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According to the February Intergovernmental Panel on Climate Change, a failure by African countries in limiting oil, gas, or coal development and limiting global warming is seen as a potential threat to climate crisis and systemic threat to the global financial system.
Released on February 28, the Report confirms that the climate crisis disproportionately affects African countries, demonstrating that climate impacts will worsen sooner than previously predicted and that worldwide action is more urgent than previously assessed, “and yet Africa is host to a growing number of oil, gas and coal projects,”
“Although climate change litigation around the world is forcing companies to reduce their emissions output, the risk of reputational damage has been heightened in recent years by the lack of transparency, corruption, illicit financial flows and serious environmental and human rights violations that characterize this sector in Africa,” the report reads in part.
According to the report, majority of European, Asian and North American financial institutions are putting the continent in danger of becoming locked into fossil fuels, “despite its massive potential for renewable energy. As a result, Africa runs the risk of not being able to make the necessary leap to sustainable energy in time.”
According to the report, $132Bn worth of lending and underwriting was used in 964 gas, oil, and coal projects in West and East Africa, Central and Southern Africa between 2016-2021.
“The vast majority of this finance came from financial institutions based outside Africa, both commercial banks and public institutions such as development banks and Export Credit Agencies,” the report highlights.
The top 15 financial institutions include 10 commercial banks and 5 public finance institutions.
“The largest fossil fuel financiers are; JPMorgan Chase, Standard Chartered, and Barclays but the largest single financier of fossil fuel projects and companies in Africa in this period is the China Development Bank,” the report says
According to the report, $55 billion was contributed by those based in Australia, Europe, North America and Canada. Asia-based financial institution, mainly from China, provided $42 Billion of the total amount. This is 32%. Africa-based financial institution provided only $15 billion, or 11%, of the total finance.
The study was conducted in collaboration with BankTrack, Milieudefensie and Oil Change International. It also included 19 African partners including 350Africa, Alliance for Empowering Rural Communities, (AERC) from Ghana and WEP Nigeria.
The report also stated that the oil, gas, and coal sectors are growing in importance.
The energy transition is accelerating and the production cost of renewable energy dropping rapidly compared to fossils means that there are increasing risks for the financial sector. These projects are at greater risk of becoming stranded assets.
“The National and international legislation Such a major turnaround requires strict legislation from governments worldwide on mandatory human rights and environmental due diligence to make sure the mistakes of the fossil fuel era will not be repeated, giving African countries the prospect of a green, resilient and sustainable future,” it reads
Henrieke Butijn (Climate campaigner, researcher at BankTrack, and lead author of this report) said that although commercial banks can make all of the Net-Zero promises they want, these pledges won’t automatically lead to the necessary short-term steps to end fossil fuel financing or a true Just Transition.
“Banks need to start thinking beyond fossil fuel divestment and renewable energy as the new business-as-usual opportunity and focus on what truly benefits African countries and communities now and in the long-term,” he said
Isabelle Geuskens is a Senior Program Officer at Milieudefensie and a co-author of this report. She said that Africa has the greatest potential for renewable energy, but it hasn’t been able tap into it to build a more resilient and sustainable society.
“Meanwhile our financial institutions and industries continue fuelling the fossil fuel development myth and pour billions of dollars into new fossil fuel projects, locking the continent into fossil fuel dependency and a stranded future.
A Just Transition for Africa means stopping fossil fuel finance and contributing to a renewable energy future that benefits African people first and foremost,”
Bronwen Tucker, Public Finance Campaign Co-Manager at Oil Change International said, “The resources and profits from fossil fuel projects in Africa have overwhelmingly flowed out of the continent rather than providing energy access or public goods.
Anabela Lemos, Director JA! Justiça Ambiental/FoE Mozambique said, “Mozambique and its people are in the tragic situation of being devastated by both the causes and effects of the climate change crisis,” he said adding,
“One of the major causes of the climate crisis is the extractive industry, and right now the gas rush in Mozambique is causing land grabs, destroyed livelihoods, human rights abuses, militarization and conflict,”
The African Development Bank is at the moment navigating between green- and dirty-energy financing options.
