Climate change and global warming affect all countries across the globe, albeit not exactly at the same rate. The countries from developing regions are reportedly hit the hardest, considering the fact that these countries are already experiencing unstable economic conditions and a huge lack of economic infrastructure.
Several African countries, including South Africa, have been reporting drought disasters and rainfall fluctuations, which have significantly impacted the economy, infrastructure project development and the lives of many citizens. While the effects of climate change have been felt for many years, with research and investments funnelled into the development support to relevant solutions, the problems persist.
This prompted an innovative move to establish a climate-related investment facility, which is solely designed to boost climate investments into climate projects. The Climate Finance Facility is a result of a partnership between the Development Bank of Southern Africa (DBSA) and the Green Climate Fund (GCF).
DBSA experience in climate change solutions
DBSA has extensive experience in dealing with climate change through sourcing funds to implement sustainable and environmentally-friendly infrastructure solutions. The Green Fund has, since inception, been supporting green initiatives that contribute towards the transition of South Africa to a low carbon economy that is resource-efficient and climate-resilient. The fund continues to deliver high impact economic, environmental and social benefits.
Meanwhile, the Green Climate Fund is a global fund set up as a funding mechanism of the United Nations Framework Convention on Climate Change (UNFCC) to support developing countries in responding to climate change.
The purpose of the climate finance facility
This support has made the partnership between DBSA and the GCF a suitable force to run the Climate Finance Facility Debt Unit, in an effort to address market constraints in the private sector. It will fast track the processes of acquiring investments for climate-related projects in Southern Africa. The development of the facility was supported by Convergence Blended Finance and the Climate Works Foundation.
The CFF is designed to enable private-sector financial institutions to scale up climate finance by sourcing funds for capital. The key focus of the facility will be on climate-resilient infrastructure projects and businesses which mitigate or adapt to climate change. The facility will concentrate on two main implementation mechanisms: credit enhancements and tenor extension to projects and businesses which are commercially viable but not yet bankable in the private sector.
DBSA’s Chief Executive, Patric Dlamini, explains that climate change is a severe and growing threat that affects Africa’s economy, natural resources, livelihoods and social stability.
“The signing of this agreement is a significant milestone that represents our concerted effort to address climate change and contribute to the broader low-carbon and resilient development trajectory in Southern Africa.” Patric continues, “The CFF will enable the DBSA to increase our financial support to climate-friendly projects in the region and crowd in private capital investors.”
At present, the facility only caters to countries in Southern Africa which use the Rand currency, namely; Namibia, Lesotho and Swaziland. The CFF focuses on specific climate investment opportunities based on the country’s needs, and sectoral priorities identified in the Intended Nationally Determined Contributions (INDCs) for each CFF targeted country.
The facility will also serve as support to the South African Government in the quest to achieve the mandate proposed by the Intended Nationally Determined Contributions issued from the Paris Agreement. Put simply; the Paris Agreement calls on countries to reduce carbon emissions in stages, to collectively meet the global target of limiting the increase in the global average temperature to below two percent.
The future of climate change-related solutions
The Climate Fund Facility is the first-of-its-kind application based on the Green Bank model, which was adapted for emerging market conditions. Its role is to offer globally significant proof-of-concept value and financial support to middle and lower-income nations that seek to address market barriers. The facility will also help countries that seek to quickly scale up the high levels of private investment required by Paris climate commitments. With the existence of this facility, the future of climate change-related solutions look more possible and achievable than it did a few years ago.