Amal-Lee Amin is the first climate change director of CDC’s Group. She is in charge of catalysing impact investments for Africa and South Asia’s zero-carbon &climate-resilient development. In this interview with JOSEPHINE OKOJIE, she spoke about climate-smart investing and CDC’s strategies in tackling issues of climate change.
Can you tell us about CDC Group’s programme in Africa and the work it has done in the last 70 years?
CDC is the world’s first impact investor, with over 70 years of experience of successfully supporting the sustainable, long-term growth of businesses in Africa. Since being founded, we have grown to become the largest private equity investor on the continent, where we are currently invested in over 700 businesses. Our main priorities are fighting climate change, empowering women and creating jobs and economic opportunities for millions of people. We can invest across all sectors, but we focus on those that help further development such as healthcare, infrastructure, agriculture, manufacturing, and financial services.
We are proud of the transformative impact we’ve achieved over the years. Our investment in Celtel in the 1990s, for instance, helped catalyse mobile phone use across Africa. We also played a key role in creating a $20 billion pool of private equity to grow the continent’s most promising businesses and we were instrumental in boosting the private equity industry in Nigeria in the mid-1990s when we helped African Capital Alliance establish its first fund, focused on SMEs. Since then, the firm has raised an additional three private equity funds and a real estate fund for a total of more than $1.2 billion.
You recently joined CDC after serving as the chief of the climate change division at the Inter-American Development Bank (IADA). How will this experience shape your approach in leading CDC’s new climate strategy in Africa and Nigeria in particular?
I am delighted to have joined CDC at such an important time ahead of the launch of our new climate change strategy later this year. My time at the Bank taught me three important lessons that I think are highly relevant to the way CDC approaches climate-smart investing. Firstly, stronger collaboration amongst development finance institutions and with the private sector needs to be promoted to support countries transition to net-zero emissions and climate-resilient economies. Country platforms that draw in differing areas of comparative advantage are needed to: enhance upstream policy and regulatory incentives; accelerate project pipelines and investment opportunities, and finance for new business models and financial instruments to transform markets and scale up investments at a greater pace. Secondly, climate change needs to be integrated across all social and economic sectors, particularly to ensure the transition is just one for workers and communities. However, there is a particular urgency to ensure decisions we make around infrastructure – as long-lived assets – are consistent with countries’ objectives under the Paris Agreement on climate change, otherwise they risk becoming stranded assets. Thirdly, as climate impacts are already being felt, it is urgent to ensure all investments made now are resilient to climate impacts, and also scale up the investments that are designed to build resilience to future climate-related threats.
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To what extent would you say CDC has contributed towards solving climate change issues?
Combatting climate change is a vital priority for CDC because it affects so much of what we strive to achieve, whether in terms of poverty alleviation, economic growth or building a sustainable future. It’s the greatest threat we face in the 21st century. CDC has been committed to climate action for many years and we have been implementing a deliberate climate policy over the last five years. We work closely with our investee companies to improve their resource efficiency, help them transition to a lower-carbon future and become more resilient to climate change. For instance, we’ve been working closely with Jacoma Estates in Malawi to make its farms more climate-resilient through an irrigation scheme for farms and surrounding smallholder farmers. We have also been ramping up our commitments to clean power generation, which reached $500 million between 2017 and 2019 – equivalent to a quarter of our annual commitments. We need to build on these experiences to ensure climate change is considered in every investment that we make.
What is climate-smart investing?
Climate-smart investing relates to investments which result in mitigation of or adaptation to climate change. For CDC, climate-smart investing represents a tremendous opportunity to invest in a way that contributes towards the transition to net-zero emissions and climate-resilient economies, while also generating returns that we reinvest for sustainable development impact. Last year, we invested the equivalent of $12.5 million in PEG, a leading distributor of off-grid solar home systems in West Africa. The investment will provide a clean, reliable source of energy to an additional 200,000 predominantly rural, low-income households over the next three years. We have also made a $17.5 million commitment to Mettle Solar Investments, a pan-African commercial and industrial solar company. The investment will enable the company to expand its provision of cleaner and cheaper sources of electricity for business into Nigeria and several other African countries.
How does CDC screen investment relating to climate change and how can the public sector mobilise the private sector in the fight against climate change?
CDC takes a future-facing and holistic approach to climate change. We look closely at the climate risks and opportunities of each potential investment to ensure they are aligned with our climate change strategy. We look at climate change through the lens of opportunity and are actively exploring investments in new and emerging business models or technologies designed to accelerate the transition to a more sustainable future, while also creating jobs and stimulating economic growth.
We will be publishing a new climate change strategy later this year, ahead of COP26 in Glasgow, which will provide even greater clarity on how we are supporting the fight against climate change.
