The International Finance Corporation, Social Investment Managers and Advisors, and other financiers have closed a $150 million green bond, planning to fund small and medium-sized rooftop solar enterprises in Africa.
The funding will supply short-term corporate and project financing for up to 10 years towards projects of less than 5 megawatts, with a focus on manufacturing, services, education, healthcare, and agri-processing. Overall, the bond intends to finance more than 220 MW of solar energy and solar storage projects that will reportedly avoid 4 million tons of emissions over the projects’ lifetimes.
"Although demand for solar solutions is growing rapidly, access to affordable financing is a major bottleneck for Africa's smaller businesses,” said Sérgio Pimenta, regional vice president for Africa at IFC. “Solar projects still have higher capital costs than alternative polluting technologies, leading to continued heavy reliance on fossil-fuel backup generators."
Investments include $45 million from the IFC and the Finland-IFC Blended Finance for Climate Program along with $9 million from Global Energy Alliance for People and Planet (GEAPP), representing the first investment under the organizations' partnership to invest in distributed renewable energy projects, specifically in Africa. Additional investors include Shell Foundation, the U.S. Development Finance Corporation, the Schmidt Family Foundation, and several others.
According to the investors, the new green bond is meant to contribute to a just energy transition for Africa. According to the International Monetary Fund, about half of sub-Saharan Africa’s population goes without electricity access. Further, those with electricity access tend to face much higher prices than the rest of the world and experience consistent power shortages.
As solar energy prices have fallen, solar power serves as a potential source of affordable electricity for Africa, especially since the continent experiences consistent, abundant sunshine.
However, high installation costs remain the main obstacle to expanding solar development in the region. Investment gaps are a persistent barrier for renewable energy companies in developing countries, especially smaller- to medium-sized businesses, so this new green bond is one example of what may be made possible with upfront investment.
"We are proud to partner with IFC and SIMA in the launch of this solar green bond that can help scale universal energy access and a just energy transition for Africa," said Joseph Ng'ang'a, Interim CEO at GEAPP. “Through this partnership we are demonstrating the viability of such models and the critical need for cross-sector collaboration to help break down silos, pools resources, and encourage innovation.”
