November 16, 2016
The World Bank Group and Ithmar Capital, a Moroccan Sovereign Investment Fund, announced Wednesday they have signed an agreement to launch a pan-African-dedicated green investment fund.
The fund, Green Growth Infrastructure Facility for Africa, will be used for the development of domestic infrastructures such as water efficient apparatus, clean energy, and low carbon cars, which will aid the continent’s climate change efforts.
GGIF will be the first dedicated structured private capital fund done though a public-private partnership that is aimed at private investors who are looking for so-called impact or green investment opportunities in Morocco and other African countries.
The goal is to use the fund as a catalyst for the transition of Africa into a green economy.
The MoU comes as world leaders and private sector representatives convene for two weeks in Marrakech, Morocco from November 7- 18, 2016 for the 22nd Conference of the Parties to the United Nations Framework Convention on Climate Change (COP22) meetings to discuss further implementations of last year’s Climate Change Paris Agreement, which went into forced effect this month on November 4 ,as well as rally more financial support for the implementation of the agreement.
So far, 45 sub Saharan African countries have pledged to implement their Intended Nationally Determined Contributions and 19 countries, including Nigeria, have ratified the Paris Agreement for carbon offsetting, according to a recent World Bank’s report Accelerating Climate-Resilient and Low-Carbon Development, which highlights the success African countries have made since the launch of the ACBP in 2015.
Experts say the GGIF deal, which also underscores multilateral financial institutions’ willingness to work with the private sector to help African counties and other developing nations meet their climate change commitments and build resiliences against climate change effects such as El Nino, will benefit from the dual-financiers’ expertise and strengths.
The World Bank, known for its policy and financing work around the world in supporting developmental works that aid in closing economic inequalities plus Ithmar Capital’s network of partners and experience in co-investment structuring will serve as a linchpin for leveraging as well as mobilizing further private capital actions and investments that can increase private capital flows for environmentally sustainable infrastructure investments across the continent.
The deal has already been lauded by International Forum of Sovereign Wealth Funds (IFSWF), which recently launched its first exclusive working group on climate change.
Sovereign Wealth Funds are well known for their long investment horizon, sovereign status, and relatively little need for portfolio liquidity as natural investors in infrastructure projects.
The partner plans to work with government agencies and a broad range of public and private investors, including Regional Development Banks, Sovereign Wealth Funds, and global and regional institutional investors on creation of practicable projects that will boost target countries’ economy using innovative mechanisms for project preparation and capital structures which will reduce the risk of marginally non-bankable projects.
The GGIF deal builds on the World Bank’s efforts to help African countries access a menu of internal and external concessional and climate change sources to achieve their climate change commitments.
Last year, the World Bank launched the Africa Climate Business Plan– a blueprint for fast-tracking climate resilience that has since generated $3.6 billion, funding 60 projects in 33 countries by working with client countries, development partners such as African Group of Negotiators, and the private sector, to continue to build on the ACBP’s program of work.
Though progress has been made by several African countries, including Cote d’Ivoire, Nigeria, on many key areas of the ACBP such as in the ocean economy, coastal protection, forests, landscapes, migration, transport, water, and energy, one particular area of growing interest is the transport sector, specifically in the development of climate-smart automotive, which is getting $3.2 billion investment.
Makhtar Diop, World Bank Vice President for Africa, speaking about a recent report that came out last week about the progress of ACBP since its launch, noted that it is time time to scale up efforts to accelerate Africa’s climate-resilient, low-carbon development.
“It was fortunate that we launched the ACBP at COP21[last year], where Africa was front and center. Morocco is now taking the baton from France to ensure continuity and renewed attention to the African continent at COP22,” said Mr. Diop.
Earlier this month ahead of the COP22 meetings, the World Bank’s International Bank for Reconstruction and Development (IBRD) raised US $500 million with World Bank green bonds from US institutional investors, including Blackrock and PIMCO and the Maryland State Treasurer’s Office to support the financing of global climate action.
PIMCO’s Scott Mather, Chief Investment Officer U.S. Core Strategies said the firm views “the World Bank’s green bonds as an opportunity to help our clients achieve their investment objectives while also supporting the World Bank’s important global sustainability efforts.”
World Bank Vice President and Treasurer, Arunma Oteh welcomed the international community efforts and financial support to help tackle climate change through the 2015 Paris Climate Agreement and added that “mobilizing financing through the capital markets is a key part of the solution that the Bank’s Treasury has been leading since 2008, with its green bond transactions and other capital market activities. We’re very pleased that the State of Maryland and other institutional investors are supporting these climate finance efforts with their investments in high-quality, liquid World Bank bonds.”
The GGIF deal also highlight the importance and benefit of long-term partnerships between governments and the private sectors in helping countries like Morocco take a step closer to achieving their strategic economy priorities.
The North African country, which relies on its growing economy and European proximity has become a competitive African business hub, and a key economic and strategic partner for many African economies- attracting investments from Abraaj Group, and TPG, under the leadership of His Majesty the King Mohammed VI, is underway as evidenced by the rise in direct investment in high-value sectors such as banking, insurance, telecommunications, energy agriculture and social housing.
Analysts say these efforts will help countries in the implementation of the climate agreement and mobilizing financing schemes.
Nigeria’s Minister of Environment, Hon. Amina J. Mohammed said “the fact that [government and business leaders and representatives from both public and private sectors] are underscoring Africa and that individual countries are in the driving seat is really important. She said Nigeria plans to turn its Intended Nationally Determined Contributions from words to actions.
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