Our Burning Planet


Fashioning a new global economy: The climate finance heavy hitters on Africa’s role

Fashioning a new global economy: The climate finance heavy hitters on Africa’s role
Photo by Hu Chen on Unsplash

On Monday 19 April, a high-level virtual dialogue was hosted by Absa and the G30 in the lead-up to COP26. What distinguished the discussion from the usual gab-fests in these forums was the urgency of the topic and the potency of the speakers. The simple fact is, if the climate crisis is not going to bring on the collapse of modern civilisation, the world will need an entirely new economy. How will Africa fit into this emerging paradigm? Daily Maverick brings you the views of the people who are making it happen.

“I’d like to open with that young girl in any one of our African capitals,” said Vera Songwe, the United Nations executive secretary of the Economic Commission for Africa.

“When she wakes up in the morning, she needs energy. She needs energy to go to school, she needs energy to cook, and she needs energy to connect. This young girl does not wake up in the morning thinking green energy or a green planet. She’s thinking, how can I make sure that my family and I are prosperous?”

Songwe, a Cameroonian, had picked up the thread from Tidjane Thiam, the Ivorian financial genius who – after being forced to step down as CEO of Credit Suisse in February 2020 – was appointed by the cabinet of Rwanda to head the board of Rwanda Finance Limited. It was 25 minutes into the discussion, which had so far touched on a range of complicated instruments and incentives to ensure that Africa would not be left behind in the global transition towards “net-zero” emissions. 

The virtual dialogue, themed “Road to COP26: Opportunities, Challenges and the African Transition to Net-Zero”, was convened by South African bank Absa in partnership with The Group of Thirty (G30), an independent global body comprising economic and financial leaders from the public, private and academic sectors. 

The objective of the dialogue was to address three key questions: how to manage the transition, how to finance the transition and how to integrate climate resilience in the post-Covid recovery.

For outsiders, the discourse was often tough to penetrate. 

Mark Carney, the Canadian who’d served as governor of the Bank of England from 2013 to 2020, and as governor of the Bank of Canada from 2008 to 2013 – and who appeared in the virtual dialogue in his new role as UN special envoy for climate action and finance – made no bones about the fact that achieving the commitments of the Paris Agreement would require the fashioning of an entirely new global economy. 

As co-author of the G30 report “Mainstreaming the Transition to a Net-Zero Economy”, he had perhaps dug deeper than any human being alive into what the switch-over would entail.

“Transition risks arise from the process of adjusting to a net-zero world, which requires significant structural changes to the economy,” he’d written on page 31 of the report. 

“These changes will prompt a reassessment of a wide range of asset values, leading to stranded assets in high-carbon sectors and a fall in income and creditworthiness of some borrowers. In turn, this entails credit losses for lenders and market losses for investors. 

“The level of transition risk depends on how orderly the transition is. A delayed or disorderly transition will require more abrupt adjustments, and possibly lead to a climate Minsky Moment.”

With this last phrase, the authors were referring to Hyman Minsky, the economist whose work had languished in relative obscurity until 2007, when the subprime mortgage crisis erupted in America. On the whole, the report had been written in language that was relatively upbeat – the “significant opportunities” inherent in green stimulus packages had been inserted as a key feature – but with the citation of Minsky, Carney and his collaborators were subtly acknowledging that things could go horribly wrong. 

On the other hand, as the G30 report also noted, while a business-as-usual scenario would possibly reduce transition risks in the near term, it would lead to much more severe “physical risks” in the future.     

Damage to property and infrastructure, disruption of business supply chains, famine and mass migration – these were what the report had itemised as the physical consequences of an increase in severity and frequency of extreme weather events, which would in turn “reduce asset values, result in lower profitability for companies, damage public finances and increase underwriting losses for insurers.”

In another deviation from the upbeat tone, both risks had been identified by the report as “unprecedented by definition”:

“The levels of CO2 in the atmosphere today are higher than at any point in the past 800,000 years. This means that past data cannot help us reliably measure and manage the physical impact of climate change. Transition risks are equally unprecedented: the global economy has never before gone through such a widespread structural change, brought about by citizens and governments across the world.”


With these free-floating facts as the baseline – and with an intricate knowledge of public policy, carbon markets and risk management taken for granted – Carney kicked off his contribution to the virtual dialogue with the core financial agenda. 

“Private finance, in other words,” said Carney, “would turn billions in public investment into trillions.” 

