Climate Change and Finance in Africa: Some Theoretical and Practical Justifications

Abstract

Global warming evidence is worrisome, and its impact has spread across all continents of the world. Unfortunately, many countries are not paying sufficient attention to environmental damages resulting from climate change. Commitments to emissions reductions are also not being honored by countries. This exploratory paper seeks to justify the need for African countries to pursue clear-cut climate mitigation and adaptation strategies and the necessity of integration across multiple disciplines and embraced by both public and private sectors. Climate change is a source of financial risk; it threatens the stability of the financial system through systemic risk factors, produces negative externalities, and creates moral hazard. Innovative debt and equity instruments for funding climate-compatible urban infrastructure are discussed and recommendations made for assessing climate projects.