Africa’s sustainable finance landscape continued to evolve in 2024, with green instruments emerging as a dominant force in the continent’s labelled debt market.
According to Standard & Poor’s (S&P) latest report titled “Sustainable finance is growing in Africa, but volumes fall short of addressing needs”, African issuers raised an estimated $13 billion in labelled debt last year.
The report says nearly 40% of this amount came from green instruments—bonds and loans expressly tied to projects that deliver measurable environmental benefits.
These green instruments are increasingly attractive to governments, corporates and development-focused issuers seeking lower-cost capital while strengthening their climate credentials.
“Labeled debt raised by African issuers totaled approximately $13 billion in 2024, according to the Environmental Finance database. Almost 40% of this amount was raised through green instruments, or bonds and loans where issuers or borrowers commit to allocating an amount equivalent to net proceeds toward financing projects with clear environmental benefits,” S&P stated.
S&P notes that while sustainability-linked instruments have traditionally dominated the loan segment, they remain a vital tool, particularly for companies in hard-to-abate sectors such as heavy industry, mining, and logistics.
“African governments can use sustainability-linked bonds and loans to formalize and strengthen sovereign sustainability commitments to external stakeholders,” S&P noted.
Other key sectors lag behind in climate finance
According to S&P, while green, social and sustainability (GSS) bond allocations largely support renewable energy investments—crucial for addressing Africa’s energy transition and closing the electricity-access gap—other key sectors continue to lag behind.
“Most of the allocation from green, social and sustainable bonds goes to renewable energy projects, which are key to addressing Africa’s energy transition needs and ensuring broader and more stable access to electricity. Meanwhile, underfunded areas such as climate change adaptation, water security and biodiversity preservation may benefit from broader financing strategies,” S&P report stated.
What you should know
On June 16, the Federal Government launched its N50 billion Series 3 Sovereign Green Bond, aimed at financing environmentally sustainable projects that mitigate climate change and support long-term economic resilience.
The Debt Management Office (DMO) announced the conclusion of the third Sovereign Green Bond issuance, which closed with an impressive total subscription of N91.42 billion.
The DMO noted that investors were allotted a total of N47.355 billion at a coupon of 18.95% per annum.
According to the DMO, the Series 3 Green Bond will finance several priority projects:
- N15.960 billion allocated to the Federal Ministry of Environment for climate change adaptation and mitigation efforts.
- N15 billion directed toward Pi-CNG’s clean energy transition initiative, accelerating Nigeria’s shift toward cleaner fuel sources.
- N9.320 billion designated for the Federal Ministry of Water Resources to construct three earth dams supporting water conservation.
- N6 billion earmarked for the Dange Earth Dam project to strengthen irrigation and water security.
- N1.075 billion will fund the rehabilitation and upgrading of the Buruku/Gboko water supply project, improving access to potable water.
