This article is sponsored by UDB
Access to financial resources is essential in the fight against climate change. Considering that Africa receives a disproportionately small share of the funding needed for its climate initiatives, experts emphasize the urgent need for more innovative and localized solutions to mobilize and allocate the necessary financial resources on the continent.
In his opening remarks, Ibrahima Cheikh-Diong, executive director of the Fund for Responding to Loss and Damage, stressed that the increase in extreme weather events, which significantly impact the most vulnerable communities, demands urgent action to empower African nations in tackling the climate crisis. He underscored the necessity of incorporating climate considerations into public policy and private sector planning, commending UDB for launching a climate finance facility. “In today’s landscape, every institution must stay relevant in the climate finance sphere,” he remarked.
Cheikh-Diong called for financing to be made available, accessible, and affordable for African nations, highlighting that bureaucratic procedures can impede some countries from fully utilizing climate funds. “Based on our experiences with climate finance, we are dedicated to ensuring that the processes are nimble, adaptable, and fair – enabling individuals to obtain the funding they require,” he stated.
He further pointed out the critical need to find a balance between climate initiatives and development, which could facilitate innovation in African countries, thereby improving access to social services and infrastructure while being mindful of climate considerations.
Green Finance
Dr. Francis Mwesigye, chief economist at UDB, revealed that the bank established its green finance unit back in 2019, which has now transformed into a fully operational department. “In 2022, the bank developed a green finance policy, which was complemented by a green finance and investment strategy, guidelines, monitoring indicators, and a green finance scorecard.” The bank’s methodology involves evaluating submitted projects for clarity and identifying opportunities for improvement. “For industrial projects, we seek energy-efficient technologies from alternative energy sources. In agriculture, we emphasize resilience and adaptation strategies,” he explained.
Mwesigye stated, “The sectors we support include climate-smart agriculture, low-carbon industry, climate-resilient infrastructure, clean energy, ecotourism, and sustainable waste management.” To date, the bank has approved projects amounting to UGX309 billion (around $85 million), with green manufacturing accounting for 82% of approvals in 2024. He also noted that approximately 56% of its climate funding is directed towards mitigation projects, while adaptation initiatives make up the remainder. Mwesigye indicated that the bank aims to enhance its capitalization and has called for support in mobilizing additional capital for green and climate-related initiatives.
Where Capital Will Go
During the panel discussion, Joseph Nganga, vice president for Africa at the Global Energy Alliance for People and Planet, remarked that capital generally gravitates toward the most favorable risk-return profiles. As a result, public and philanthropic investments often need to lay the groundwork for larger private sector funding.
Nganga asserted that in order to attract significant investments, countries should adopt regional strategies. “Not every nation needs to develop its own generation assets. Some may be better off focusing on distribution while allocating their limited resources elsewhere.” He contended that small-scale, localized projects might restrict the types of investments that can be made. He emphasized the need for African nations to foster a conducive policy environment to entice investors. “Investors must be assured that their capital in your country will not encounter political risks and that there is consistency in policies and regulations,” Nganga emphasized.
Marco Serena, chief sustainable impact officer at the Private Infrastructure Development Group, called for a shift in mindset to fundamentally integrate climate considerations into investment and credit evaluations. With the frequency of extreme weather events increasing, infrastructure projects, for example, must be selected and designed with resilience in mind. He shared an example from Rwanda: “We invested in the Kigali water project, which serves half a million people; by deciding to elevate the control room above the flood line, the facility remained functional during last year’s floods,” he noted. He also highlighted the importance of recognizing the potential in renewable energy, electric mobility, and battery storage to capitalize on the opportunities presented by climate challenges.
Juvenal Muhumuza, Commissioner for Development Assistance & Regional Cooperation at Uganda’s Ministry of Finance, Planning, and Economic Development, shared insights into the country’s efforts to incorporate climate objectives into policymaking. Uganda has implemented tax incentives for businesses involved in green technology and sustainable energy, is considering the issuance of green bonds, and is integrating climate issues into its national planning process to ensure that green elements are included.
Despite the notion of risk being a significant barrier to financing access, Lanre Shasore, senior adviser for energy transition planning (Africa) at Sustainable Energy for All, outlined strategies to mitigate these challenges. She mentioned that her organization has collaborated with the Association of Pension Funds in Nigeria to develop a local currency base to finance clean energy endeavors. “Some of Nigeria’s largest pension funds have committed 11 billion naira, which will be combined with an energy access initiative from the World Bank to create a $2 billion fund aimed at catalyzing additional investments,” she disclosed. The organization plans to replicate this model in other African countries, such as Kenya and Ghana.
Olympus Manthata, head of climate and environmental finance at the Development Bank of Southern Africa, stated that the bank committed several years ago to allocate 35% of its investments to climate-related projects, with 30% designated for adaptation and 70% for mitigation strategies. Since making this commitment, the DBSA has not only met but exceeded its targets as it continues to expand its climate investments. He stressed the importance of securing finance from the Green Climate Fund, the Global Environment Facility, and other organizations, in addition to leveraging limited resources to draw private sector investment. Manthata advocated for enhanced collaboration among development finance institutions to share experiences regarding facilities developed, thus streamlining the pathway to access funding.
Uganda’s Supportive Environment
In her concluding remarks, Patricia Ojangole, managing director of UDB, lauded the Ugandan government for creating a favorable environment that has allowed the bank to effectively pursue its initiatives. Building on this foundation, UDB has developed a robust internal policy framework to guide its interactions with the government, partners, funders, and other stakeholders. “This serves as our starting point, as stakeholders frequently inquire about our climate agenda when discussing funding and climate change issues. Therefore, we must showcase both intent and knowledge in our actions,” she stated.
UDB’s climate finance facility focuses on mobilizing capital while ensuring the capacity for efficient deployment. A vital part of this strategy involves demonstrating the readiness of a pipeline of viable projects and the capability to deploy funds efficiently and effectively. Ojangole explained that the bank’s approach encompasses the entire project lifecycle, from pipeline development to evaluation, deployment, and reporting. “This comprehensive strategy allows us to clearly convey our actions, showing that mobilization and deployment can occur simultaneously,” she concluded.
