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Monica_55905 Nov 26

New CDC research: African business and investor perspectives on the climate challenge

New CDC research: African business and investor perspectives on the climate challenge image
In the run-up to COP26, climate change and the energy transition were key topics on everyone’s mind at CDC Group, as they were on the minds of African Energy Forum attendees as well.
An article written by CDC Group
 
Preparing for a changing climate and supporting efforts to decarbonise already make up a substantial portion of economic activity in emerging markets - in Africa in 2019, for example, nations were already spending around 5% of their GDP on climate adaptation and mitigation measures. This share is only likely to grow in the coming years.
 
As an impact investor in Africa we are supporting the private sector to find the solutions needed for a just transition to net zero by 2050, while building economic resilience. We see significant opportunities for green economic transformation in all sectors and know that many of these will be found in the energy sector.
As a major investor in Africa and South Asia we wanted to get a clearer understanding of how private sector leaders in these markets see climate change. So, we carried out a survey of senior management at businesses and investment funds in our portfolio – including those from the energy and broader infrastructure sector - operating across these regions. We asked questions on how climate affects their firms today, how it’s influencing their future plans, and what they need from international investors like CDC.
 
The responses reveal the realities of managing a business in challenging environmental conditions and the impact climate change is already having. Among the findings are:
  • 86% of businesses said climate change would negatively impact their business over the next decade
  • 82% of respondents agreed that businesses that take steps to reduce emissions and vulnerability to physical climate risks will be better off in the long run
  • 48% said they have experienced an extreme weather event that has significantly affected their company, including flooding and droughts
  • Respondents are already taking action, first by identifying vulnerabilities. 78% are identifying or planning to identify physical risks to their business or investments, and nearly as many (70%) are concerned about transition risks such as demand shifts or policy-related changes that may affect their investments.
  • Respondents are also proactively engaging in other ways. 33% are calculating their carbon footprint and 39% are acting to reduce vulnerability to physical risks. Another quarter are planning to take each of these steps, and 35% are considering setting greenhouse gas emissions targets.
Perhaps most importantly, only 12% agreed that the international community was doing enough to support emerging markets to address the impact of climate change. At CDC, we are listening to this feedback and recognise the role the development finance institutions need to play in addressing climate change in our markets. Our support for the African energy transition is a key part of this response.
 
In addition to our core infrastructure equity, project finance, and intermediated equity offerings, which have channelled $1.7Bn to the African energy sector since 2015, we are constantly innovating, including by introducing a range of thematic “Catalyst” strategies that allow us to expand our risk appetite to maximise development impact. Many of these strategies focus on African energy, including our Gridworks and Energy Access strategies. We have recently expanded this toolkit with our new Greenovate project finance strategy, which aims to address, through concessional debt, financing constraints for high impact infrastructure projects caused by first-mover disadvantage, lack of precedent or affordability challenges.
 
We thoroughly enjoyed discussing these and other CDC solutions with our partners at the African Energy Forum.