The G7 has pledged US$100 billion per year towards a sustainable investment plan to spur development of green infrastructure projects across the globe, with a particular focus on Africa. How has this initiative been embraced by the public and private investment communities?
- Through to 2025, the G7 has pledged US$100 billion per year to finance a sustainable investment project. Infrastructure in Africa will be a focus of the initiative as the continent aims to “build back better” following the impact of the COVID-19 pandemic.
- Africa possesses abundant natural resources, which can help, among other things, with the development of solar power and hydropower. The continent is also rich in mineral deposits.
- However, private investment in the plan has been somewhat lacklustre so far.
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Will G7 support be enough to help Africa develop a more sustainable infrastructure?
In its June 13 Carbis Bay G7 Summit Communique, members of the G7 committed to an ambitious US$100 billion per year investment from public and private sources through 2025 to help spur the development of “technologies, infrastructure, ecosystems, business, jobs and economies that will underpin a net-zero emissions resilient future that leaves no one behind.”
The note calls out a specific focus on developing nations, saying: “We recognise the particular challenges that financing the transition to net zero economies poses for developing countries and stand by our bilateral and multilateral commitments to support these partners, in the context of meaningful and transparent decarbonisation efforts.”
Sustainable investment in Africa
It singles out Africa in particular, explaining: “As we advance recovery plans to support our economies and build back better, in line with the 2030 Agenda for Sustainable Development, including through innovative measures and massive budgetary support, developing partner countries, especially in Africa, cannot be left behind.
“We are deeply concerned that the pandemic has set back progress towards the Sustainable Development Goals and continues to exacerbate global inequalities.”
It’s hard to argue the logic of this focus.
While Africa only contributes roughly 4 percent of world’s total carbon emissions, it is the continent most vulnerable to climate change. According to the UN Environmental Program, a warming of 2 degrees celsius would reduce agricultural yields in sub-Saharan Africa by 10 percent.
The latest predictive weather models, covering the five-year period from 2020 to 2024, suggest continued warming and decreasing rainfall especially over North and Southern Africa, and increased rainfall over the Sahel.
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Renewable natural resources in Africa
However, there is more to the G7 commitment than just goodwill for a continent that’s been on the frontlines of climate change for many years. Africa also happens to be home to some of the world’s richest troves of renewable natural resources.
Seven of the 10 sunniest countries on Earth are in Africa, making it a dreamscape for solar projects, and its massive network of rivers is a treasure trove of hydropower potential. It also happens to have the majority of the world’s chromium and platinum deposits – both of which are essential for the development of green tech, such as batteries and fuel cells.
Together, this unique combination of urgent need and untapped opportunity has put a spotlight on Africa as epicentre of sustainable infrastructure investment. It’s recipe so central to global sustainability goals that EU President Charles Michel commented at the conclusion of the summit: “Africa needs to be at the heart of our future international relations.”
Echoing this, French President Emanuel Macron called for “a massive investment in Africa’s economies”.
While world leaders all seem to agree that Africa is uniquely positioned to become a hub of industrialisation and decarbonised growth, critics have questioned whether the commitment is enough.
Catherine Pettengell, director at Climate Action Network, told Reuters she thought that the G7 had failed to rise to the challenge of agreeing on concrete commitments on climate finance, explaining: “We had hoped that the leaders of the world’s richest nations would come away from this week having put their money their mouth is.”
Will private investors come to the table?
Though the commitment of US$100 billion a year through 2025 is a significant pledge, there are still several details that need to be sorted out before a real action plan for Africa can be developed. Chief among these is answering the question: Will private investors come to the table?
So far, that has not been the case.
According to Refinitiv data tracking total sustainable infrastructure investment by G7 countries over the last five years, G7 nations have invested roughly US$22 billion in sustainable infrastructure projects in their own countries, but just US$3 billion in Africa.
In fact, private investment among G7 nations in African sustainable infrastructure projects has been trending down since 2017 when US$1.5 billion was invested in the continent. That number fell to US$72 million in 2018.
So far this year, just US$42 million has been invested in these projects.
That’s an inauspicious start to a global movement to be sure.
As the world’s largest governments put their might – and their dollars – behind the initiative, it may capture the hearts and minds of private investors. But, for now, there’s still a long way to go to build significant momentum among the institutional investors who will be critical to the success of this global effort.
