Panellists at BCG Roundtable seek solutions to bridge Africa’s Climate Finance gap

By Faridat Salifu

The Boston Consulting Group (BCG) recently highlighted the pressing need to address the substantial gap in climate financing across Africa.

The consultancy firm wared that Africa, which contributes the least to global carbon emissions, faces the gravest threats from climate change.

BCG’s report, tagged: More Money, Fewer Problems: Closing Africas Climate Finance Gap, underscores the urgency of securing the estimated $2.4 trillion required by 2030 to meet Africas climate needs.

It said to date, only 12% of this funding has been mobilized, revealing a critical shortfall that could impede the continents sustainable development.

The Roundtable which held on August 14 discussed the reports findings and explored strategies to unlock climate finance in Africa. BCG Nairobi Climate Partner and Associate Director, Katie Hill underscored the “tremendous urgency”for capital infusion into green sectors, emphasizing the significant role the private sector could play.

She noted that just 14% of Africa’s climate finance comes from private sources, largely due to perceptions of heightened investment risk in the region.

Hill pointed out that the cost of capital in African countries is disproportionately higher than in other regions with comparable risk profiles and GDP per capita.

Also, Warren Chetty, BCG Johannesburg Partner and Managing Director, observed that Africa has historically underutilized its debt and equity financing capacities but suggested that this trend is shifting.

He argued that debt is crucial for climate financing, while equity can catalyze and unlock further debt opportunities.

Chetty also emphasized the importance of portfolio value creation and the role of various stakeholders in mitigating risks associated with debt capital instruments.

Climate Fund Managers CEO, Andrew Johnstone, also echoed the need for risk mitigation, stressing that unpredictability in Africa exacerbates the finance gap.

He argued that capital markets favor predictability, while the volatility associated with Africas external environment deters investment. Johnstone called for a focus on absorbing, structuring, and pricing risk to attract capital.

The roundtable concluded with a consensus on the potential of blended finance as a tool to derisk investments and mobilize the necessary capital for Africas green transition.

However, panellists stressed that continuity in intent and policy is crucial to sustaining the flow of risk-absorbing capital into the continent.