As African Heads of State participate in the thirty-seventh ordinary session of the Assembly of Heads of State and Government of the African Union in Ethiopia this week and grapple with climate finance challenges, a hidden crisis akin to the “Scope 3 challenge” in global climate finance looms large.

The imperative to mobilize private capital at scale for Africa’s $3 trillion of Nationally Determined Contribution (NDC) and sustainable development investment projects by 2030 is obscured by an exaggerated emphasis on Multilateral Development Bank (MDB) concessional loans, which, after all the reforms, will at best only address 10% of Africa’s private capital mobilization financing gap.

Much like the scrutiny investors face in accounting for Scope 3 emissions, African governments and MDBs must confront the hidden “Scope 3 equivalent” – the private capital mobilization market failure — the 90% financing and investment gap that demands immediate attention and strategic institutional investor at scale intervention. The urgency of recognizing and addressing this issue is heightened by Africa’s soaring external debt, reaching 29% of GDP in 2022, coupled with declining Official Development Assistance (ODA).

To achieve the Nairobi Declaration and the Sustainable Development Goals (SDGs), Africa requires at least an additional annual financing of approximately USD 194 billion, a goal that current MDB efforts fall significantly short of and are incapable of mobilizing from the private sector.

This call to action implores Heads of State and MDBs to augment and shift focus from the 10% addressed by MDB concessional loans, to urgently partner with the institutional investment community (representing over $150-$200 trillion of assets) as universal owners, to play a leadership role in addressing the hidden 90% private financing gap exacerbated by the pervasive MDB private capital mobilization market failure. Regulatory bodies from the European Union, Japan, the UK, and others signal the impending mandatory disclosure of private sector contributions, echoing the evolving landscape of Scope 3 reporting.

Institutional Investor-Public Partnerships (IIPPs) and blended investments are indispensable to co-create bankable NDC projects and bridge this financing gap at scale and speed. Much like the push for mandatory Scope 3 disclosures, governments and MDBs must incentivize the institutional investment community to invest and procure at scale as universal owners, to close Africa’s financing gap at speed.

The transformative role of entrepreneurial philanthropies, spearheading and catalyzing Africa’s private capital mobilization paradigm shift, – rendering African Green Industrial Infrastructure a globally competitive investable asset class, which makes development investable, not investment development, cannot be overstated.

In essence, this call to action advocates for a comprehensive and strategic approach to address Africa’s “Scope 3 equivalent” of private capital mobilization at scale. The focus should be on making development investable by unlocking the potential of the African Union’s 5% Institutional Investment Agenda, IIPPs, and blended investments, to close the investment gap, ensuring the responsible mobilization of private capital at scale and speed for Africa’s Nairobi Declaration, is incentivized and mainstreamed as the expectation, not the exception.

Africa investor’s Dr. Hubert Danso will be chairing the high-level panel on ‘Making Development Investable’ at the Africa Business Forum, alongside the thirty-seventh ordinary session of the Assembly of Heads of State and Government of the African Union in Addis Ababa, Ethiopia. See Ai MDB Reform Private Capital Mobilization Initiatives here 

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Ai Combating Climate Change

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