During the Banking on Carbon Markets workshop, industry experts emphasized the need for banks to gain a deep understanding of the risks and returns associated with carbon projects. The African Guarantee Fund stressed that carbon projects play a crucial role in channeling funds into various sectors of the economy, making it essential for financial institutions to support these transitions effectively.
Mr. Patrick Lumumba, the Director of Capacity Development at the African Guarantee Fund Group, highlighted that while many financial institutions are eager to support carbon projects, they often lack comprehensive data to assess associated risks and returns. Additionally, they lack information about effective market entry strategies, growth-oriented business models, risk management, and portfolio construction.
Mr. Lumumba stated that the workshop aimed to enhance the banking sector’s capabilities in venturing into carbon markets, particularly in financing clean cooking projects. This sector’s prioritization has direct positive impacts on several Sustainable Development Goals (SDGs), including gender equality, good health and well-being, and climate action.
Organized in collaboration with the Clean Cooking Alliance and the UN Capital Development Fund, the workshop provided Africa’s banking industry with valuable knowledge and insights required to navigate carbon markets effectively. Topics discussed included carbon finance business models, the intricacies of financing clean cooking projects, and associated risk-return profiles.
Leaders and investors from the industry shared global evidence and experiences related to underwriting risks associated with lending to clean cooking carbon projects. The UN Secretary-General, António Guterres, emphasized Africa’s vast solar resources and the need for increased investments in renewable energy in the region.
The focus on green financing is primarily centered on mitigating climate risk and the untapped potential for banks to maximize opportunities. As pressure mounts, banks are compelled to align their corporate strategies and lending criteria with environmental, social, and governance (ESG) standards.
Mr. Feisal Hussain, the Senior Director of Innovative Finance at the Clean Cooking Alliance, emphasized the essential role of banks in realizing the full potential of carbon markets. He stressed that banks must help bridge the financing gap required to initiate and scale up carbon projects, which is crucial for accelerating the clean energy transition and improving the lives of those without access to clean cooking fuels and technologies.