Editor’s Note: Adjoa Adjei-Twum. She is the founder and CEO of the Africa-focused and UK-based consultancy Emerging business information and Innovation (EBII) Group for global investors interested in Africa and emerging markets.
The opinions expressed in this article are solely hers.
CNN
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The recently concluded COP27 was dubbed the “African COP” – with the continent at the center of the global effort to combat the causes and effects of climate change.
As negotiations in the Egyptian resort of Sharm el-Sheikh progressed into the weekend, there was a major breakthrough on one of the most tricky elements: creating a fund to help the most vulnerable developing countries hit 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 droughts in four decades in the Horn of Africa, and severe European heat waves and hurricanes in the US.
The loss and damage fund — to pay for the sudden impacts of climate change that cannot be avoided through mitigation and adaptation — has been a major obstacle in COP talks.
The wealthiest, most polluting countries were hesitant to agree to a deal, fearing it could force them into costly legal claims for climate catastrophes.
I welcome progress here, as African countries bear the brunt of climate change. The continent is responsible for about 3% of global greenhouse gas emissions UN Environment Programme and the International Energy Agency (IEA).
Climate change is estimated to cost the continent between $7 billion and $15 billion a year in lost economic output, or GDP, rising to $50 billion a year by 2030, according to the African Development Bank (AfDB).
But my joy is muted – the devil is in the details, as always. As an entrepreneur in the African diaspora whose work focuses heavily on the impact of climate change on the risk profile of African financial institutions and countries, I am concerned about the lack of details about how the fund would work, when it will be implemented and the time frame . . I’m afraid this could take years.
On a recent visit to the US, I discussed reparations with US Democratic Congressman Ilhan Omar. She said it was important for the US and other countries to make heavy investments, which could come in the form of reparations.
She spoke of the importance of consulting affected communities in Africa to prevent exploitation and the need for countries such as the US and China to end fossil fuel expansion and phase out existing oil, gas and coal in a way who is “fair and just. ”
Adaptation is Africa’s great challenge – the AFDB estimates that the continent will need between $1.3 and $1.6 trillion by 2030 to adapt to climate change.
The bank’s Africa Adaptation Acceleration Program, in partnership with the Global Adaptation Center (GCA), aims to mobilize $25 billion in funding for Africa, for projects such as weather forecasting apps for farmers and drought-resistant crops.
It is now time for African countries to impose a climate export tax on commodities, such as cocoa and rubber, to help pay for climate adaptation. But it still falls short of the money Africa needs.
Adaptation is all about building resilience and capacity, and I believe our governments, banks and businesses need to adapt as well.
I call on our governments, institutions and businesses to step up their 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 corporate tax, it is essential for the survival of companies. Only companies that focus on the changing world around us – from regulation to consumer and investor attitudes – will survive the climate crisis.
Companies that ignore this can expect fines, boycotts and limited access to financing. Banks will also suffer. The financial sector must therefore be better prepared and more agile.
This message will be reinforced when I meet with CEOs, bank executives and the Central Bank of Nigeria next month at the 13th Annual Bankers’ Committee Retreat, hosted by the Nigerian Bankers Committee, in Lagos. The aim is to support the country’s largest banks in navigating new international sustainability regulations.
Investment funds are increasingly required to conform to green taxonomies – a system that clarifies which investments are sustainable and which are not. In other words, banks will only support investments from institutions in G20 countries if they comply with national or supranational rules, such as the European Union’s Green Taxonomy.
This not only helps combat greenwashing, but also helps companies and investors make more informed green choices. In addition, G20 countries ask their banks to predict how risky their loans are due to climate change.
African countries need to implement robust systems to mobilize private capital and foreign direct investment in key sectors. Governments must ensure that they have a favorable climate for more green investments.
Regulators need to strengthen their capacity to develop and effectively enforce climate-related rules. Businesses, especially banks, need to strengthen climate risk management teams, regulatory compliance expertise and prepare bankable projects for international climate finance. This is the basis for a successful transition to a low-carbon economy.
Looking ahead, there are other actions we can take. The African Continental Free Trade Area (AfCFTA) – the world’s largest free trade zone and internal market of nearly 1.3 billion people – could protect Africa from the adverse effects of climate change, such as food insecurity, conflict and economic vulnerability.
It could lead to the development of regional and continental value chains, trade agreements between Africa, job creation, security and peace. A single market can lead to less energy-intensive economic growth while keeping emissions low, for example through the development of regional energy markets and production hubs.
But we need much better pan-African coordination, like the European Union, to accelerate the AfCFTA. I urge our governments to cooperate and take swift and concrete measures to ensure the full and effective implementation of the AfCFTA. There’s no time to lose.
This will not be popular with some African regimes as they will be forced to be more transparent and accountable about their public finances.
This year’s COP may have been marred by chaos, squabbles between rich and poor nations, and broken multi-billion dollar pledges by developed nations that fueled the climate crisis.
Many observers point out that the final agreement contained no commitments to phase out or reduce fossil fuel use.
But the deal to create a joint fund for the countries most affected by climate change is significant, and as UN Secretary-General António Guterres warned, it was no time to point the finger.
Nor is it time for the blame game. It is a wake-up call for African governments, banks, institutions and businesses to unite, step up and adapt to a new climate reality.