In recognition of the scale of the task, he said, over 125 countries, “including more than half of the G20”, had now committed to net-zero by 2050 at the latest. This response by the world’s governments to the demands of their citizens meant that global finance needed to quickly follow suit, Carney emphasised, adding that “all forms” of finance were implicated. 

Public finance would need to fund the critical infrastructure required for the transition; development and “blended finance” would need to support adaptation and resilience, as well as “develop new markets for private finance by de-risking investment”; and mainstream private finance would “need to help all companies realign their business models” for net-zero.    

“Private finance, in other words,” said Carney, “would turn billions in public investment into trillions.” 

Then, leading into how this would affect the nations of Africa, he got into the details – the “bedrock for climate finance,” he said, was the $100-billion-per-year commitment that had first been made at COP15 in Copenhagen in 2009 and reaffirmed at COP21 in Paris in 2015, earmarked as a flow of funds from developed to developing countries. 

“Securing that commitment in action is a top priority for the UK COP presidency in Glasgow,” added Carney, referring to the upcoming Conference of the Parties set for November this year.     

“Now, bilateral climate finance is the source of almost all concessional climate finance,” he continued, “and it’s vital to shore up the integrity, solidity and predictability of financial flows for adaptation and mitigation in developing countries. All bilateral donors must live up to their climate finance commitments, and will need to set more ambitious targets for the period ahead.

“Multilateral vehicles of concessional finance, such as the Green Climate Fund, as well as non-dedicated funds such as [the World Bank’s International Development Association], the African Development Fund or the Asian Development Fund… will play important roles in directing catalytic support to developing countries, particularly in Africa.”

Carney’s point, ultimately, was that the momentum in the private sector needed to be matched by the international development finance institutions, which had become “uniquely placed” to address the financing gap for adaptation, mitigation and resilience in Africa, “including by de-risking projects and leveraging private finance”.

In terms of “innovative and alternative” sources of finance, Carney cited the International Monetary Fund’s proposal for large, additional Special Drawing Rights (SDR) allocations, at an equivalent of $650-billion. In March 2021, as Carney noted, the UK chancellor and the G7 had endorsed this “sizeable” allocation of SDRs. 

“The scale of investment opportunities are enormous,” Carney stressed, “$3-trillion in Africa, in this decade alone.”    

“It will also be critical to tackle debt distress and the excessive debt overhang, especially in the most climate-vulnerable economies,” he said, “and it’s welcomed that G20 countries have extended the [World Bank’s Debt Service Suspension Initiative] to provide further temporary relief, although a more permanent solution should be found.”

Finally, after highlighting his UN division’s “simple objective” for COP26 in Glasgow – “to ensure that every professional financial decision takes climate change into account” – Carney moved onto his “four pillars for sustainable finance”.

The first, he said, is reporting: “improving the quantity, quality and comparability of climate-related financial disclosures, by making the [Task Force on Climate-related Financial Disclosures] mandatory.” Already, he noted, 34 companies from across Africa had joined the TCFD, with central banks working to implement robust disclosures in line with the task force. 

The second pillar, Carney added, is risk management. 

“The central banks of Tunisia, Morocco, South Africa and the West African States have all joined what’s called the Network for Greening the Financial System, a group of over 80 central banks that are developing the capacity to better manage climate risk and to seize the opportunities that arise from combating climate change.”

Those opportunities, Carney went on, had given rise to the third pillar – “returns” – which had been included to help investors identify what they could gain from the transition to net-zero.   

“The scale of investment opportunities are enormous,” he stressed, “$3-trillion in Africa, in this decade alone.”       

 Which brought him to the fourth pillar, mobilisation. 

“We need to develop new market structures in order to ensure that the flows go to emerging economies,” he said, “and one of the most important will be a market for carbon offsets. 

“Ninety percent of the demand for those offsets will come from advanced economies, 90%  of the supply will come from developing economies, including in Africa. This is a market that can scale quickly, to $100-billion per annum.”


When it came to Thiam’s contribution to the virtual dialogue, given that Carney had outlined the core financial mechanisms, the focus was strictly on Africa. But the Ivorian wanted to stress at the outset how the Covid-19 pandemic had highlighted “the interconnectedness of our world”, particularly with some of the “painful lessons” learned.

“Africa in the last 20 years has had a very strong and broad expansion of its economies,” he began, “improving the livelihoods of people across the continent. Unfortunately, the Covid pandemic has been a real shock, with its impact on exports, on tourism, the lockdowns and their impact on activity. 

