Editor’s note: Adjoa Adjei-Twum. He is the founder and CEO of the Africa-focused, UK-based Emerging Business Intelligence and Innovation (EBII) Group for global investors interested in Africa and emerging markets.
The opinions expressed in this article are his own.
The recently concluded COP27 was dubbed the “African COP”, with the continent at the center of the global effort to address the causes and consequences of climate change.
As negotiations in the Egyptian resort of Sharm el-Sheikh unfolded over the weekend, there was an important step forward on one of the most difficult elements: the creation of a fund to help the most vulnerable developing nations affected by climate disasters.
The backdrop to COP27 was a series of catastrophic global weather events, including record floods in Pakistan and Nigeria, the worst drought in four decades in the Horn of Africa, and heat waves in Europe and severe hurricanes in the US.
The loss and damage fund – to pay for the sudden impacts of climate change that cannot be avoided with mitigation and adaptation – has been a major obstacle in the COP talks.
The wealthiest and most polluting nations are reluctant to agree to a deal, worried they could be on the hook for expensive legal claims over climate disasters.
I welcome progress here as African nations bear the brunt of climate change. The continent accounts for about 3% of greenhouse gas emissions, according to the UN Environment Program 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 significantly on the impact of climate change on the risk profile of African financial institutions and nations, I am concerned about the lack of details on how the fund would work, when it will be implemented and the time frame. . I’m afraid these could take years.
During a recent visit to the US, I discussed reparations money with Democratic US Congressman Ilhan Omar. He said it was important for the US and other countries to make significant investments, which he said could come in the form of reparations.
He spoke of helping affected communities in Africa to avoid exploitation and countries like the US and China ending fossil fuel expansion and phasing out existing oil, gas and coal “in a fair and equitable manner”. ”
Adaptation is Africa’s big challenge – AFDB estimates that the continent needs between 1.3 and 1.6 trillion dollars to adapt to climate change by 2030.
The Bank’s Africa Adaptation Acceleration Program, in partnership with the Global Center for Adaptation (GCA), aims to mobilize $25 billion in financing for Africa, weather forecasting applications for farmers and drought-resistant crops.
It’s time for African nations to levy a climate export tax on commodities like cocoa and rubber to help pay for climate adaptation. But it still falls far short of the money Africa needs.
Adaptation is 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 companies to boost efforts to attract green finance and make Africa more resilient by improving governance, tax systems, anti-corruption efforts and law enforcement.
Sustainability is not a business tax, it is essential for business survival. Only companies focused 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 funding. Banks will also suffer. Therefore, the financial sector must be better prepared and more flexible.
This message will be reinforced when I meet CEOs, bank managers and the central bank of Nigeria next month at the 13th Annual Bankers’ Committee Retreat organized by the Nigerian Bankers’ Committee in Lagos. The aim is to support the country’s largest banks as they navigate the new international sustainability rules.
Increasingly, investment funds have to comply with green taxonomies, systems that highlight which are sustainable investments and which are not. In other words, banks only accept investments from organizations in G20 countries if they meet national or supranational standards, such as the European Union’s Green Taxonomy.
This will not only help combat greenwashing, but also help businesses and investors make more informed green choices. In addition, the G20 countries are asking their banks to predict how risky their loans are due to climate change.
African nations must establish strong systems to mobilize private capital and foreign direct investment in key sectors. Governments must ensure that they have the right environment to increase green investment.
Regulators need to strengthen their capacity to develop and effectively enforce climate-related regulations. Companies, especially banks, should prepare climate risk management teams, regulatory compliance expertise and international climate finance projects. This is the basis for a successful transition to a low-carbon economy.
Looking ahead, we can take other actions. The African Continental Free Trade Area (AfCFTA) – the world’s largest free trade area and a single market for nearly 1.3 billion people – can protect Africa from the adverse effects 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 agreements, job creation, security and peace. A single market could lead to less energy-intensive economic growth by keeping emissions low, for example by developing regional energy markets and manufacturing hubs.
But we need much better African coordination, like the European Union, to speed up the AfCFTA. I urge our governments to work together and take swift and concrete action to ensure the full and effective implementation of the AfCFTA. There is no time to waste.
This will not be popular with some African regimes 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, clashes between rich and poorer nations, and multibillion-dollar commitments by developed countries that created the climate crisis.
Many observers have pointed out that the final agreement did not include a commitment to phase out or reduce the use of fossil fuels.
But the agreement 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 not the time to point fingers.
This is no time for the blame game either. It is a call for African governments, banks, institutions and companies to come together, move forward and adapt to a new climate reality.