CLIMATE CHANGE CAPITAL MARKETS
ARUNMA OTEH Arunma Oteh is a highly accomplished leader and expert in global capital markets with 40 years experience in finance, governance, and international development. A
Public-private partnerships (PPPs) can play a pivotal role in scaling up investments, as governments can provide initial funding and policy support to de-risk projects, making them more attractive to private investors. Additionally, innovative financial mechanisms such as blended finance can combine public and private capital to enhance the viability and impact of SDG initiatives. By fostering such synergies, capital markets can amplify the efforts to close the SDG financing gap, ensuring that the global community moves closer to achieving the 2030 SDGs. Africa’s potential Achieving the SDGs by 2030 presents a challenge of gigantic proportions for Africa specifically, with massive investment gaps that need to be addressed. According to UNCTAD, Africa faces an annual SDG financing gap of about US$200 billion to US$300 billion 7. This funding shortfall spans critical areas such as infrastructure, healthcare, education, and climate action. The AfDB estimates that the continent needs around US$130 billion to US$170 billion annually for infrastructure development alone, yet current investment levels are only around US$67 billion, leaving a substantial gap 8. Africa’s wealth of resources, if harnessed effectively, can significantly contribute to meeting the SDGs. Africa holds 39% of the world’s renewable potential. Our continent possesses immense potential for renewable energy generation, with its vast solar, wind, and hydro resources significantly underutilized compared to global figures. The continent has about 60% of the world’s best solar resources, yet it currently generates less than 1% of global solar electricity9. According to a study commissioned by the IFC, Africa possesses wind resources capable of meeting its entire electricity demand 250 times over. The study, which assessed the continent’s technical wind potential, revealed that Africa could generate more than 59,000 gigawatts of wind energy – more than sixty times the current global installed wind capacity10. Despite this vast potential, wind power remains largely underutilized in Africa, with the continent accounting for less than 1% of the world’s installed wind capacity. Hydropower also remains largely untapped despite the continent’s extensive river systems. This disparity underscores the need to accelerate investment to begin tapping into Africa’s renewable energy resources fully.
Overall, to achieve the SDGs by 2030, we must all come together to produce unprecedented global investment and create innovative financial solutions. Capital markets can play a pivotal role in mobilizing resources and aligning investor interests with sustainability goals through instruments like green bonds and sustaina- bility-linked loans. Utilizing the resources of underfunded regions such as Africa will not only support the financial development of several economies but also benefit the planet for the better. Accelerating sustainable finance is not just a necessity—it is a shared responsibility to ensure the lasting progress of our world and our future. Arunma’s new book All Hands on Deck is launching on January, 14, 2025. Arunma offers a profound case study for the type of leader needed to build sustainable capital markets, drawing on practical anecdotes and insightful reflections from her journey leading Nigeria’s Securities and Exchange Commission. This is a must-read for those looking to unleash the potential of capital markets to generate true global economic and social transformation. former Treasurer of the World Bank, she has also served as Director General of Nigeria’s Securities and Exchange Commission, driving crucial capital market development initiatives and reforms post-global financial crisis. Currently, Arunma is an academic at Oxford University’s Saïd Business School.
US $5 trillion to US $7 trillion
the amount of investment needed annually to achieve the UN SDGs
the value of climate bonds issued in 2023 US $870 billion
1 817UDGHDQG'HYHORSPHQW)LQDQFLQJIRU6XVWDLQDEOH'HYHORSPHQW5HSRUW 81&7$' KWWSV XQFWDGRUJSXEOLFDWLRQƓQDQFLQJVXVWDLQD - ble-development-report-2024; 2 UN Trade and Development, “SDG investment is growing, but too slowly: The investment gap is now $4 trillion, up from $2.5 in 2015,” SDG Investment Trends Monitor, 4 (2023), https://unctad.org/publication/sdg-investment-trends-monitor-issue-4; 3 The IMF estimates this could actually have been as high as US$450 trillion in 2021; 4 Organisation for Economic Co-operation and Development (OECD) Global Outlook on Financing for Sustainable Development 2021: A new way to invest for people and planet (OECD Publishing, 2020); 5 Climate Bonds Initiative, Sustainable 'HEW *OREDOVWDWHRIWKHPDUNHW ZZZFOLPDWHERQGVQHWƓOHVUHSRUWVFELBVRWPBKSGI 6 L. Tang, “Sustainability-linked bonds, loans sink in 2023,”The Asset (January 13, 2024), www.theasset.com/article-esg/50731/sustainability-linked-bonds-loans-sink-in-2023; 7 UN Trade and Development, :RUOG,QYHVWPHQW5HSRUW ,QWHUQDWLRQDOWD[UHIRUPVDQGVXVWDLQDEOHGHYHORSPHQW 81&7$' KWWSV XQFWDGRUJZHEŴ\HUZRUOGLQYHVW - ment-report-2022; 8 African Development Bank, “African Economic Outlook 2022” (2022), www.afdb.org/en/documents/african-economic-outlook-2022; 9 International Renewable Energy Agency, “Renewable capacity statistics 2020” (IRENA, 2020), www.irena.org/publications/2020/Mar/Renewable-Capaci- ty-Statistics-2020; 10 International Finance Corporation (IFC), Wind Energy: A Review of the potential in Africa (2013)
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THE FUTURE OF ENERGY
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