7 climate funds in Africa for Canadian developers and clean tech companies
Trends and lessons learned to help Canadian developers and green companies secure climate funds in Africa
In 2009, parties of the United Nations Framework Convention on Climate Change gathered in Copenhagen and committed to mobilize US $100 billion a year by 2020 in climate financing.
The purpose of these funds was to help low-income countries mitigate climate change or adapt to it. These funds can be local, national or transnational, as well as public or private.
Since then, global climate finance has grown from US $360 billion in 2012 to over US $500 billion in 2017.
Canada itself has pledged to mobilize $2.65 billion by 2021.
5 climate finance trends in Africa
In their study, CPCS and GAC have recognized numerous patterns in climate-smart infrastructure development in Africa. Acknowledging these currents can help Canadian developers pick the right infrastructure projects to support on the continent:
- Renewable energy is ripe for climate financing: Plummeting renewable energy costs and rising electricity demand make renewable energy an attractive sector for investors, as shown in the graph below.
Investment in renewable energy over time
- Transport and agriculture sectors likely to grow in the short–term: Investor interest is increasing in emerging markets in areas of electric mobility and climate-resilient agricultural projects.
- Greater focus on early-stage project preparation and development: Risks are highest at the earlier stages of a project. International financial institutions are increasingly recognizing the importance of supporting infrastructure projects at these early stages.
- Development banks looking for innovative ways to finance projects: Development banks can provide risk mitigation instruments such as insurance. These instruments can improve private sector confidence in the project and help make the project viable.
- Investors and funders open to new technologies: Spurred in part by the rapid growth of renewable energy, investors and funders have been looking to add innovative technologies to projects. Combining battery storage with solar power systems is one such example.
5 infrastructure lessons from the field in Africa
Drawing from its experience in project development in Africa, CPCS has a number of lessons to share with fellow Canadian developers. Applying these lessons can improve the likelihood of a project surviving beyond early phases.
- Environmental, social and governance (ESG) criteria are critical: Regulatory regimes in Africa are not always as robust as expected. Projects can run into land control and resettlement issues or harm the environment. As such, projects must meet ESG standards to remain viable.
- Keep the national context in mind: Important considerations include whether the tariff of the project is affordable, whether the quantity of power proposed by the project is really needed and whether the utility will be able to effectively transmit the energy to the end user.
- Local partnerships are key: Having a clear understanding of the national context may require local partnerships. These agents can provide unique perspectives and are familiar with the local regulatory framework.
- Corruption and bribery risks are manageable: Some African projects have difficulties gaining traction due to perceived corruption and bribery risks. Showing investors that all parties can be held accountable can go a long way in securing funding.
- Canada’s reputation and resources as levers: Canadian developers enjoy a head start on the continent thanks to their positive reputation. Use embassies, diplomatic missions and the Trade Commissioner Service to network and locate relevant stakeholders.
7 funds accessible to Canadian developers and clean tech companies in Africa
We’ve identified seven climate funds accessible to Canadian developers and clean tech companies driving infrastructure projects on the continent.
- InfraCo Africa: This development finance institution provides grants and equity investments. It aims to develop early-stage infrastructure projects that can produce a return in later stages. InfraCo primarily focuses on transport, energy and water projects.
- Development Bank of Southern Africa (DBSA) preparation fund: This fund helps projects meet expectations from both the public and private sectors during the investment stage. It builds a pipeline of deals for which it can then provide debt financing at financial close.
- Sustainable Energy Fund for Africa (SEFA): This multi-donor organization offers grants to facilitate pre-investment activities for renewable energy and energy efficiency projects. It also engages in technical assistance and promoting enabling environments.
- Renewable Energy Performance Platform (REPP): This U.K. government-funded program provides financial relief to small and medium-sized projects. Aid includes loans for development phase financing, gap financing and long-term lending.
- ElectriFi – The Electrification Financing Initiative: Funded by the European Union, this financing mechanism supports investments that increase access to modern and sustainable energy solutions.
- African Development Bank’s Facility for Energy Inclusion – Off Grid Energy Facility: As its name suggests, this fund provides loans to off-grid energy companies. It pursues universal access to electricity for off-grid and underserved households.
- United States Trade and Development Agency (USTDA): This organization provides grants to infrastructure projects likely to use U.S. goods and services.