Editor’s note: Adjoa Adjei-Twum. She is the founder and CEO of a UK-based advisory firm focused on Africa. Emerging business intelligence and Innovation (EBII) Group for global investors interested in Africa and emerging markets.
The opinions expressed in this article are his alone.
The recently concluded COP27 was dubbed the “African COP”. With the continent center stage In global efforts to combat the causes and effects of climate change.
As talks in the Egyptian resort of Sharm el-Sheikh spread over the weekend, There was significant progress on one of the most controversial elements – the creation of a fund to help the most vulnerable developing countries affected by climate disasters.
The backdrop to COP27 was a series of catastrophic global weather events, including record-breaking floods in Pakistan and Nigeria, the worst drought in four decades in the Horn of Africa, and severe European heat waves and hurricanes in the United States.
The damage and loss fund – to pay for the sudden impacts of climate change that are not avoided by mitigation and adaptation – has been a major stumbling block in the COP negotiations.
The richest, most polluting nations are reluctant to agree to a deal, worried it could put them on the hook for costly legal claims for climate disasters.
I welcome progress here, because African countries are vulnerable to climate change. According to the , the continent contributes about 3 percent of global greenhouse gas emissions. United Nations Environment Programme And International Energy Agency (IEA).
It is estimated that climate change will cost the continent between $7 billion and $15 billion a year in economic output, or GDP, rising to $50 billion a year by 2030. African Development Bank (AfDB).
But my joy is muted – the devil is, as always, in the detail. As an African diaspora entrepreneur whose work focuses significantly on the impact of climate change on African financial institutions and the risk profile of nations, I am concerned about the lack of detail on how the Fund will work, when it will be implemented, and the timescale. I’m afraid it could take years.
During a recent visit to the US, I discussed reparations with US Democrat Congresswoman Rep. Ilhan Omar. He said that it is necessary for the US and other countries to make a huge investment, which could come in the form of compensation.
He spoke about the importance of consulting with affected communities in Africa to avoid exploitation and the need for countries like the US and China to end fossil fuel expansion and phase out existing oil, gas and coal. Talks that are “fair and equitable.”
Adaptation is Africa’s major challenge – AFDB estimates. That the continent needs $1.3 to $1.6 trillion by 2030 to adapt to climate change.
The Bank’s Africa Adaptation Acceleration Program, in partnership with Global Center on Adaptation (GCA), aims to mobilize $25bn in finance for Africa for projects such as weather forecasting apps for farmers and drought-tolerant crops.
Now is the time for African countries to impose climate export taxes on commodities like cocoa and rubber to help pay for climate adaptation. But this is still less than what Africa needs.
Adaptation is all about building resilience and capacity, and I believe our governments, banks and businesses must adapt too.
I am calling on our governments, institutions and companies to promote efforts to attract green finance and make Africa more resilient by improving governance, tax systems, anti-corruption efforts, and legal compliance.
Sustainability is not a business tax, it is essential to business survival. Only companies that focus on the changing world around us – from regulation to consumer and investor attitudes – will survive the climate crisis.
Businesses that ignore this can expect fines, boycotts and limited access to funding. Banks will also suffer. So the financial sector needs to be better prepared and more agile.
This message will be reinforced when I meet with CEOs, banking executives, and the Central Bank of Nigeria at the 13th annual Bankers Committee Retreat hosted by the Nigerian Bankers Committee in Lagos next month. It aims to help the country’s biggest banks as they navigate new international consolidation rules.
Increasingly, investment funds must conform to a green rating – a system that highlights which investments are sustainable and which are not. In other words, banks will only support investments by institutions in G20 countries if they comply with national or foreign laws, such as the EU’s Green Taxonomy.
This will not only help combat greenwashing, but also help companies and investors make more informed green choices. Additionally, G20 countries are asking their banks to predict how vulnerable their loans are to climate change.
African countries should implement strong systems to mobilize private capital and foreign direct investment in key sectors. Governments must ensure that they have an enabling environment for increasing green investment.
Regulators should strengthen their capacity to develop and effectively enforce climate-related laws. Companies, especially banks, should strengthen environmental risk management teams, regulatory compliance expertise, and the preparation of bankable projects for international climate finance. This is the basis for a successful transition to a low carbon economy.
Looking ahead, there are other steps we can take. The African Continental Free Trade Area (AfCFTA) – the world’s largest free trade area and a single market for nearly 1.3bn people – can protect Africa from the negative impacts of climate change, such as food insecurity, conflict and economic vulnerability.
It can lead to the development of regional and continental value chains, inter-African trade deals, job creation, security and peace. A single market can drive low-energy economic growth while keeping emissions low, for example by developing regional energy markets and manufacturing hubs.
But we need much better pan-African coordination like the EU to accelerate the AfCFTA. I urge our governments to work together and take immediate and concrete steps to ensure the full and effective implementation of the AfCFTA. There is no time to waste.
This will not be popular with some African governments as they will be forced to be more transparent and accountable with their public finances.
This year’s COP may have been marred by chaos, rows between rich and poor countries, and billion-dollar pledges by developed countries that created the climate crisis.
Many observers noted that the final agreement did not include commitments to reduce or reduce fossil fuel use.
But an agreement to create a pooled fund for countries most affected by climate change is important, and as UN Secretary-General Antonio Guterres warned, this is not the time to point fingers.
This is also not the time to blame. This is a wake-up call for African governments, banks, institutions, and companies to unite, step up, and embrace a new climate reality.