Revolutionising urban climate solutions through financial innovation
Published: 5 Oct 2019
Two major publications on climate finance for African cities, developed under the Covenant of Mayors in Sub-Saharan Africa initiative, will be officially launched at the Climate Chance Summit, which will take place from the 16th to the 18th of October 2019 in Accra, Ghana. This conference will bring together local governments from all over the continent as well as development banks and financiers. It promises to be a hive of activity and the occasion to collate the experience of CoM SSA cities with the expectations of funders and financiers.
Addressing the finance gap
Raising finance, and especially climate finance, in the African context, has proven to be one of the biggest barriers to sustainable development for subnational governments. This is for reasons that include poor creditworthiness, unstable revenue collection systems, limited technical and financial expertise and prohibitively onerous application processes. Local governments in Sub-Saharan Africa face similar challenges when it comes to the development and implementation of their Sustainable Energy Access and Climate Action Plans (SEACAPs). In response to this, the CoM SSA initiative, has been providing support to CoM SSA signatory cities, to identify and seize opportunities to finance their SEACAPs and associated activities, and identifying a series of case studies to showcase some best practices, with the support of ICLEI Africa.
In response to this, the CoM SSA initiative, through the work of one of the implementing partners ICLEI Africa, has been providing support to CoM SSA signatory cities, to identify and seize opportunities to finance their SEACAPs and associated activities. The two publications released this October capture the experience and the work done with CoM SSA cities so far.
Two publications presenting concrete solutions to cities
These two inaugural publications are the first of many resources to be developed under CoM SSA for financing climate and energy action at the local level in Sub-Saharan Africa. Their objective is to provide an overview of the finance instruments – including grants, loans, public-private partnerships, innovative finance mechanisms, etc- available to cities in Sub-Saharan Africa for the development of their sustainable energy access climate action plans (SEACAPs) and the implementation of their climate-related projects.
The two products, which are complementary, highlight that creative, inclusive and flexible finance tools and mechanisms are developing in Sub-Saharan Africa which not only address climate challenges but also grow local economies.
The finance mapping publication, titled “The City Climate Finance Landscape in Sub-Saharan Africa”, provides some recommendations to cities and local governments to guide them towards institutions which could finance their SEACAPs. The second publication titled “Financing Climate and Energy Action in African Cities” gives 10 concrete examples of cities in Sub-Saharan Africa which successfully managed to tap into different sources of finance to develop their SEACAP or implement climate action at the local level.
Some key lessons: cooperation, innovative models and new technologies as enablers for accessing local climate finance
These two publications lead to similar conclusions. They both highlight the value of effective cooperation and targeted partnership across all different spheres of public, private and civil society, to enhance local climate action. It has been proven that cooperation between local governments in the planning process could reduce the cost of SEACAP development as well as the amount of time needed to complete the process. In terms of implementation, partnerships and other models of cooperation such as PPPs, co-financing, risk pools and cooperatives, are proving valuable vehicles for unlocking finance at the local level.
Both publications encourage cities to diversify their sources of funding as well as explore new, innovative and untapped sources of financing which have proven a major success factor for new models of urban climate and infrastructure development in Africa. These innovative models include the Green Bond, which earmarks proceeds for environmental projects and repays investors through municipal or other revenue. Successfully issued by the cities of Johannesburg and Cape Town, South African cities have now paved the way for other African cities to follow suit. Another example of innovative financial governance is Makueni County local climate fund in Kenya. This dedicated and devolved fund operates at the subnational level, without the onerous bureaucracy of large sources of financing, yet with sufficient funds to effectively address local needs.
Finally, technology is proving a major enabler and driver of exponential leaps in access to finance for climate-related activities. Some innovations include the use of crowdfunding for local climate action. Yet to be developed on the continent, the advantages of technological innovations are undeniable. They make it easier and cheaper to manage resources, gather data and attract and facilitate investment at the local level. They also offer a means of accelerating social financial inclusion, capacity building, improved access to resources and ultimately community empowerment.
There is no doubt that African cities are poised for immense growth in the next decade, and indeed, those able to effectively leverage that growth will experience significant social, economic and environmental benefits. Efficient local action planning, supported with well-informed climate finance strategies form part of the recipe for success.
Download the PDF version here