Institutional leadership and information sharing

Explanation

The AfDB has shown strong institutional leadership both among Public Development Banks (such as through hosting Finance in Common 2022), and at the regional level in several key areas. Below, three key areas of leadership are set out.

Finance mobilisation leadership

In the context of considerable climate finance needs across Africa (with an estimated total of USD 242.4 billion annually needed from 2020 to 2030 for the implementation of updated Nationally Determined Contributions (NDCs) across Africa), the AfDB has been a leader in seeking to mobilise resources for this purpose. Key examples include:

• Leading by example among MDBs in the use of innovative financial mechanisms for balance sheet optimisation. In particular, the AfDB is the first and only MDB so far to have used a synthetic securitisation scheme – namely, through the innovative “Room2Run” scheme. This mechanism can free up as much as up to USD 2 billion for increased lending, due to be dedicated to climate finance and equally split between adaptation and mitigation. Moreover, the AfDB has notably previously exchanged sovereign risk exposure in partnership with the IDB and the IBRD, and is part of the innovative proposal to rechannel Special Drawing Rights (SDRs) through MDBs for greater leverage through hybrid capital issuance.[1]
• Launching the African Financial Alliance on Climate Change (AFAC) to promote private sector participation in climate finance delivery through technical assistance and the development of guidelines for green lines of credit in Africa.
• Launching the African Green Bank Initiative(AGBI), off the back of an in-depth joint study into the potential of green banks to de-risk investments in low-carbon and climate-resilient projects in Africa. The AGBI aims to support the creation of a green bank ecosystem in Africa to develop local pipelines of green projects, reduce financing costs and mobilise private investment. The AGBI is targeting the creation of a USD 1.5 billion ecosystem of green investment by 2030.
• Enhancing access to climate finance through initiatives such as the Africa Climate Change Fund (ACCF) and African Development Fund (ADF) Climate Action Window (CAW). The former, established in 2014, focuses on capacity building, supporting project implementation and strengthening enabling environments. The latter, established in 2023, consists of three subwindows with funds allocated towards adaptation (75%), mitigation (15%) and technical assistance (10%). The CAW specifically caters for low-income African countries in offering large grant components to minimise any contribution to debt distress, as well as supporting capacity building to effectively attract climate finance from other sources.

Adaptation and resilience leadership

The AfDB is a leading actor in climate adaptation and resilience across Africa.[2] Prominent examples of its work in this area include:

• In 2022, the AfDB, in partnership with the Global Centre for Adaptation, launched the Africa Adaptation Acceleration Program (AAAP), aimed at mobilising USD 25 billion over five years, to accelerate and scale climate adaptation action on the African continent. The AAAP was endorsed by other MDBs including the World Bank, EIB and EBRD.
• The 2019–2023 Pilot stage of the Adaptation Benefit Mechanism (ABM) has shown transformative potential. It has been discussed under Article 6.8 UNFCCC negotiations, and if successful can serve as a key instrument to mobilise investment for climate-proofing across Africa. The ABM has received interest from shareholders such as the United States, which explicitly named it for support in the 2024 budget proposal for the Department of State.
• The ClimDev Special Fund has shown impact in strengthening disaster risk management capacities of national and subregional bodies to combat extreme weather risks. This functions through supporting a network of regional climate centres across Africa and contributing to longer-term national meteorological capacity building efforts. The scope of this is due to be expanded through the Systematic Observations Financing Facility of the Alliance for Hydromet, of which the AfDB is a founding member.

Access to sustainable energy leadership

Energy access is as an area where the AfDB is undertaking leading work among the MDBs. The Bank participates in various global platforms focused on energy access, such as the Sustainable Energy for All (SE4ALL) initiative, and is engaged in regular exchanges with key development partners to share its experience. Further examples of the Bank’s work in this area include:

• In 2016 a “partnership-driven effort”led by the African Development Bank founded the New Deal on Energy for Africa (NDEA), which set the goal of achieving universal electricity access for the continent by 2025. At the time, a major obstacle to this goal was a lack of easily available and consistent data, so the Bank developed the Africa Energy Portal, a “one-stop source” for energy access, supply, and technical information across Africa. It also launched the Africa Energy Market Place, a collaborative, tri-partite investment platform aimed at fostering private investment in the energy sector through bringing together governments, the private sector and development partners.
• Through its Green Mini-Grid (GMG) Market Development Programthe Bank integrates and shares best practice in the mini-grid space through its GMG helpdesk. The GMG Market Development Program also participates in the Mini-Grid Partnership (comprised of other financiers, developers, foundations and public sector representatives), which facilitates collaboration, coordination, and information sharing in the mini-grid sector. 
• Another potentially transformative large-scale programme led by the AfDB is the Desert to Power Initiative. This initiative aims to harness the solar potential of the Sahara Desert across the “”, covering 11 countries. The programme seeks to mobilise both public and private investment to provide 10 GW of new capacity, touted to eventually provide electricity for up to 250 million people.
• The AfDB also leads other sustainable energy initiatives such as the Sustainable Energy Fund for Africa, a multi-donor Special Fund offering technical assistance and concessional finance instruments.

Recommendation: 

• The AfDB should consider working to actively involve other PDBs in the Expert Group on Biodiversity Finance it announced in 2023 (in partnership with UNEP) to advance the implementation of the Global Biodiversity Framework (GBF). This could also involve exploring synergies with both the biodiversity COP process and the Finance in Common agenda.

[1] For further details on these initiatives and a broader overview of how the AfDB is progressing with implementing the G20 Capital Adequacy Framework (CAF) recommendations, see the “Promotion of green finance” metric.

[2] See the “Climate risk, resilience, and adaptation” metric for more details.