According to a new IFC study, private investment opportunities in Africa to help climate change adaptation against floods and droughts might exceed $100 billion by 2040.
The report, “Adapting to Natural Disasters in Africa: What’s in it for the Private Sector?” examined commercially viable investment alternatives that could increase the continent’s climate resilience while also supporting development and job creation in 43 of Africa’s 54 countries. It discovered that many of Africa’s most promising chances are in lower-income countries such as Eswatini, Malawi, Namibia, Niger, and Mauritania.
Investing in weather-resistant agricultural varieties, crop insurance for farmers, irrigation systems to guard against drought, climate data and information systems, and erecting dikes to defend against coastal floods are all examples of specific opportunities.
“Extreme weather disasters are occurring with growing regularity and severity in Africa, with floods and droughts being particularly catastrophic,” says Sérgio Pimenta, IFC Vice President for Africa. However, governments cannot fund the necessary investments on their own. The corporate sector will be critical in making investments to support the climate agenda. This analysis demonstrates the wealth of prospects for investors to assist Africa adjust to the new climatic realities while also supporting economic development.”
Despite accounting for less than 4% of global greenhouse gas emissions, African countries are among the most vulnerable to climate change, partly due to their reliance on rain-fed agriculture and low capacity to respond to and adapt to shocks. The study revealed that between 1990 and 2019, Africa saw 1,107 floods and droughts, resulting in approximately 44,000 deaths and at least $14 billion in damages, based on data from the Centre for Research on the Epidemiology of Disasters’ Emergency Events Database (EM-DAT). Droughts and floods have also reduced African countries’ GDP by an average of 0.7 percent and 0.4 percent since 1990, according to the report.
The study calculated the initial investments required in each country to offset drought and flood-related losses, assuming that the intensity and frequency of these disasters remain constant over the following 20 years. According to the study, because these disasters are projected to grow more frequent and severe in the future, investment demands will be even bigger.
The study comes as the United Nations climate change conference, COP27, emphasizes the critical role that the private sector can play in climate change adaptation, particularly in Africa. IFC delivered $4.4 billion in climate finance globally in the fiscal year 2022 and mobilized an additional $3.3 billion from other sources, with $2.1 billion supporting Africa’s green transition.