Authored by: David Mueller, Regional SDG Impact Specialist, UNDP and Daisy Mukarakate, Regional Climate Policy Advisory, UNDP

Climate change is the defining challenge of our time, and Africa stands at its forefront. Despite contributing minimally to global greenhouse gas emissions, the continent often bears the brunt of climate impacts — dragging down economies, lives, and communities. African nations have responded with robust Nationally Determined Contributions (NDCs), outlining their plans to reduce emissions and adapt to climate change. However, a significant hurdle remains: financing these ambitious goals.

The scale of investment required is staggering. To achieve their NDCs, African countries need an estimated US$2.8 trillion between 2020 and 2030. African Governments have committed US$26.4 billion of domestic public resources annually, about 10% of the total cost, some of which they may not actually be able to provide due to debt levels and other development priorities from concurrent crises. 

To date, private finance for African NDCs remains largely untapped. As of 2022, the private sector contributed only 14% (USD 4.2 billion) of total climate finance on the continent, much lower than in other regions. Within that financing gap, however, lie immense and valuable opportunities, particularly for the private sector.

New market intelligence from UNDP's SDG Investor Maps reveals a landscape full of potential. The upcoming UNDP Africa Investment Insights Report, developed by the Africa Sustainable Finance Hub in partnership with Climate Promise, highlights 207 investment opportunities with significant financial and SDG impact potential in 11 sectors, 24 sub-sectors, and 42 industries from across 15 African countries. Of these, 130, more than half, are climate-related investments. These opportunities, spanning food and beverage, infrastructure, renewable energy, and other sectors, offer attractive financial return expectations, while promising substantial environmental and social benefits.

The numbers are compelling. Most of these opportunities have market sizes between US$100 million and US$1 billion, with potential returns of 15-20 percent for both Internal Rate of Return and Return on Investment. Importantly, many of these opportunities are classified as "contribute to solutions," meaning they generate positive outcomes for stakeholders who would otherwise be underserved.

Overall, cities offer the greatest potential for net zero investing since they generate about 70 percent of global emissions. However, rural areas, often overlooked by investors, are also prime targets for climate investments, as most investment climate-related opportunities in the report are suitable for such localities. Investments in rural areas not only offer financial returns; they ensure that climate action reaches those most vulnerable to its effects, embodying the principles of leaving no one behind and reaching the last mile.

The investment opportunities aren't just theoretical. Real-world examples are already demonstrating their potential as business solutions that support countries’ NDCs. In Eswatini, an integrated waste collection and management services business model is helping to achieve the country's adaptation and mitigation targets in the health sector. In Nigeria, SOSAI Renewable Energies, a UNDP Growth Stage Impact Venture (GSIV) finalist, is deploying efficient, reliable and affordable renewable energy to underserved communities in the northern region.

Unlocking this potential, however, requires a collaborative approach. The public sector has a critical role to play. About 60 percent of the identified climate investment opportunities need public support, either through blended or concessional financing. To achieve this, governments must create enabling environments that facilitate the flow of private capital towards climate solutions. This includes implementing supportive policies, offering financial de-risking mechanisms, and strategically using public finance to unlock private investment at scale. Innovative financing instruments, such as high-integrity carbon markets and green and blue bonds, can further catalyze funding for a just net-zero transition.

Recognizing the opportunities, countries are rising to this challenge, using Integrated National Financing Frameworks (INFFs), to align financing to meet their sustainable development ambitions.  UNDP is supporting 35 African countries in this process, with 15 already implementing reforms to enable private sector investments and other interventions to realise their climate and development objectives.

The path forward requires concerted effort from both the public and private sectors. By bridging the gap between government commitments and private investment, we can turn Africa's climate challenges into opportunities for sustainable growth. The upcoming UNDP Africa Investment Insights Report, set for release on July 17, 2024, will provide valuable market intelligence to guide this transformation.

As we approach critical climate milestones, the opportunity is evident: Africa's climate action represents not just a moral imperative but a smart investment. The time is ripe for the private sector to play its part in shaping a future for the continent and the world that is low carbon, resilient, and sustainable.

For more information:

To access the UNDP Africa Investment Insights Report, Third Edition – Climate Opportunities upon its release at the Africa Impact Summit on July 17, 2024, please visit: https://www.undp.org/africa/investment-insights. 

For a comprehensive exploration of the SDG Investor Map market intelligence, visit the SDG Investor Platform: https://sdginvestorplatform.undp.org/market-intelligence.

These resources offer valuable insights into climate-related investment opportunities across Africa and provide detailed market intelligence to guide sustainable investments.