Collaboration between the public and private sectors is vital. Climate change complex, a multifaceted challenge that affects us all and requires concerted and coordinated action from all stakeholders. Since 2016, we have been working with LafargeHolcim – one of the world’s leading building materials manufacturers – through 14Trees, a joint-venture that aims to accelerate the production and commercialisation of Durabrics. These are environmentally friendly, affordable alternatives to traditional clay burnt bricks, which are made using wood-fired kilns and are associated with widespread deforestation. We are actively looking to partner with more businesses and other private sector players to scale our response to climate change.
Partnership with the business community is very critical to achieve the Sustainable Development Goals (SDGs). How do you see the role of top executives in advancing the climate change cause?
Business is a vital stakeholder for achieving the SDGs and successfully combatting climate change and its impacts. Top executives around the world wield considerable power in the climate sphere because of the size of their companies, their businesses’ impact on climate change and the potential solutions they can create and scale. Many CEOs are taking this responsibility seriously and working hard, both through their initiatives and with groups such as the We Mean Business Coalition, which gathers over 1,200 companies with a market capitalisation of almost $25 trillion. Over the last few years, CEOs of financial services titans have also played an increasingly important role by committing to financing the low-carbon, climate-resilient economy required to limit global warming to well below 2 degrees Celsius. Others have gone a step further and said that they will avoid investments in companies that present a high sustainability-related risk. These are encouraging developments and proof that there is significant momentum building within the business community.
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When it comes to getting major companies to act on climate change, CEOs increasingly list pressure from their shareholders, their customers, and their employees. How can they handle such pressures?
It’s becoming increasingly clear that the only way to respond to these pressures is to act. Companies that fail to address concerns around climate change from their key stakeholders will face shareholder revolts, customer boycotts or dissatisfied workforces. Climate change tends to be viewed as a risk to businesses. I disagree. The Global Commission on the Economy and Climate concluded in 2018 that ambitious climate action does not need to cost much more than business-as-usual growth. Bold action on climate change could yield economic gains of $26 trillion and generate over 65 million new low-carbon jobs around the world by 2030. Businesses that get a head start today will reap the rewards tomorrow.
There have been a lot of discussions about how industries across all sectors should be working towards carbon neutrality – and with buildings responsible for nearly 40% of global emissions, how can the construction industry mitigate it?
The bulk of these emissions come from operations emissions, primarily the energy used to heat, cool and light buildings. The remainder – about 11percent of total emissions – comes from embodied carbon emissions associated with materials and construction processes throughout a building’s lifecycle. Operational emissions can be reduced by introducing technologies with higher performances, implementing intelligence sensing and control strategies that improve the efficiency of building operations and lower the demand for energy. In terms of embodied emissions, the construction industry is moving towards designs and materials that reduce the carbon footprint of buildings and infrastructure. For instance, the use of Durabrics – the environmentally friendly bricks produced through our joint-venture with LafargeHolcim – saves up to 14 trees per built house relative to more traditional materials.
The Bank of England Governor Mark Carney, was quoted as saying that companies and industries that are not moving towards zero-carbon emissions will be punished by investors and go bankrupt. He said the longer action to reverse emissions was delayed, the more the risk of collapse would grow. He also said the transition to net-zero carbon emissions would change the value of every asset, raising the risk of shocks to the financial system. Do you agree with him?
I agree that the transition to net-zero carbon emissions will change the value of every asset. While some businesses that are not deemed to be aligned with a low-carbon future loss in value, others that are future-facing and part of the solution will become more prized by investors. The risk is that we delay this transition until a point where it happens abruptly and results in widespread financial shocks. We need to act decisively now to ensure a smooth, orderly transition can take place. This requires the commitment of all actors in the system – including policymakers, regulators and financiers. Most importantly, the rewards more than outweigh the effort: climate actions and the transition to a greener economy will be the central drivers of global economic growth and create millions of new green jobs around the world.
Africa accounts for less than 4% of global carbon emissions and the continent is the most vulnerable in terms of the impact of climate change. As climate change director, what are some examples of impact investments CDC intends on making on the continent to contribute to African countries’ adaptation and mitigation?
Africa is the continent that is most vulnerable to climate risks, both in terms of investing in assets that may become stranded because either they are misaligned to countries’ pathways to net-zero emissions, or because of the physical impacts of climate change threaten their viability. We are looking at a full spectrum of investments on the continent, ranging from mini, off-grid renewable power systems to large-scale wind and solar projects, through to agribusinesses where we can add value by improving resource efficiency and implementing resilience measures to protect against heat stress, more prolonged periods of drought and/or floods.
