Lack of finance data hampers climate goals in South Africa: Report

South Africa is the world’s 14th largest emitter of carbon dioxide. Its national climate change response policy calls for inclusion of financial services sector

By Madhumita Paul
Published: Wednesday 10 February 2021

Implementation of climate goals is becoming increasingly difficult in South Africa due to a lack of climate finance data, according to a report published recently. South Africa has committed to reach the goal of limiting global warming to 1.5 degrees Celsius.

The report, published by GreenCape and the Bertha Centre for Social Innovation and Entrepreneurship in partnerships with Climate Policy Initiative (CPI), provided a baseline of all that was possible in catalysing financing and investments required to proceed towards a low-carbon and climate-resilient economy.

A low-carbon / green economy is a call for action aimed at greening the current economy to make it resilient and globally competitive.

Five growing sectors lead climate-resilient development in South Africa: Clean energy; low-carbon transport; smart water (supply and demand); circular economy and smart agriculture.

The report, titled South African Climate Finance Landscape 2020, tracked 62.2 billion African Rand ($4.09 billion) in annual climate finance invested in South Africa for 2017 and 2018.

It looked at a detailed project-level data and studied its source, disbursement, instrument and use. The insights can support public and private role-players with information to shape sectoral strategies and selected policies. They can help improve coherence and coordination between public- and private-level spending in the sectors.

The sources of finance tracked included public finance, private finance and blended finance. Public finance actors committed an annual average of R22 billion, or 25 per cent of the total climate finance tracked in 2017-2018.

Public finance includes funds provided by governments and their agencies, climate funds, and government-funded development finance institutions.

Private finance

Private actors accounted for an average of R35.3 billion of the funds tracked per year in 2017 and 2018. Whole of this investment was tracked in climate mitigation sectors (clean energy, energy efficiency and demand-side management). Commercial investors are the largest source of private climate investment, accounting for R19.3 billion.

Blended finance

Blended finance is the strategic use of development finance (public or philanthropic finance) for mobilisation of additional finance ( private finance) towards sustainable development in developing countries.  

Blended finance provided on average of R4.9 billion of the funds tracked per year during 2017 and 2018.

The end uses of the tracked climate finance included mitigation activities (81 per cent of the finance tracked), adaptation activities (7 per cent of the finance tracked) and dual benefit activities (13 per cent of the finance tracked).  

South Africa is the world’s 14th largest emitter of carbon dioxide. Its National Climate Change Response Policy explicitly calls for an inclusion of financial services sector for shaping climate and green finance architecture alongside project developers and policymakers.

An International Finance Corporation study estimated that the total investment needed to achieve South Africa’s Nationally Determined Contributions (NDCs) was R8.9 trillion over a 15-year timeframe (from 2015 to 2030).

This translates to a required annual investment of R596 billion to achieve South Africans NDCs by 2030, thereby highlighting a substantial gap between required annual investment and actual tracked investment. 

The project team identified several challenges in creating a South African climate finance landscape. Some of the main challenges were: A lack of climate finance tagging across sectors and centralised datasets; limited availability of project-level data; limited industry response and willingness to provide data; the availability of data across periods and data duplication.

The report makes the following recommendations to address these challenges:

  • Launch a process to develop 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
  • Increase clarity and consistency of regulation, particularly for smaller climate sectors and sub-sectors

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