US commits $7bn to support climate resilience in Nigeria, Others

In an effort to promote climate resilience, adaptation, and mitigation in Africa, the United States has announced a $7 billion investment support for Nigeria and other African nations.

“These new investments and initiatives will generate significant economic benefits while addressing African nations’ pressing needs resulting from the climate crisis, including food security challenges, by helping to lift up over 116 million farmers and promote climate-smart agriculture,” a statement from the US’s white house said.

To facilitate this, Africa Finance Corporation (AFC) and its asset management unit AFC Capital Partners will invest and mobilize $510 million for the initial $750 million first close of a $2 billion Infrastructure Climate Resilience Fund (ICRF) with a mission to incorporate climate risk in physical infrastructure built across the continent.

This is in line with the over $7 billion commitment across various sectors to promoting climate resilience, adaptation and mitigation across Africa as announced by Kamala Harris, vice president of the United States of America.

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The ICRF was launched last year and is focused on the following four sectors: Transport and Logistics, Power and Renewables, Telecoms and Digital Infrastructure, Industrial Parks and Special Economic Zones.

It is the first large-scale adaptation program of its kind, which offers a unique opportunity to support sustainable development in Africa while mitigating the impacts of climate change through a blended finance approach to de-risk investment opportunities

With a target fund size of $750 million, ICRF is an innovative finance instrument established to climate-proof Africa’s infrastructure by integrating scientific climate-resilient measures in the planning, design, development, construction and operation of infrastructure assets in alignment with the Paris Agreement on climate change.

“Through ICRF, AFC Capital Partners will finance greenfield and brownfield infrastructure that is planned, designed, built and operated in a way that anticipates, prepares for, and adapts to the continent’s changing climate conditions,” AFC said in a statement.

The finance corporation said the problem of financing climate-resilient infrastructure in sub-Saharan Africa amounts to a financial summit of investment barriers that few private investors are willing to scale.

“We are leveraging the massive untapped pool of institutional capital to provide climate finance at scale to bridge Africa’s infrastructure deficit and unleash its economic potential.

“Rising temperatures, infrequent precipitation patterns, flooding and other extreme weather patterns threaten critical existing and yet-to-be-built infrastructure across sub-Saharan Africa – a region already challenged by infrastructure low in quantity, quality and accessibility.

“Climate change also heightens pre-existing investment barriers, putting economic growth and development at risk across significant regions,” AFC said.

Earlier this year, the AFC and AFC Capital Partners secured a US$253 million commitment from the Green Climate Fund (GCF) to strengthen climate-resilient infrastructure in Africa.

The commitment marks GCF’s biggest equity investment in Africa and the largest for an Africa-wide multi-country program, according to a statement by AFC.

Yannick Glemarec, executive director of GCF, said ICRF is a pioneering fund that will catalyse climate-resilient infrastructure development across Africa.

“GCF’s first-loss anchor investment in ICRF will mobilise African pension funds and other private investors to invest in climate-resilient infrastructure as a new asset class in Africa,” he said.

“It will also serve as a model for local banks and financial institutions to engage in climate finance. I’m delighted that GCF is partnering with AFC on GCF’s largest equity investment in Africa to date.”

ACF noted that the GCF’s US$253 million equity investment will support the incremental cost required to integrate adaptation and climate-resilient measures into climate-proofing infrastructure.