Private sector investments are critical in addressing the drivers and effects of climate change to ensure sustainable development and economic growth, experts have emphasized.
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In a Country Focus Report (CFR) by the African Development Bank (AfDB), launched on September 28, it is noted that green growth and climate action are essential if Rwanda is to achieve its national development vision of becoming an upper middle-income country by 2035 and high-income country by 2050.
According to the Notre Dame-Global Adaptation Index (NDGAIN) 2020, Rwanda is the 32nd most climate-vulnerable country with an index of 52.7, yet it is the 88th readiest country with an index of 42.9 as it aims to reduce greenhouse gases by 38 percent by 2030.
However, to achieve this, the report indicates that there needs to be a comprehensive approach to addressing climate change which involves investments in climate change adaptation, addressing losses and damages from climate change, investments in natural resource management, and in reducing social inequalities. ALSO READ: ‘Blended finance’ could boost green investments in Rwanda
The 38 percent reduction of greenhouse gases is equivalent to mitigation of up to 4.6 million tons of carbon dioxide estimated at a cost of $11 billion. This cost comprises $5.7 billion for mitigation and $5.3 billion for adaptation, excluding loss and damage, and other costs.
However, Rwanda faces challenges mobilizing private sector financing due to high upfront capital needs to develop key projects, financing costs from banks, and collateral requirements, the report states.
Aïssa Touré, the Country Manager of the AfDB, said that institutions should question why there is a low uptake of private sector on available green growth financing instruments and find more effective approaches to have them on board.
"There should be thorough assessment according to different segments constituting the private sector with various needs, challenges, and opportunities. We want them to be part of the solution but we are not giving them tailored support they can tap into,” she explained.
Toure added that green growth demands the attention of public and private financing, even to informal business people, putting into perspective what $1 can do in the fight against climate change.
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Beatrice Cyiza, the Director General of Environment and Climate Change in Rwanda’s Ministry of Environment, said that the ministry and stakeholders will work on the recommendations highlighted in the report including policy coordination and strengthening the partnership with the private sector.
She took note of the need to close the gap of accessing capital for green projects, arguing that sometimes a project that address climate change issues, like adaptability, reducing carbon emissions, or building people’s resilience might be good on the environmental side but cannot be considered bankable by a commercial bank because of assessed risks.
"We will work together with banks for private sector capacity building and coming up with innovative financing mechanisms targeting SMEs and big enterprises.”
In November 2022, Rwanda launched the Rwanda Green Investment Fund (RGIF) at the COP27, which was successfully capitalized with $104 million and has been financing project preparation and providing concessional credit facility loans and guarantees to support SMEs to invest in green projects.
The RGIF aims to mobilize climate finance at speed and scale to finance a pipeline of innovative projects in clean energy, smart mobility, sustainable cities, climate-smart agriculture, increased forest cover, and waste and circular economy.