How African exchanges can help accelerate climate action financing

Significant financing is needed by African governments and businesses to support climate change mitigation and adaptation which are crucial for advancing resilient economic development as well as enabling countries to meet commitments under the Paris Agreement.

The cost of climate change adaptation in Africa has been estimated in the range of $20-30 billion per annum over the next 10 to 20 years.

As countries on the continent explore alternative sources of financing for climate action, African Exchanges can accelerate financing for climate adaptation in Africa through various initiatives, but the special focus should be placed on;

Green bond markets

African Exchanges have the ability to work closely with respective regulators and develop the necessary regulatory frameworks to support the listing and trading of innovative financial instruments such as green bonds.

Green bond proceeds are earmarked exclusively for projects with positive climate, environmental and sustainability outcomes across a myriad of sectors, including energy, transportation, construction, agriculture and water.

These projects range from renewable energy infrastructure to upgrading energy efficiency and low-carbon transportation and buildings.

Green bonds can therefore help build deeper, more resilient and sustainable financing for the continent.

Proceeds raised through green bonds that list and trade on African Exchanges can be used to develop sustainable infrastructure and build resilience against the negative impacts of climate change.

According to the UN Economic Commission for Africa, a green recovery, based on green investments, can generate up to 420 percent better returns in gross value added and up to 250 percent better returns in job creation.

Carbon markets

Carbon markets are trading infrastructure systems in which carbon credits are sold and bought.

One tradable carbon credit equals one tonne of carbon dioxide or the equivalent amount of a different greenhouse gas reduced, sequestered or avoided.

Carbon markets provide yet another avenue for African markets to accelerate financing for climate mitigation.

If well harnessed, carbon markets can provide Africa Exchanges the opportunity to unlock billions of dollars for climate finance needs of African economies whilst creating employment opportunities and driving climate action.

Carbon markets will enable African countries to attract funding for projects such as renewable energy, reforestation, and carbon-storing agricultural practices.