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AFC targets $2bn over 3 years to combat climate risk

Africa Finance Corporation (AFC) is expanding its horizons beyond infrastructure development to environmental protection, as it is looking to raise two billion dollars over the next three years, starting with $500 million in the next twelve months, to promote a healthy environment and address Africa’s vulnerability to climate risk.

Environmental reports reveal that although Africa is the contributor to climate change, the continent is the most exposed because of housing, transport, industrial, and energy structures ill-equipped to survive storms, floods, droughts, wildfires, and other hazards from extreme weather patterns.

Data from the UN Office for Disaster Risk Reduction, states that without urgent intervention, the cost of structural damage caused by natural disasters will increase from $250-300 billion now to $415 billion a year by 2030.

Furthermore, damage to rail tracks, roads, bridges, seaports, and power grids will add to an infrastructure deficit currently at $130–170 billion per year.

In view of this, the corporation has created an independent asset management arm known as the “AFC Capital Partners” which forms a core part of the Corporation’s five-year strategy, as set out in 2018 to expand its suite of pragmatic and innovative funding solutions by mobilising capital to drive the development of infrastructure that is resilient to the impact of climate change.

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The AFC Capital Partners has commenced operations with the Infrastructure Climate Resilient Fund (ICRF) under which the funds will be managed. The newly created fund incorporated in Mauritius will employ traditional project finance and private equity structures, supported by a blend of concessional finance, grants, and soft equity.

According to AFC’s website, the ICRF will act as a direct investor and a co-investment fund to enhance the quality of African ports, roads, bridges, rail, telecommunications, clean energy, and logistics in the face of rising temperatures and sea levels due to climate change.

Samaila Zubairu, President and CEO of Africa Finance Corporation said that the AFC Capital Partners will enhance the corporation’s firepower in driving integrated infrastructure solutions that are core to Africa’s development in the post-Covid era.

“The Infrastructure Climate Resilient Fund will enable us to support climate adaptation as well as projects that reduce carbon emissions and catalyse our continent to build back better, with more climate-resilient and sustainable infrastructure,” he said.

Zubairu also welcomed Ayaan Zeinab Adams, who was appointed as the Chief Executive Officer (CEO), AFC Capital Partners, noting that she possesses a wealth of experience which will enable investors to access meaningful exposure in Africa’s infrastructure market.

As the former leader of the private sector arm of the Green Climate Fund under the UN Framework Convention on Climate Change, as well as a former CIO and Senior Manager of the World Bank Group’s IFC, Adams brings 27 years of experience in climate response and investment to her new role.

Adams said the mandate of AFC Capital Partners is aligned to AFC’s in offering attractive investment opportunities to the global development finance and commercial investor community seeking long-term returns through structures that protect African-built infrastructure from climate risks.

“Significant financing is urgently required to build physical infrastructure that will survive the forces of climate change, the good news is that much of this investment is compatible with competitive returns for investors through leveraging the expertise, relationships, and blended finance models that have been tried and assessed for many years by Africa Finance Corporation,” she said.

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