The effects of climate change are no longer a future risk for Africa. They are a present crisis.
Floods are destroying infrastructure that took decades to build. Droughts are collapsing harvests and displacing communities. Extreme heat is eroding labour productivity and straining health systems. Coastal communities are losing ground to rising seas and storm surges.
The case for massive investment in adaptation and resilience is overwhelming. In the infrastructure, agriculture, water systems, and coastal protections that help communities survive a climate that has already changed. But adaptation only buys limited time. Only deep, rapid cuts to the greenhouse gas emissions warming the planet can prevent those impacts from escalating beyond the reach of any response.
The global response to this dual challenge has been woefully inadequate, with particularly devastating consequences for the countries that contributed least to global warming yet are most profoundly affected.
First, despite continued pledges to increase adaptation finance, the financing gap remains massive. Africa is receiving less than US$14 billion per year in adaptation finance against an estimated need of more than US$100 billion. And more than half of what does flow arrives as interest bearing loans.
Second, the growing attention to adaptation has crowded out the increasingly urgent imperative of deep decarbonisation. Investing in decarbonisation has become more, not less, urgent as global warming reaches the 1.5°C threshold, with emissions still rising. Deep decarbonisation is the only way to stop climate-related risks from rising to unmanageable levels.
Resilience becomes increasingly ineffective as emissions and temperatures continue to rise. We cannot adapt to many extreme events, or their impacts on food systems, livelihoods and health. Tipping points are irreversible.
Third and most profoundly, the global financial architecture is failing Africa on multiple levels simultaneously, with cascading impacts for both mitigation and adaptation. Investing in decarbonised energy and transport systems and in building resilience to the increased impacts of climate change requires access to long-term affordable capital.
Yet Africa remains trapped in a cycle of perceived risk and access only to limited and expensive financing. This has made it prohibitively difficult to finance critical investments, exacerbating African countries’ vulnerability, increasing perceived risk, and raising the cost of capital. Debt sustainability frameworks, credit rating systems, multilateral lending practices, and global market rules and conventions reinforce each other. They constrain access to capital that is needed for critical climate-related investments, channelling capital away from the places and sectors that need it most.
For two decades at Columbia University, as my colleagues and I have worked with governments and partners around the world, we have seen these failures play out directly. In the investment decisions that don’t get made and the infrastructure that doesn’t get built. We have watched risks mount, even as the pathways to decarbonisation were known. Already, we are seeing mounting risks and liabilities. There are increased liabilities, more profound trade-offs, and accumulated borrowing from future generations to cover losses today.
The single most important imperative is to lower the cost of capital for African borrowers, both sovereign and non-sovereign, to invest in modern, decarbonised infrastructure and in resilience at scale, for the benefit of the region and the world.
Fundamentally, this means reformed debt sustainability frameworks, liquidity mechanisms, risk assessments and credit ratings. Sovereigns, project developers and investors should also align around coherent, rigorous least-cost energy system modelling, so that investment pipelines are integrated with economy-wide planning.
Then strategic risk-allocation mechanisms at every level of the system, complementing fundamental reforms at the global level, will allow private capital to flow to hundreds of viable projects across the continent.
Failures on the mitigation front
Only mitigation – the deep decarbonisation of the world’s energy, transport, land and industrial systems – reduces the drivers of climate change. All other financing – for resilience, insurance and disaster recovery – manages the consequences of unmitigated climate risk. It does not reduce the underlying hazard.
That we are failing to decarbonise the world’s economy rapidly and at scale is inexcusable. We have the technology, capital and known pathways to achieve rapid deep decarbonisation. Tremendous technological gains mean that the economics increasingly support low-carbon solutions across the built environment, mobility and energy systems.
Energy consumers that have been passive offtakers can now act as storage on grids, stabilising energy demand, lowering system costs, creating new revenue streams, and lowering costs for downstream consumers. Distributed energy systems allow distinct locales to pool and share their energy, so that system disruptions have more limited impacts. Energy generated from the wind and sun are not subject to political capture or fossil fuel price volatility, the only means of truly securing energy security and economic sovereignty.
The current frameworks and institutions for global decarbonisation were built for a different era. Net-zero plans and mitigation targets obscure the way in which energy systems have transformed, expanding opportunities and enabling emissions reductions through systems optimisation.
Rather than insisting on net zero plans and mitigation commitments, we need:
rigorous technical analyses to identify least-cost pathways to decarbonised, optimised energy systems, considering how integration across sectors and regions unlocks efficiencies and reduces cost coordination among diverse actors to support technological diffusion across interconnected systems risk-sharing mechanisms to manage the financing risks that deter private capital at the early stages of transition.
The world is also failing Africa in particular. Africa holds 60% of the world’s best solar resources.
Some 600 million people on the continent still lack access to electricity. Modern infrastructure, properly planned and coordinated, represents an extraordinary development opportunity; energy system investments will power industrial growth, digital connectivity, health and education.
Yet Africa receives just 2% of global clean energy investment, a tiny fraction of the financing needed to build clean energy and mobility systems at scale.
A broken international financial system
The cost of borrowing determines whether an energy system is financeable, and especially whether it is more competitive than fossil-based energy. In Africa’s power sector, the average cost of borrowing to build clean energy infrastructure is 15%-18% on average, compared to 2%-5% in Europe and the United States. At these high costs of capital, clean energy infrastructure is simply not financeable.
Those borrowing costs do not reflect genuine investment risk. They reflect a compounding set of structural constraints and misperceived risks.
GDP per capita is de facto the most decisive determinant of a country’s creditworthiness. A low-income country has virtually no path to investment-grade status regardless of its growth trajectory, governance quality, or returns on public investment.
As of late 2025, only three of 34 rated African countries held investment-grade status. Not a single low-income country held that status.
The IMF-World Bank Debt Sustainability Framework compounds the damage. Based on their institutional methodologies, the IMF and World Bank discourage the long-term public borrowing that African governments need to invest in infrastructure, human capital and climate resilience.
Recent European Central Bank research shows how these failures add up. Climate disasters directly raise sovereign borrowing costs. The ECB analysis shows that the effect is largest and most persistent in developing countries.
A major storm can push bond yields up by more than 140 basis points in an emerging economy, versus roughly 66 in a typical advanced economy. This means the cost of borrowing rises sharply at precisely the moment a country most needs resources to recover and rebuild. Financial breathing room shrinks precisely when climate impacts demand the greatest response.
The ECB analysis further shows that countries with slow energy transitions face a growing transition risk premium. The slower one transitions, the more costly it is to borrow. But the trickle of financing for clean energy in Africa is itself the result of high borrowing costs. So African countries are penalised for facing high borrowing costs for not having adequate public resources to build resilience to the climate impacts they did not cause.
The structural determinants of this problem are well understood. African governments must be able to access affordable, long-term capital to build clean energy and mobility systems, to invest in resilient cities, agriculture and coastlines, and to develop the institutions, health systems and education on which everything else depends.
That requires credit rating methodologies that stop treating poverty as a self-fulfilling proxy for default risk. And a debt sustainability framework that stops discouraging the public investment African economies need to grow. African countries that can make these critical investments at scale will grow far faster than the world’s wealthy economies. The international financial architecture must reflect that – urgently, before adaptation becomes an increasingly inadequate response to risks we had every opportunity to contain.
