The African Development Bank (AfDB) has urged rich nations to channel their International Monetary Fund (IMF) special drawing rights through the continental lender to help fund projects needed to adapt to climate change.
The Abidjan-based bank last year allocated 63 per cent of its climate finance to adaptation, the most of any multilateral development finance institution, Chief Financial Officer Hassatou Diop N’Sele said in written a response to questions.
With Africa being the most undeveloped continent and its nations among the hardest hit by global warming, more finance is needed to make it resilient against the cyclones, floods and droughts that are hitting with increasing frequency, damaging infrastructure and impairing food systems, N’Sele said.
Her call echoes an ambitious request by the African Union last week for at least $100 billion of the $650 billion of SDRS issued in 2021 to be redirected by rich nations to the continent. The African Union also proposed that the IMF consider a similar-sized issue of the instruments to tackle the climate crisis.
“Additional efforts in supporting the green transition are premised on enhancing our lending capacity,” she said.
“Re-channeling $10 billion of SDRs would increase multilateral development banks’ lending capacity by $30 billion to $40 billion, at zero cost to those providing the SDRs.”
Of the $650 billion of SDRs issued last year, Africa got only $33 billion, compared with $113 billion for the US alone.
The African Development Bank, the continent’s biggest development finance institution, is being pushed by the African Union as the institution through which it would like the world’s developed nations that are responsible for the bulk of the emissions causing climate change to channel their financial assistance.
The bank has put in place a number of initiatives to bolster climate resilience on the continent, including the strengthening of infrastructure and food systems against adverse weather, N’Sele said.
The African Development Fund, the concessional funding arm of the AfDB, created the Climate Action Window, which raised $429 million from the UK, Germany, Netherlands and Switzerland and ultimately aims to mobilize more than $4 billion.
The AfDB has also set up the Alliance for Green Infrastructure in Africa, which seeks to raise $10 billion in public and private capital, including $500 million for early stage project preparation, in a bid to generate a pipeline of projects. In addition, the lender plans to issue sustainable hybrid capital, a mix of debt and equity funding, in a first for a multilateral development bank, she said.
The Rotterdam-based Global Center on Adaptation released a report at the Africa Climate Summit in Nairobi, Kenya, last week that estimated the continent needs $100 billion in adaptation finance annually.
“The financing gap is staggering and resources are barely trickling in,” N’Sele said. “Climate finance flows to Africa have been far too low and fall far short of what the continent needs.”