• Income diversification
28
The demand for mobilization of funds for adaptation exists but the
private sector is barely involved as investor or
project initiator
29
So what is the problem?
• The problem is that very few of the adaptation responses and technologies in developing countries are financially attractive to the private sector
• Some can yield revenues but they may be delayed, insufficient, high-risk, require up front investment, which cannot be obtained or face other barriers
• Others have no revenues at all, as they yield public goods, while there is a mindset that public goods should be met by public finance, which does not need to be the case
• We lack a bankable business model for adaptation
• And yet…. There is a broad understanding that without private sector engagement in adaptation, the adaptation needs cannot be met!
30
How will ABM work?
31• ABM introduces a new asset capturing the value of resilience and the incremental costs: Certified Adaptation Benefits
• Project developers sign off-take agreements with buyers for payment on delivery of Certified Adaptation Benefits
• Sales create an(additional) revenue stream for project developers, which helps them to achieve equity or de-risk loans
• As result, adaptation activities that would otherwise not be feasible, become attractive
• The more vulnerable the community is, the more compelling the outcomes will be
• Adaptation benefits will deliver reliable information on direct and leveraged adaptation finance, and progress towards resilience, achieving the NDCs, SDGs, etc.
• Both host and donor countries & the private sector will receive useful information for transparency and reporting