Africa is reimagining climate finance
Africa is taking charge of its climate future, realizing its inability to depend on external aid and traditional financing for development needs. The continent is rallying investments through new models that integrate climate initiatives with development goals. This shift is not merely a rehashing of old approaches; rather, it represents a fundamental change in how climate action is designed and implemented across Africa.
When climate finance first emerged in the 1990s, it was shaped by principles of responsibility and assistance, where developed economies were expected to support developing countries through financial transfers. Initially, climate finance was largely focused on mitigating the impacts of climate change and was organized through project-based mechanisms that reflected donors’ priorities rather than recipients’ needs.
The Clean Development Mechanism, established under the Kyoto Protocol in 1997, embodied this approach. It allowed industrialized countries to invest in projects that reduce emissions in developing economies instead of seeking more costly emissions reductions domestically, regardless of whether the projects aligned with development pathways or adaptation needs in those countries.
As the climate system evolved, shortcomings of this early approach began to be recognized, and the scope of climate finance expanded to include adaptation efforts and longer-term financing commitments. The introduction of Nationally Determined Contributions under the Paris Agreement in 2015 was a particularly promising step, explicitly seeking to align financing with countries’ development strategies.
However, in practice, the climate finance model in Africa has largely remained unchanged. Climate actions have remained tied to soft power, funded by official development assistance, and implemented mostly on a project-by-project basis. Mitigation efforts have continued to be prioritized over adaptation measures, despite Africa’s heightened vulnerability to the consequences of climate change.
More fundamentally, external forces—governments, NGOs, and development agencies—have continued to make decisions based on their own perceptions of climate risks, imposing solutions that do not reflect Africa’s priorities or perspectives. While individual projects may sometimes achieve local benefits, they have consistently failed to address infrastructure gaps, let alone enhance state capabilities or transform economic markets and systems.
These vulnerabilities were exacerbated during the COVID-19 crisis, when flows of climate finance to Africa halted and were not resolved in the aftermath of the pandemic, even as flows began to recover. According to the Climate Policy Initiative, climate finance directed to Africa increased by 48% from the 2019-2020 to the 2021-2022 period, rising from $29.5 billion to $43.7 billion, largely driven by renewed multilateral engagement and a partial recovery in private investment.
This recovery mirrored a broader global rebound: global climate finance surpassed $2 trillion for the first time in 2024, marking an almost 8% annual growth. However, this growth was slower than the 15% increase recorded between 2022 and 2023, reflecting unfavorable factors including rising interest rates, falling natural gas prices, and infrastructure network constraints. Africa’s share of the total pie did not keep pace with overall growth.
A shift toward investment aimed at mitigation also occurred. During the periods of 2019-2020 and 2021-2022, the share of total funding allocated to adaptation efforts in Africa decreased from 39% to 32%, largely due to an expansion of dual-benefit financing that combined mitigation and adaptation goals. While this percentage might seem significantly inadequate compared to regions like Latin America, South Asia, Southeast Asia, and the Middle East (which range from 1% to 14%), the total remains insufficient to protect African nations from rapidly escalating climate impacts. The largest increases in climate finance in 2024 occurred in the transport sector, particularly electric vehicles, shifting the focus towards mitigation efforts, with China, Brazil, Vietnam, and Indonesia leading the way.
In the face of stagnant adaptation financing and escalating climate impacts, Africans are taking matters into their own hands, innovating new climate financing approaches that better reflect their needs. A notable example here is the Just Energy Transition Partnership in South Africa, a leading investment platform seeking to align climate-linked financing—especially to support decarbonization of the energy system—with broader economic development and growth strategies. Since this concept was introduced at the 2021 United Nations Climate Change Conference in Glasgow (COP26), Indonesia, Vietnam, and Senegal have followed South Africa’s lead in signing Just Energy Transition Partnerships with advanced economies in the international partner group.
As highlighted by the African Expert Panel in a recent report, investment platforms like the Just Energy Transition Partnership provide a structured mechanism for identifying fundable projects and reducing capital costs. This can ease debt-related pressures while mobilizing larger and more diverse sources of climate and development finance that would otherwise remain out of reach.
Undoubtedly, significant challenges still lie ahead. When first-order (civil and political) and second-order (social, cultural, and economic) rights are at stake, no single program or platform can achieve inclusivity—even those designed, like the Just Energy Transition Partnership, to promote fairness and equality. Instead, a more inclusive economy requires broader political and institutional reforms, supported by political, financial, and economic elites who adopt an enlightened and long-term perspective.
However, Just Energy Transition Partnerships could indeed bolster this effort. By integrating social justice considerations into investment frameworks—including project selection, evaluation, and management—they can support systemic incremental change. Thus, Just Energy Transition Partnerships represent a truly transformative model for climate finance that aligns with the needs and interests of countries.
Although climate investment models adopted by African nations are still in their early stages of development, they are already opening new avenues for participation firmly rooted in the real economy. As they mature, they promise to mobilize greater amounts of new and concessional capital—precisely what Africa needs to maintain investment and productive capacity, support economic resilience amid climate shocks and macroeconomic crises, and move forward towards achieving long-term development goals.
