Africa, in general, and the dryland systems are considered the most vulnerable to climate variability and change compared to the rest of the world, due in part to the lack of financial, institutional and technological capacity to respond to climate change.
Fragile contexts have an additional layer of exposure attributed to poor governance, conflict, poverty and inequality.
Speaking to The Standard, the Director of Investments and Advisory Services, Sanjeev Debipersad shared learnings from investments in renewable energy and climate adaptation technologies.
Can you provide an overview of the current state of climate-resilient investments in fragile countries and arid lands? What are the key challenges these regions face?
There has been a growing interest in climate-resilient investments, driven by the recognition of climate change as a global threat. Governments, international organizations, and private investors have started to allocate resources to projects aimed at increasing resilience to climate impacts.
Private investors and businesses are also increasingly considering climate resilience as a factor in their investment decisions. This includes investments in renewable energy, sustainable agriculture, and water-efficient technologies.
Despite the interest in climate-resilient investments, fragile countries and arid lands encounter distinctive challenges that impede progress. Among these challenges is the limitation of financial resources and scarce funding that makes it daunting for these regions to embark on comprehensive climate-resilience projects.
Additionally, attracting private sector investment proves to be a challenge due to perceived risks and uncertainties. Fragile countries often grapple with political instability, regulatory ambiguities, and infrastructure deficiencies, which can deter private investors who seek a stable and predictable environment for their capital.
What are some successful examples of climate-resilient investment projects in fragile countries or arid lands that you've been involved with, and what lessons can we learn from them?
One of our success stories has been our Renewable Energy and Adaptation to Climate Technologies sub-Saharan Africa Programme (REACT SSA), which has played a pivotal role in scaling climate-resilient investments in fragile countries and arid lands, especially within the framework of the Innovation Fund.
This fund is a critical component of REACT SSA, which is a US$61 million project funded by Sida (the Swedish International Development Cooperation Agency). The primary objective of the REACT SSA programme is to reduce poverty through a transformational increase in the use of renewable energy by off-grid households in sub-Saharan Africa, with a particular emphasis on innovations originating from Western and Southern Africa.
The success of REACT SSA has served as a valuable blueprint for future endeavours that ensure that climate-resilient investments continue to make a more meaningful impact on both local communities and global climate resilience efforts.
In these regions, how do you assess the potential risks and rewards of climate-resilient investments, especially given the unique challenges they present?
We do this in several ways. One, by prioritizing climate-smart solutions, investing in renewable energy technologies, and supporting carbon markets, which aims to reduce fossil fuel dependence and incentivize emission reduction.
We have also incorporated climate risk management into our strategies and projects that enhance resilience against climate change. The reward has improved project sustainability and reduced vulnerability to climate-related disruptions. However, the risk is that failure to adequately manage climate risks can lead to project failure or financial losses.
Finally, but not lastly is by securing funding for climate-resilient investments. The funds support capacity-building efforts and exploration of opportunities with global finance mechanisms. However, the risk is that securing funding may be competitive and uncertain, particularly in fragile regions.
What role does innovation play in scaling climate-resilient investments in these areas? Are there specific technologies or approaches that have shown promise?
Innovation plays a crucial role, and we have existing technologies that are showing great promise currently.
One of our key focus areas is on climate-smart agriculture which shows the importance of innovative farming techniques and crop varieties. Developing drought-resistant crops and other climate-resilient agricultural practices can enhance food security and adapt to changing climatic conditions.
We also acknowledge carbon markets as potential income sources for SMEs. This recognition shows how innovative financial mechanisms, like carbon trading, can incentivize emission reduction efforts. Carbon markets can provide financial incentives for businesses to adopt more climate-resilient practices.
How do you measure the impact of climate-resilient investments in terms of both environmental sustainability and economic development?
AECF typically employs a comprehensive set of tools and methodologies to measure the impact of climate-resilient investments in terms of both environmental sustainability and economic development.
Several ways include baseline data where we understand the first state of the targeted area or community. This includes information on environmental conditions, economic indicators, and social well-being.
We also conduct environmental impact assessments to assess the project's effects on the environment. This includes evaluating changes in land use, water quality, and ecosystem health.
