A warming planet is by now well documented, not least by the Intergovernmental Panel on Climate Change’s sixth report, released earlier this year, where they warned, we are now set to reach the 1.5-degree level within the next two decades. Whilst the impact is being, and will continue to be, felt in all corners of the world, Africa is disproportionately affected.
Eight out of the ten countries in the world that are the most vulnerable to climate change are in Africa. These countries (Chad, Kenya, Malawi, Niger, Somalia, Sudan, Madagascar and Mozambique) are severely exposed to extreme weather events, such as droughts and flooding, and are ill-equipped to adapt to these climate risks. Against this backdrop, Africa, home to a sixth of the world’s population, has contributed just 3% of cumulative greenhouse gas emissions and 4% of annual emissions (Our World in Data, 2021).
AfDB Impact on SDGs
The African Development Bank, along with other Multilateral Development Banks (MDBs), signed up for the UN’s Sustainable Development Goals as far back as 2015. In the same year, the Bank set out their “High 5” strategic operational priorities, namely: Light up and Power Africa, Feed Africa, Industrialize Africa, Integrate Africa and Improve the Quality of Life for the People of Africa.
It’s often impossible to disentangle environmental from social considerations when looking at development, and the High 5 “Feed Africa” epitomises this. The UN released its report, The State of Food Security and Nutrition in the World, earlier this year stating that over 20% of Africans were undernourished. Clearly, the COVID-19 pandemic has exacerbated this, and that has been compounded by the Russia-Ukraine conflict, a region that provided 44% of the continent’s wheat between 2018 and 2020 (UN data).
Since 2020, the Bank has set up a number of initiatives to address this issue. In April 2020, the Bank established a USD 10 billion COVID-19 Rapid Response Facility (CRF), aimed at providing a flexible range of support to assist Regional Member Countries (RMCs) in fighting the pandemic and mitigating its social impact, in particular with regards to women, 92% of whom are in insecure and informal employment on the continent.
The Bank recognized the potential for additional adverse effects in the agricultural sector and set up the Feed Africa Response to COVID-19, as part of the CRF, to address the specific issues faced by the sector. This facility paved the way for a comprehensive intervention to build resilience, sustainability and regional self-sufficiency in Africa’s food systems.
Food Security in Africa
More recently in May of this year, the Bank set up a USD 1.5 billion Africa Emergency Food Production Facility (AEFPF), which is tasked with addressing the estimated shortfall of at least 30 million metric tonnes of food, largely grains, imported from Ukraine and Russia. This initiative, to be implemented in 36 African countries, will help raise the production of wheat, maize, rice and soybean to compensate for the food supply deficit due to the war in Ukraine, benefitting 20 million smallholder farmers. The objective is to make up that shortfall by producing 38 million metric tonnes of food – leading to an increase of approximately 30%, equivalent to USD 12 billion, in local food production over the next two years. As of August this year, USD 1.13 billion had already been approved under this facility, contributing to addressing fears of starvation and food insecurity on the continent.
ESG, Social Bonds and Financing Programs
To fund these projects, the Bank has been partnering with ESG minded investors on Social Bonds since 2017, the same year that the Social Bond Principles were released, and the Bank established its Social Bond Framework. For climate focused projects, the Bank has been issuing Green Bonds since 2013, before the Green Bond Principles were even published. Given the Bank’s mandate to spur sustainable economic development and social progress in Africa, Social Bonds are inevitably the larger instrument, with a cumulative USD 7.4 billion equivalent issued to date, through 10 transactions, making the AfDB the largest issuer of Social Bonds amongst its peer MDBs.
For investors though, it is worth noting that, under the Bank’s second Climate Change Action Plan for the period 2016 – 2021, 92% of Bank funded projects were screened for climate risks and opportunities as of 31 December 2021, whilst 41% of Bank projects approved in 2021 were identified as Climate Finance. The Bank is targeting 2025 for all projects to be Paris Aligned.
In spring of 2020, the Bank issued its largest ever Global Benchmark, a USD 3.1 billion 3-year “Fight COVID-19” Social Bond. In September of this year, the Bank issued a EUR 1.25 billion 7-year Social Benchmark, its most successful Euro transaction ever. And it is not just about size, the Bank also has a role to play in the development of local capital markets, where it can pair market development and investor diversification with financing sustainability projects. This role is typified by the inaugural ZAR 200 million 1-year Green Bond launched in August.
Investors can see details of all Bank financed projects, whether financed by social or green bonds or not, on the Bank’s website. However, the Bank also provides a focus on projects in its annual green and social bond newsletter. From recent initiatives, for example in Cote-d’Ivoire, the AEFPF will contribute to the delivery of 2,279 tons of certified seeds of maize, 3,539 tons of rice and 134 million of linear meter of cassava cuttings with technical support from the Technologies for African Agriculture Transformation (TAAT) program. In Guinea, the TAAT team will support the country for the provision of hybrid rice and maize varieties and install an ex-vitro rapid cassava multiplication system (Semi-Autotrophic Hydroponics) to produce 1,2 million cassava cuttings per year and strengthen the cassava seed system capacity in the country.
There is a lot more work to do in Africa, and the Bank is going to need partners, both public and private sector, to do it. However, we believe that, with the Bank providing the strategy and expertise, and ESG minded investors providing the financing, there is good hope that Africa can overcome these challenges in an environmental and sustainable way.
More information visit www.afdb.org
