JOHANNESBURG—Discussions about climate finance follow a familiar script: a financing gap is declared, pledges are announced, and the size of the commitments is the main concern. But the form that financing takes matters as much as the amount of money pledged, particularly in Africa.
According to the Climate Policy Initiative’s most recent data, climate-finance flows to Sub-Saharan Africa reached $55 billion in 2024, more than double the 2019 level. This represents important progress. But the continent still faces several challenges.
For starters, the CPI’s report “Landscape of Climate Finance in Africa 2024” showed high levels of concentration, with ten countries receiving 50% of Africa’s climate-finance flows, while the continent’s ten most climate-vulnerable countries received only 10%. The difference is even starker for private climate finance, 76% of which goes to ten countries, further narrowing access to capital. Meanwhile, multilateral climate funds under the United Nations Framework Convention on Climate Change, which are meant to deliver concessional support, account for only 2% of Africa’s climate finance.
Perhaps more importantly, the report found that as much as 51% of climate finance to Africa comes in the form of debt, evenly split between concessional and market-rate borrowing. By contrast, debt accounts for only 18% of climate finance in East Asia and the Pacific, and 20% in Latin America and the Caribbean.
It is also worth noting that 82% of Africa’s debt-based climate finance priced at market rates comes from official sources, mainly multilateral and bilateral development-finance institutions. The contradiction is glaring. Institutions that are supposed to support sustainable economic growth, create jobs, and improve social outcomes by financing businesses and projects deemed too risky or unattractive for private investment are lending at commercial rates to economies already struggling to carry the added costs.
To be sure, this is partly a response to Africa’s immense climate-finance needs, which are estimated at just under $2 trillion until 2030, of which only 23% is currently being met. But instead of continuing to rely on debt-based lending, development-finance institutions must change the instruments through which climate finance is delivered.
As ActionAid’s new report finds, debt is a major barrier to green investment. In 2026, 54 of the world’s most climate-vulnerable countries, many of them in Africa, will spend $304.8 billion on servicing debt, compared to $12.3 billion on climate action. That is a ratio of nearly 25 to one. While most of this debt was not borrowed specifically for climate action, servicing it still leaves policymakers with limited fiscal space for investing in such measures, with debt repayment absorbing 65% of their combined national revenue.
The implications for national climate plans, known as nationally determined contributions (NDCs), are profound. The climate-vulnerable countries assessed in ActionAid’s report have budgeted for only one-quarter of their combined unconditional NDC costs, with Tanzania allocating 0.9% of its unconditional NDCs costs and Malawi allocating 10.3%. Zambia has devoted just 0.32% of its budget to climate policies, highlighting the constraints debt-burdened governments face in using public finance to fund their NDCs.
Addressing these countries’ fiscal constraints requires reporting climate finance in a way that reflects its actual worth. A loan that must be repaid with interest is currently counted the same as a grant of equivalent size, which ends up overstating how much support is reaching Africa. Reporting a loan’s concessional portion rather than its full value would provide a clearer picture. The OECD’s Development Assistance Committee uses this method to measure official development assistance.
Moreover, the recipient country’s debt position should be taken into consideration when determining the concessionality of loans, so that countries at moderate or high risk of debt distress receive grants rather than being saddled with an even heavier burden.
There is also a strong case for lending in local currencies, so that borrowers are not also carrying exchange-rate risk, and mobilizing Africa’s domestic capital. Even though international sources provide 87% of Africa’s tracked climate finance, the continent has roughly $2.4 trillion in domestically managed bank, insurance, and pension assets.
Recent domestic issuances have shown what is possible with the right regulatory frameworks and financial instruments. In February 2024, Tanzania’s Tanga UWASA issued East Africa’s first subnational water infrastructure green bond, worth Tsh53.12 billion (approximately $20 million). The bond was oversubscribed by 103%, with 65% of the total raised from domestic investors. In Zambia, Copperbelt Energy Corporation Renewables raised $150 million to finance solar capacity by issuing the country’s first green bond over two tranches, both of which were oversubscribed and priced without a sovereign guarantee.
While these issuances are just a drop in the bucket compared to Africa’s total climate-financing needs, they demonstrate the potential of mobilizing the continent’s significant amounts of institutional capital. True, domestic issuances are subject to market pricing, but they remove currency risk, keep debt-service payments within domestic economies, and build a base of local institutional demand that could reduce long-term reliance on foreign lenders.
None of this is a substitute for scaling up grants and concessional finance from official creditors. Rather, it gives African countries a new tool to help fund the climate transition on their own terms, as opposed to relying on money delivered through instruments that risk exacerbating the crisis.
