Given governments' growing fiscal constraints, the private sector has an essential role to play, and interest in, ramping up adaptation investments that will help Africa adjust economically to the new climate reality.
Africa is the most vulnerable continent to climate change-induced natural disasters such as droughts and floods.
Since 1990, droughts and floods have respectively lowered African countries’ GDP by 0.7 percent and 0.4 percent.
Upfront investments in climate adaptation between now and 2040 could amount to 4 percent of Africa’s GDP, close to $100 billion, or $5 billion a year.
This is an upper bound estimate, contingent on the investment being commercially viable with the necessary technologies available and a favorable investment climate.
Private sector investment is needed as most African governments lack the fiscal space to adapt at the levels needed.
Development finance institutions have a critical role to play in encouraging private investment through de-risking instruments.
A solar-powered crop irrigation system that prevents harvests being decimated by droughts. Crop insurance that guarantees farmers a livable income if yields dramatically drop due to a weather-related event. When we think of priority actions to be taken to adapt to climate change, such examples may not be the first things to spring to mind — but should be, argues IFC in a new Africa-based study that shows what the private sector could gain by making investments that reduce the damage caused by climate-change induced natural disasters.
While climate change causes many types of natural disasters, including biodiversity loss, landslides and wildfires, this study focuses on the most frequent and economically damaging to infrastructure and livelihoods, namely floods and droughts. Among the 43 African countries analyzed, all of which experienced at least one drought or flood since 1990, the study finds that there are up to $100 billion in total in potential upfront adaptation investment opportunities, or $5 billion a year, between now and 2040. This is an upper bound estimate, contingent on the investment being commercially viable with the necessary technologies available and a favorable investment climate.
No continent has been more impacted by climate change-induced natural disasters than Africa. Between 1990 and 2019 Africa suffered 1,107 floods and droughts, leading to 43,625 deaths and at least $14 billion in damages to crops, livestock, and property. The devastation has been greatest even though Africa is also the continent that has contributed the least to climate change, responsible for only 3.8 percent of global greenhouse gas emissions.