Development Finance Institutions (DFIs) in southern Africa are pouring significantly more money into fossil fuels exploration than into renewable energy.
This goes against the Paris Agreement as climate change requires financial institutions to stop funding fossil fuels and to fund a swift, just transition to renewable energy.
These are the findings contained in a report released by the Fair Finance Coalition of Southern Africa (FFCSA) yesterday on the sidelines of the UN Climate Change Conference, or COP27, in Egypt.
COP27 has already been marred by controversy as activists said that there were more fossil fuel lobbyists at the gathering than representatives of the 10 countries most affected by climate change.
The FFCSA assessed the policies of six DFIs in Africa focusing on transparency, power generation and climate change.
The DFIs assessed were the African Development Bank (AfDB), Development Bank of Southern Africa (DBSA), Export Credit Insurance Corporation (ECIC), Industrial Development Corporation (IDC), and New Development Bank (NDB).
The “Financing Fairly 2022” report found that there were 782 fossil fuel projects in operation or under construction in Africa between 2016 and 2021.
African Climate Reality Project’s Amy Giliam Thorp said that of those 782 fossil fuel projects, 418 were situated in southern Africa and 212 in South Africa.
Thorp said that climate change and extreme weather events had already killed more than 4 000 people and affected 19 million others in Africa alone since the beginning of 2022.
“There is a huge dependency on fossil fuels in Africa. But the continuing investment in fossil fuel is unacceptable, and transition has never been more urgent,” Thorp said.
The FFCSA research also showed that the AfDB, Africa’s biggest public finance institution with $253 billion capitalisation, scored low on climate change because it needed a clear strategy that details how and when it will phase out fossil fuel financing.
“The AfDB has zero limits on financing new coal, oil and gas projects despite pledging in 2019 that it would get out of coal,” said Zahra Omar, environmental justice attorney at the Centre for Environmental Rights.
“Without a clear strategy on how or when it will phase out fossil fuel financing, the AfDB continues to provide the highest amount of project finance for fossil fuel projects in Africa.”
Omar said the AfDB was not alone as the IDC had a total shareholding of $1.5bn in two coal companies as of November 2021.
“The IDC is the worst-performing public finance institution in Africa, with poor scores on climate response, transparency and accountability, and energy generation,” she said.
“Export Credit Insurance Corporation’s recent loan agreement with Total Energies is worth $800 million and is intended to export gas from Mozambique to Europe. “Meanwhile, communities in Mozambique have exceptionally limited access to electricity.”
The report also found that South Africa was the largest carbon emitter in southern Africa as the country’s coal power plants made up 83.5% of the country’s energy mix in 2020. It said the Public Investment Corporation (PIC) was the third -argest South African institution investing in the coal industry.
The coalition said it required that those most affected by climate impacts be included in making the rules for climate finance.
Community activist Lucy Duba spoke about living in the polluted shadow of the Medupi coal power station in Limpopo, which is funded by AfDB and the World Bank.
“When AfDB came to Lephalale to build the Medupi coal station we were happy because we were jobless and poor,” Duba said.
“Later on we realised that AfDB did not come to make our lives better. We inhale dirty air and no one is doing anything about it. Our lives matter.”
The report made six recommendations to the DFIs, including establishing a fossil exclusion plan or policy, aligning policies with the Paris Agreement goal to limit global warming to 1.5°C, improving the level of disclosure and using the Fair Finance Guide Methodology for better sustainable practices.
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