“African financiers’ enthusiasm for green finance has never been greater!”
During the “Proparco Days Leaders for Climate Finance” held in Paris on October 2, Françoise Lombard told Financial Afrik of her satisfaction that green finance is gaining momentum among bankers and investment funds operating in Africa, while paradoxically, announcements of disengagement from major climate financial coalitions have multiplied since the beginning of the year in other parts of the world.
Interview by Christine Holzbauer
Nearly 200 representatives from financial institutions and banks worldwide came to Paris to participate in the first edition of “Proparco Days” dedicated to climate finance. How do you explain such enthusiasm?
We are very proud to have had a full house. We decided to bring together the leaders of over 70 financial institutions, clients, and partners of Proparco, to discuss this crucial topic of climate finance and share experiences. The response exceeded our expectations. The combined balance sheet and assets under management of the banks and investment funds that came to Paris is around… 800 billion euros! This means we have gathered a powerful group. We are especially pleased that around fifty leading African financial institutions such as Equity Bank or Ecobank were present. This proves that African bankers and financiers are interested in green finance. This can be easily explained given the impact of climate change on the continent where we conduct about half of our activities.
Among your strategic priorities, which one specifically applies to the African private sector to enable it to be more involved in climate finance?
The climate issue has always been a strong priority in our interventions for many years. With our parent company, the French Development Agency (AFD), we were the first development financial institution to align 100% with the Paris Agreement (signed in 2015) for all our financing. Every year, we also allocate around 1 billion euros to finance new projects with climate co-benefits (adaptation/mitigation). This shows our commitment to green finance, which is deeply rooted in our current five-year strategy (2023-2027). This strategy is based on three pillars, starting with planet protection with a strong focus on climate and more recently, nature-based solutions.
The second pillar is reducing inequalities and the third is supporting sustainable and resilient growth. When it comes to Africa, we continue to address these three strategic pillars. This is not the case in other emerging countries where only projects related to planet protection or reducing inequalities are financed. Proparco’s mandate towards Africa is therefore broader. Considering the significant financial resources involved, we mobilize other actors to finance large-scale projects in solar, wind, or hydroelectric power plants such as the Nachtigal dam in Cameroon. But our role is also to work with local financial actors so that they can themselves play a role in financing the continent’s green transition.
How do you implement your commitments towards these local actors?
This can take various forms. For example, we provide green financing lines at market or concessional rates, bringing maturity through long-term financing, which local banks often struggle to find! This subsidiarity component can also involve financing in foreign currencies or technical assistance. Proparco then targets funds, whether for renewable energy projects, energy efficiency, or green housing. We can also provide non-targeted financing for specific projects but linked to strategic climate finance objectives for the bank, as we did for Ecobank.
In this specific case, we pooled 200 million dollars with other financial actors for a loan linked to climate indicators, allowing Ecobank to anchor climate not just as a funding object, but as a strategic object whose objectives permeate its entire activity. Of course, we continue to finance the activity of African SMEs through programs like Choose Africa, in partnership with AFD. I take this opportunity to clarify that we are not making a trade-off between planet protection issues and those of sustainable and resilient growth! Access to clean and affordable energy is a key concern for the African private sector. And when it comes to financing renewable energy projects, it is clear that in Africa today, this is the key to accessing energy that is abundant, affordable, and tailored to local needs.
You have supported climate tech funds (Equator Africa) and agri-resilience funds (ARAF), why are these vehicles crucial?
Proparco’s support for local financial actors in Africa also applies to private equity and venture capital. Proparco invests between 30 and 40 million euros each year in African venture capital. This is quite substantial considering the size of this market. We closely accompany these funds and their teams because we believe this is how the capital market can grow and develop on the continent.
Today, venture capital is concentrated 90% in four African countries (Egypt, Nigeria, Kenya, South Africa). Therefore, it is in our interest to diversify by supporting funds like ARAF, which invests in startups offering innovative solutions to improve the climate resilience of small-scale farmers in East and West Africa. We have supported this fund twice because Africa should be able to feed itself. This is a way to work towards self-sufficiency and food sovereignty by investing to make agricultural enterprises more resilient to climate change. For this, they need to reach a certain critical size. For us, climate finance should permeate all sectors. We work towards this by selecting funds that we believe are most promising in providing solutions, such as in agriculture.
Additionally, we also support microfinance institutions that can include a significant microinsurance dimension to support small-scale farmers.
Regarding TFSC/Investec, what concrete impact do you observe on banks’ ability to lend to climate projects?
With Investec Bank, we launched the Transforming Financial Systems for Climate (TFSC) program in South Africa in 2023. The initiative consists of an $80 million credit facility and a technical assistance program. Here, we are clearly financing green projects. The technical assistance component allows Proparco to support the bank in better evaluating the emissions sources in its portfolio and to help integrate climate into its strategic and credit decisions. In the credit approval process, we conduct the necessary due diligence, but we do not request ex ante approval for each green project backed by the credit line we financed. A post-reporting allows us to verify the proper use of funds. Gradually, a relationship of trust is established during this support process with partner banks.
When do you decide to provide adaptation grants rather than loans?
Proparco finances through loans, guarantees, or investments in projects. It is not a grant… However, the technical assistance that accompanies a significant number of our interventions can be considered as grant-like (sometimes with co-financing from our partner). These amounts are not comparable to our financial instruments. We are talking about 20,000 to 200,000 euros in some cases.
How do you measure the impact on local SMEs and small-scale farmers? What indicators do you require?
We measure the local impacts of our financing both ex-ante on existing macro-indicators and through ex-post evaluations. In terms of climate, for example, we measure the impact of our investments by the tons of CO2 avoided. And in the case of banks and funds, where we act as financial intermediaries, we ensure that our partners are able to conduct these evaluations and report the results back to us.
