A new fund aims to blend $500m of concessional finance with $1.5bn of private investment to back local communities and entrepreneurs restoring land in Africa
An international initiative to finance and support locally-led restoration of environmentally degraded areas of Africa has been given a boost with the launch of a $2bn blended finance mechanism developed by SouthBridge Investments and the Arab Bank for Economic Development in Africa (BADEA).
The fund intends to blend $500m of concessional finance with $1.5bn of private investment to build local capacity and make grants and loans available to local communities and entrepreneurs restoring land in Africa.
It is a response to a call from the African Forest Landscape Restoration Initiative (AFR100) at the 2021 COP26 climate change conference in Glasgow for supporters to mobilise $2bn of investable capital in restoration by the time of COP27 in Egypt, where the fund was announced.
AFR100, launched at in 2015 at COP21 in Paris, brings together 32 African governments with various development finance institutions and a number of other institutions and NGOs providing technical support with a mission to bring 100 million hectares of land across Africa into restoration by 2030. Both Africa-focused financial services firm SouthBridge and Khartoum-based BADEA are new AFR100 partners.
Restoring denuded African landscapes and the associated economic and social damage is a tough challenge. According to a 2021 UN report, up to 65% of productive land in Africa has been degraded, while 45% of the continent’s land areas have been affected by desertification. Both processes have been exacerbated by climate change.
Projects supported by AFR100, many of them small-scale, include those tackling reforestation, greater use of organic food production, more efficient food processing to reduce pressure on land from agriculture, the reduction of chemical fertilisers, soil protection and water conservation among many others.
Backing local actors
AFR100 is solving a fundamental problem when tackling climate action of how to get large-scale finance to local actors in developing countries, according to Ani Dasgupta, CEO of research institution the World Resources Institute, an AFR100 partner.
“This round of funding is a breakthrough in how public and private capital can flow directly to the many thousands of entrepreneurs and NGOs restoring vital lands across Africa. This investment represents a beacon of possibility for what finance at scale looks like,” he said.
Frannie Leautier, SouthBridge Investments’ CEO said Africa’s youthful population has the potential to become an “innovation factory”. “With these assets and strategic partnerships with the rest of the world, we will not only tackle the challenges of climate change but also design a blueprint for the world’s benefit,” she said.
Bezos Earth Fund provides targeted support
Announced at the same time, Bezos Earth Fund (BEF), a vehicle set up by Amazon founder Jeff Bezos, said it would provide $50m in aligned philanthropic support for AFR100. This funding targets capacity strengthening, capital delivery and monitoring improvements in the Rusizi River Basin in central Africa and the Great Rift in east Africa. BEF previously provided $15m in direct support for the group of 100 selected companies, institutions and projects championed by AFR100.
AFR100s supporters stress the growing importance of blended finance in supporting locally led climate solutions, with impact and other private investors required to deliver finance at scale, supported by philanthropic grants and risk capital from governments and development finance institutions.
Whether the blended mechanism can mobilise the level of private capital needed to make it a success will depend to a large extent on whether its managers can convince investors that there are adequate returns to be made from supporting the SMEs deploying restoration solutions in Africa.
The increasing number of impact funds now targeting African SMEs suggests international investors are becoming more confident about financing smaller businesses. Initiatives such as this will provide further evidence of how far this appetite extends.