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It’s now or never for green financing
Author: Primrose Kobusingye is the marketing manager of FINCA. PHOTO/COURTESY
What you need to know:
- It is not the sole responsibility of the State to influence green growth.
The banking sector globally can arguably be called one of the most agile sectors. It quickly responds to emerging issues and over the last 12 years I have witnessed a few shifts in financing priorities. From women in entrepreneurship to youth, trade and export financing and carbon scoring. Today, the focus is on green financing.
This was the highlight at the 2022 East Africa Banking and Finance Forum. Green financing refers to the provision of services and resources towards creation of ecologically sustainable initiatives. The private sector plays a pivotal role in both the implementation and financing of climate change initiates. It is no longer the sole responsibility of the State to influence green growth.
Climate change is a threat to the global economy and requires all hands on deck to revert it. It not only affects the large polluting enterprises, but even small medium enterprises (SMEs) which are credited to be the back bone of most Sub-Saharan industries. Banks particularly cannot shy away from pushing the financing of change mitigation and adaptation initiatives.
The crucial purpose of green financing in Africa is to promote financial support for programmes and projects that advance environmentally sustainable growth, lower greenhouse gas emissions, and protect natural resources.
Currently, Africa is grappling with environmental deterioration and climate change, include rising temperatures, biodiversity loss, and increased desertification. By enabling African nations to finance environmentally responsible projects and programmes, green financing offers a solution to these problems.
Examples of green financing initiatives in Africa include the African Development Bank’s climate investment funds, which provide financing to support renewable energy and energy efficiency projects, and the Green Climate Fund, which supports African countries in adapting to and mitigating the effects of climate change.
Moreover, there is a growing trend among African investors to incorporate environmentally sustainable investment practices into their portfolios. This trend is driven by increasing awareness of the risks associated with environmental degradation and the potential for financial returns from green investments.
There are challenges on this journey. According to the green financing platform, the financing gap to achieve the SDGs (which includes green financing) is estimated to be $2.5 trillion per year in developing countries alone (UNCTAD, 2014). The Covid-19 pandemic has caused unprecedented events as more and more countries have been facing debt crises and fiscal deficiency. Due to the pandemic, the SDG financing gap has magnified by 70 percent to $4.2 trillion (OECD 2021), calling for collective action to address both the short-term collapse in resources of developing countries as well as long-term strategies.
As one of the leading advocates for green financing in Uganda, aBi has invested Shs7.5 billion as a pilot green challenge fund with a vision to scale it up to Shs20 billion by 2023. Green challenge fund focuses on supporting: SMEs and farmers to increase their resilience to climate change and climate variability; climate mitigation actions to reduce or limit greenhouse gas emissions; and a stronger local environment, including soils, ecosystems and biodiversity. This is a super example which all entities can emulate sustainably. I wish to applaud the other companies which have also taken centre stage in the implementation of green financing initiatives.
Green financing plays a crucial role in promoting environmentally sustainable economic development in Africa. It provides much-needed financial resources and support to projects and initiatives that address the challenges of environmental degradation and climate change and encourages investment in environmentally sustainable practices. Nonetheless, combating climate change isn’t a one person job. It is a collective job that requires the participation of all companies and individual. It starts with you.
Ms Primrose Kobusingye is the marketing manager of FINCA
