Green bonds are emerging as possible options for climate change financing in countries to supplement public financing.
Ursula Von Der Leyen, president
of the
European
Commission (EC)
suggests green bonds as part of the initiatives to help Africa to attract
climate financing.
Von
Der Leyen made the commitment on Tuesday at the Africa Climate Summit (ACS) in
Kenya. She said the EU
Commission put forward the Global Green Bond Initiative to attract private
investment in climate financing.
Green
bonds are emerging as possible options for climate change financing in
countries to supplement public financing.
Ursula Von Der Leyen admits that
there is a need for a conversation of climate financing at the global level
especially when leaders meet for the UN Climate Change Conference in Dubai in
November.
She notes that the transition to
green energy will require an unprecedented scale of private investment.
“Public
Finance will not surface. This is true for Europe, but it is also true for
emerging markets and emerging economies” she said.
////Cue in “Private Capital will
need....
Cue Out.... its called the Global
Green Bonds Initiative” ///
The
Global Green Bond Initiative is relatively new and yet to spared across the
world.
It
is hoped that bonds can facilitate the flow of private capital from institutional
investors into climate and environmental projects in EU partner countries.
The
fund's anticipated impact could spur green investments totaling up to €15-20
billion.
As
she announced the initiative, Ursula Von Der Leyen recognized the
fact that emerging economies can face difficulties in accessing the capital
markets but she said the EU is willing to assist.
“Europe has the most advanced green bond
market in the world. So we are ready to share our expertise with your teams on
how to develop your own green bond markets”
She said together with the
European Investment Bank, the EU Commission will allocate one billion euros to
de-risk private investments in emerging markets.
With such funding, she hopes
that up to twenty billion euros in private investment could be attracted into
sustainable investment.
Some
studies have seen a minimal inflow of climate financing to Africa using green
bonds.
According to a recent study by the Nordic Development Fund, out of all
globally issued bonds in 2021, only 5.8% were green bonds, and Africa accounted
for only 0.077% of issuances.
According
to the World Bank, global sustainable bond issuance reached more than $1.1
trillion in 2021 and is expected to surpass $1.5 trillion in 2022.
It
however said sovereign sustainable bond issuance was still quite limited
representing only 11 percent of the total in 2021.
In Africa, there have only
been four sovereign issuers of global sustainable bonds.
Apart
from the Green Bond Initiative, the EU Commission President announced a 150-billion-euro
investment plan specifically designated for Africa.
She
revealed that the Global Gateway.
These EUR 150 billion are aimed to support
investments ranging from hydropower plants in the DRC, Burundi, Rwanda, and
Tanzania, to the EUR 1 billion Initiative on Climate Adaptation and Resilience
in Africa.
///Cue
IN “ And Global Gateway is...
Cue
out.... a clear win-win”///
The
other funding option for climate change financing is the carbon tax.
But
President William Ruto of Kenya called for a debate about tax.
“This
is the continent that is the lungs of the world. We have the largest natural
carbon sequestration infrastructure. In fact, we dare say that if there was a
company collecting garbage globally, I’m talking about carbon garbage Africa
would have the largest shares” said Ruto
“The only problem is that those who
produce the garbage refuse to pay their bills and profile the company as broke.
When it is actually that have refused to pay the bills”
///
Cue in “To be able to....
Cue
Out ....so that we all pay the same” ////
Ursula Von Der Leyen agreed with
President Ruto that setting a carbon price was one of the most effective and
efficient tools.
“Because it fosters innovation by
the private sector that is crucial. Because it makes heavy polluters pay a fair
price. And because it creates revenues that can support a green transition in
developing countries.
” ////Cue IN “And this includes...
. Cue Out....we have to get
there”///
She did not turn a blind eye
or a deaf ear to the growing call by African leaders about
the need to reform the International financing architecture, especially the
World Bank and IMF policies.
//// Cue In “We fully support....
Cue Out.... action
absolutely”.///
Her remarks seem to high light
some of the EU position/ negotiating issue at the t COP28. Those
will include attracting private investment to Africa, carbon pricing and
carbon credits, and setting global targets for the energy transition.
