With climate change becoming an urgent issue in Africa, experts say Africa can leverage on green bonds and renewable energy to mitigate its impact on economic growth and achieve stronger sustainability.
“The pandemic paused many human activities but it never paused the impact of climate change on economic growth,” Jingdong Hua, Vice President and Treasurer of the World Bank said at the African Investment Roundtable with the theme “Sustainability enroute to COP26.”
Climate change, which originates from the continuous use of fossil fuel sources such as crude oil, natural gas and coal has been found to be detrimental to economic growth over time.
Hua mentioned that when the temperature increases, it decreases economic growth by 0.67 percent in most of Africa and for a 1 percent Celsius increase, there will be an estimated decline in global crop yields by 3-10 percent.
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The increase in temperature has been found to be responsible for many types of disasters including storms, floods, heat waves and droughts.
According to a survey by the World Bank using a sample of 30 African countries, it was found that two-third of these countries are warming up above the global average.
“If nothing dramatic is done to boost growth, Africa’s share of World poor population will increase from 55 percent in 2015 to 90 percent by 2030,” Hua said.
On the way forward, the World Bank treasurer says Africa needs to connect global savings to development finance.
“There is no shortage of savings in the world. There are over 3000 financial institutions managing about 23.5 trillion assets available for sustainability projects,” he said.
Investors are also considering environmental concerns as top priority in making investment decisions in countries.
A World Bank research shows that 85 percent of investors look at environmental, social and governmental factors as part of the credit risk process.
Also 91 percent of investors also ask Sovereign debt managers for Environmental, Social, and Corporate Governance (ESG) information before deciding to invest.
Hua also explains that there are also vast opportunities in green bonds if African countries can leverage on its potential.
A green bond is a type of fixed-income instrument that is specifically earmarked to raise money for climate and environmental projects.
“There are only 20 green bonds that focus on Africa and only one was from Nigeria. This means that there are opportunities the capital market can leverage on to scale up sustainability investment going forward,” Hua said.
Kelvin Kariuki Vice President Power, Energy Climate Change and Green Growth, Africa Development Bank Group also said that Africa must leverage on its vast renewable energy potential to boost growth and reduce carbon emissions.
Kariuki stated that African contributes 4 percent to greenhouse gases with 2 percent from its electricity sources which are mostly non-renewable while the other gases stem from Agriculture and deforestation.
Africa has 10 terawatts of solar energy, 380 gigawatt of hydropower, 110 gigawatts of wind power and 15 gigawatts of geothermal energy which could aid the transition to clean energy.
According to Kariuki, Africa’s energy transition faces two major challenges
The first is the efficient mobilization of capital as Africa would require $100 billion per annum for effective transition to clean energy but considering the limited capacity of public resources, attracting private sector finances is therefore imperative.
This calls for the creation or improvement of an enabling environment for private sector participation
The second challenge is that Africa does not have the resources required to store solar and wind energy and must therefore begin to consider how to tap its gas resources.
“Until energy storage systems become affordable and Africa’s power grids are interlinked, natural gas will continue to play a role in Africa’s energy mix.
Gas power plants are cheaper, quicker to deploy and can perform a whole spectrum of power generation duties,” he said.
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