While South Africa has adopted a range of national and sectoral policies, plans and strategies to decarbonise the economy, the lack of climate finance data hampers efforts to meet broad developmental objectives.
Without the analysis of financial data issues such as support of national climate policy, mobilisation of public and private partnership and the promotion of resilient economic growth are often tackled in a vacuum without a reference point.
The recently published report South African Climate Finance Landscape 2020 provides that necessary baseline of what is possible in catalysing the finance and investment needed to proceeds towards a low-carbon and climate resilient economy.
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The report, published by GreenCape and the Bertha Centre for Social Innovation and Entrepreneurship in partnerships with Climate Policy Initiative, has tracked R62.2 billion ($4.09 billion) in annual finance invested into South Africa for 2017 and 2018.
Dr Angela Falconer, Climate Policy Initiative director: “A clear understanding of the providers of climate finance, financial instruments used to channel investment, key sectors where finance is flowing and the role of different stakeholders can help to scale up investments to achieve South Africa’s Nationally Determined Contribution (NDC).
Jack Radmore, GreenCape energy and green finance programme manager, said it was inspiration to see the amount of work already underway in the climate finance landscape in South Africa. Their analysis drew on interaction about specific climate finance flows with National Treasury, the Department of Environment, Forestry and Fisheries, fund managers, investors and industry experts.
Climate finance by the numbers
The South African Climate Finance Landscape looks at detailed project-level data to understand the source, disbursement, instrument and use of the financing. The insight can be used to support public and private role-players with information to shape sectoral strategies and selected policies and improve coherence and coordination between public and private level spending in these sectors.
The report looked at three types of finance: public finance (R22 billion tracked), private finance (R35.5 billion); and blended finance (R4.9 billion) for 2017 and 2018.
The end uses of the tracked climate finance include mitigation activities (81% of the finance tracked), adaptation activities (7%) and dual benefit activities (13%).
An International Finance Corporation (IFC) study estimates the total investment needed to achieve South Africa’s NDCs is R8.9 trillion over a 15-year time frame (from 2015 to 2030). This translates to a required annual investment of R596 billion to achieve South Africa’s NDCs by 2030. This highlights a substantial gap between the required annual investment and actual tracked investment.
Radmore points out South Africa is the world’s 14th largest emitter of carbon dioxide, ad on a per capita basis, the 10th largest emitter. “We also have an added challenge, like other developing countries. One of the greatest challenges of any developing country is to find the balance between increasing consumption to improve quality of life while ensuring an equitable transition towards a low carbon economy,” explained Radmore.
Natasha Dinham, senior project manager: impact investing at the Bertha Centre for Social Innovation & Entrepreneurship: “There remains a clear need to move beyond business as usual, increasing annual investments into targeted sectors, if South Africa is going to achieve its agreed climate goals and initiate a genuine system transition across the country.”
Identifying concrete ways to upscale efforts to decarbonise the economy
The project team identified several challenges in creating a South African climate finance landscape. Although the numbers and trends identified represents the available data, more work is needed to improve the accuracy of reporting on the South African climate finance landscape.
The report makes the following recommendations to address the identified challenges:
- Launch a process to developed agreed-upon definitions of climate finance, with guidelines on tagging and tracking investments;
- Improve public-private coordination within South Africa;
- Increase support for blended finance vehicles and develop innovative financial tools; and
- Increase clarity and consistency of regulation, particularly for smaller climate sectors and sub-sectors.
Chavi Meattle, Climate Policy Initiative senior analyst: “On the back of these foundational findings, more work is needed to establish a multi-stakeholder platform to better understand the role of public and private actors and to facilitate inter-ministerial and cross-sectoral coordination and efforts to mainstream climate objectives.”
Unpacking the need for a multi-stakeholder platform, Radmore explained that catalysing the financing and investments required to proceed towards the low-carbon and climate-resilient economy is a challenge. “The South African Climate Finance Landscape report found that climate spending and investment in South Africa, for the most part, remains siloed between the public and private sector.
“Aside from the intentional efforts of a few development finance players, collaboration is limited. As shown in the Landscape, the R4.9 billion of blended finance, which brings together public and private sources of funding, generally comes from international rather than local sources.
“With R8.9 trillion of financing needed to achieve its climate targets, South Africa must unite to scale investments towards climate change,” said Radmore.
He believes the needed increase in investment will be a combination of financing from outside the country and local investors.