KPMG, an organisation of independent professional services firms providing audit, tax and advisory services, has highlighted the significant investment opportunity in renewable energy boasted by Africa in a new report titled ‘Climate Investing in Africa’
The continent will require US$277bn annually between 2020 and 2030 in order to reach its Paris Agreement targets as well as implementing its Nationally Determined Contributions to contribute to limiting global warming to 1.5°C, according to the Climate Policy Initiative. However, according to KPMG, it currently only receives US$29.5bn in annual climate finance, indicating the significant inflows of both public and private finances required from domestic and international sources.
As such, there is a remarkable untapped investment opportunity for private sector financiers, especially with a fast-approaching anticipated period of economic prosperity on the horizon for the continent.
“It is unlikely that global climate change mitigation efforts can be successful without taking Africa into consideration,” remarked Pieter Scholtz, KPMG’s ESG Africa partner lead. “The continent offers some of the planet’s biggest and most profitable options for investments in the global energy transition. From solar to wind to green hydrogen – a window of opportunity for climate investing in Africa is now opening. Superior returns can be realised by smart investors who are willing to act as early movers on the continent.”
KPMG has also stated that the perceived risks of investing into the region are actually greater than the actual risks inherent there and that political instability, limited network infrastructure and regulatory concerns are largely nuanced and far from insurmountable.
Key findings of the report include analysis of unlocking Africa’s wind potential, underinvestment in solar, the power of green hydrogen and generally Africa’s decarbonisation potential for investors.
“Despite the region’s capacity to play an essential role in the global climate response, Africa continues to be stifled by underinvestment and a range of misconceptions around its attractiveness as a location to direct green financing,” commented Benedikt Herles, EMA head of ESG insights & innovation, head of country practice Africa at KPMG. “Africa is home to some of the planet’s largest and most profitable options for investments in the global energy transition, making it a uniquely appealing green investment destination.
“Climate investors are looking ahead to new and emerging markets to deploy their funds. It is vital that there is a nuanced and sophisticated understanding of Africa’s potential, and that private investors appreciate the unique advantages and characteristics of the region with respect to not just climate investing, but the broader contribution to the global energy transition from an environmental and social impact perspective.”
Recently, African Review spoke to Tariye Gbadegesin, co-chair of the Voluntary Carbon Markets Integrity Initiative, to discover how important Africa will be in the global race to reduce emissions. Click here to discover the full interview.