“All of that has contributed to creating a tough situation for African countries. So the stakes are high, from the need to fund vaccines to protect our populations, to the need to not jeopardise 20 years of hard work on sustained reforms, which have allowed Africa to grow.”

In this context, added Thiam, the “huge and direct” impacts of climate change had only served to exacerbate the challenges. He pointed to the extension of the deserts and the lack of rain, which to his mind was doubly impactful in light of the fact that an outsized proportion of African agriculture did not take place within irrigated areas.

“Also, if you consider that various studies have shown that we need to create something like 450-million jobs for our youth in the next 20 or 30 years, the increasing population is likely to completely change the environmental equation for Africa.”

Moving onto the available resources to tackle these giant problems, Thiam referred to the IMF’s $650-billion increase in SDRs as a “game-changer”. The key lobbying point now, he said, was for developed countries to allocate part of that surplus to the African continent.

“It is estimated that the SDR allocation will release an extra $34-billion for Africa, which will be indispensable. Because the simple truth of the matter is that the transition for which we all wish cannot happen without a massive infusion of cash and additional resources.”

The role of blended finance and the private sector would also be key, Thiam stressed, with digital technologies at the forefront of any new energy infrastructure. Strong small-to-medium African enterprises, he added, an “objective that has not been achieved so far”, would likewise be critical to the transition.

His final comment was a reference to “that lady” in France, the member of the “yellow vest” fuel tax protests, who in 2018 had famously said: “These people are worried about the end of the world… I’m worried about the end of the month.” 

After a brief pause for effect, Thiam summed it up for Africa like this: “Well, both are important.”   

Which was the perfect segue into Songwe’s contribution, primarily because it afforded her the opportunity to bring the dialogue firmly to the ground. 

As a last word, Songwe mentioned carbon pricing and “domestic resource mobilisation” on the continent. She referred to the fact that many African countries are carbon sinks, particularly in the Congo River Basin, where three years of carbon emissions lay sequestered.

The Cameroonian’s solution for that “young girl in any one of our African capitals”, as cited above, was indeed to generate more prosperity, more jobs, and to ensure that post-Covid “the 100-million people that are at risk of falling into poverty can come back, and come back stronger”.

But the growth agenda for the future, she emphasised, was first and foremost a sustainable one.

“The African Union has just launched a green investment strategy,” she said, “that essentially lays the framework for how Africa can grow forward, both better and stronger. 

“Today, if I can give you orders of comparison, African countries are spending somewhere between five – and if you’re Mozambique, nine to 11 percent – of GDP responding to climate crises. We’ve seen in East Africa the locust crisis, compounded by drought, compounded by very heavy rains. 

“These are the problems for the continent that we are confronting now. And the question, then, is how do you respond to those problems?”

For Songwe, like Carney and Thiam, the SDRs had become a major part of the solution. “They ensure that the continent has the liquidity to respond just to the crisis,” she said. 

Further, Songwe stated, there was hope among African policymakers that there could be “voluntary on-lending of some of the SDRs”. For her, this would allow the costs of new infrastructure to be blended with public sector finance, so that African investment could be “super-charged”. 

Of course, she added, Africa’s transition could not be managed in a binary way. “That is, go from fossil fuels to 100% sustainable overnight. There is a just transition in the middle. Twenty-three million women die from poor cooking fuels… we need better cooking fuels, and we know that gas will be important as a transition fuel.”

As a last word, Songwe mentioned carbon pricing and “domestic resource mobilisation” on the continent. She referred to the fact that many African countries are carbon sinks, particularly in the Congo River Basin, where three years of carbon emissions lay sequestered.

“We need to be able to provide some revenue generation to the people in those areas,” she said, “so that we can ensure they don’t destroy the forest.”

On this point, Songwe and her colleagues had been speaking to the IMF. As ever, it seemed, Africa had been both blessed and cursed by her abundant natural resources. 

This time, however, if the remarks of the climate finance heavy hitters were anything to go by, the stakes would be for keeps. DM 

Absa OBP

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  • Alastair Stalker says:

    There are huge opportunities in S Africa for carbon offsets. Restoring the Eastern Cape thicket, restoring Mpumalanga grasslands and changing the way we farm to a much more holistic method are relatively quick and easy. Unfortunately at present . because these are long term projects, the price of carbon does not provide a return, so some form of developmental finance is required

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