Why Debt-Based Climate Finance Is Failing Africa and How to Fix It

Based on the latest figures from the Climate Policy Initiative, financial flows for climate initiatives in Sub-Saharan Africa hit $55 billion in 2024, representing more than twice the amount recorded in 2019.

That progress masks stark disparities in how the money is distributed and delivered. Half of all climate-finance resources directed to Africa went to just ten nations, whereas the ten most climate-vulnerable countries on the continent obtained a mere 10%.

Private climate finance shows even higher concentration. Seventy-six percent of private funds go to just ten countries, restricting access for the rest of the continent. Meanwhile, multilateral climate funds under the United Nations Framework Convention on Climate Change account for only 2% of Africa’s climate finance.

Debt makes up as much as 51% of the climate financing provided to Africa, divided equally between market-rate and concessional loans. Conversely, borrowing represents only 18% of climate finance within East Asia and the Pacific, and 20% across Latin America and the Caribbean.

Official channels—primarily bilateral and multilateral development-finance institutions—provide 82% of Africa’s market-priced, debt-based climate financing. ActionAid’s new report finds that debt is a major barrier to green investment across the continent.

In 2026, 54 of the world’s most climate-vulnerable countries will spend $304.8 billion on servicing debt, compared to $12.3 billion on climate action, according to ActionAid. That is a ratio of nearly 25 to one.

Debt repayment absorbs 65% of these countries’ combined national revenue. Tanzania allocated 0.9% of its unconditional nationally determined contributions costs, and Malawi allocated 10.3%, while Zambia devoted just 0.32% of its budget to climate policies.

Addressing these fiscal constraints requires reporting climate finance in a way that reflects its actual worth rather than counting a repayable loan the same as an equivalent grant. The OECD’s Development Assistance Committee uses the concessional portion rather than full face value to measure official assistance.

Africa has roughly $2.4 trillion in domestically managed bank, insurance, and pension assets that could help fund the transition. Tanzania’s Tanga UWASA successfully launched East Africa’s pioneer subnational green bond for water infrastructure in February 2024, pulling in Tsh53.12 billion and achieving a 103% oversubscription rate.

Copperbelt Energy Corporation Renewables raised $150 million in Zambia to finance solar capacity by issuing the country’s first green bond over two tranches, both oversubscribed without a sovereign guarantee.