CAPE TOWN – African nations are increasingly taking the lead in shaping climate finance initiatives, moving away from reliance on traditional donor models and forging new investment platforms that integrate climate action with broader development goals. This shift, underscored by recent summits and investment partnerships, signals a fundamental change in how the continent approaches climate challenges.
For decades, climate finance has been characterized by a top-down approach, with developed economies dictating terms and priorities. The Clean Development Mechanism (CDM), established under the 1997 Kyoto Protocol, exemplified this dynamic, allowing industrialized nations to invest in emissions reduction projects in developing countries rather than implementing domestic cuts, often with limited alignment to recipient countries’ development strategies. While the 2015 Paris Agreement’s emphasis on Nationally Determined Contributions (NDCs) aimed to address this imbalance, the practical implementation has often fallen short.
According to the Climate Policy Initiative, climate finance flows to Africa experienced a surge of 48% between 2019-20 and 2021-22, rising from $29.5 billion to $43.7 billion. This increase was largely driven by renewed multilateral engagement and a recovery in private investment following the COVID-19 pandemic. Still, global climate finance surpassed $2 trillion for the first time in 2024, with only a portion reaching Africa, and growth slowed to 8% year-on-year, hampered by factors like rising interest rates and grid infrastructure constraints.
A key concern remains the allocation of funds. While adaptation finance in Africa saw a decline from 39% to 32% between 2019-20 and 2021-22, due to the expansion of projects combining mitigation and adaptation objectives, the overall level remains insufficient to address the continent’s escalating climate vulnerabilities. The largest increases in climate finance globally in 2024 were concentrated in mitigation-focused sectors like electric vehicles, with China, Brazil, Vietnam, and Indonesia leading the way.
In response, African nations are pioneering new models. South Africa’s Just Energy Transition Partnership (JETP), launched at the 2021 United Nations Climate Change Conference (COP26), is a prime example. The JETP aims to mobilize investment to decarbonize South Africa’s energy system while simultaneously supporting broader economic development and growth. Indonesia, Vietnam, and Senegal have since followed suit, establishing similar partnerships with international investors.
These investment platforms, as noted by the Africa Expert Panel, provide a structured framework for identifying viable projects and reducing the cost of capital. This can alleviate debt pressures and unlock larger, more diversified sources of finance. The Africa’s Green Economy Summit (AGES) 2026, held in Cape Town, highlighted the importance of innovative finance mechanisms, including green, blue, and wildlife bonds, and biodiversity credits, in converting climate vulnerabilities into economic opportunities.
However, challenges persist. Effective implementation requires broader political and institutional reforms, supported by stakeholders committed to long-term, equitable outcomes. Embedding social justice considerations into investment frameworks – including project selection, evaluation, and management – is crucial for fostering systemic change.
The Finance in Common Summit (FiCS) 2025, hosted in Cape Town, underscored the critical role of Public Development Banks (PDBs) in shaping the future of climate finance, particularly in addressing the infrastructure gaps exacerbated by climate change. The summit aimed to foster collaboration to create a financial architecture responsive to the specific needs of the Global South.
While these new approaches are still evolving, they represent a significant step towards greater African agency in climate finance, promising to mobilize larger amounts of capital, support economic resilience, and advance long-term development objectives.
