Private climate finance in Africa has more than tripled since 2019/20, reaching $26.5 billion annually in 2023/24, according to a new report by Climate Policy Initiative (CPI), FSD Africa and the governments of Norway and the UK.

The third edition of the Landscape of Climate Finance in Africa found that domestic investors accounted for 76% of private climate finance, reflecting the growing role of African financial institutions, businesses and households in financing climate-related investments.

Commercial financial institutions contributed almost half of the increase in private climate finance between 2021/22 and 2023/24, while corporate investment also increased substantially.

The report attributes the growth to stronger climate engagement among African banks, increasing regulatory attention to climate risks and declining costs for renewable energy technologies.

Household climate investment more than doubled to $5.1 billion annually, representing 19% of private climate finance. Small-scale solar accounted for more than 90% of this growth, with household spending on solar photovoltaic systems increasing nearly fivefold to $3.3 billion a year.

Despite these gains, private capital represented just 36% of Africa's total climate finance flows, the lowest proportion of any region globally.

Total climate finance across the continent more than doubled to $74 billion annually in 2023/24, although this remains significantly below the estimated $300 billion to $572 billion required each year for climate mitigation alone.

International public finance continued to account for almost two-thirds of total flows. However, private capital mobilised by multilateral and bilateral development finance institutions more than doubled from 2021/22 to reach $8.2 billion.

The distribution of funding remained uneven. International public climate finance to low-income African countries declined by 11%, while financing to middle-income countries increased by 33%.

Investment was also concentrated in particular sectors, with energy attracting $32.3 billion annually, compared with $6.5 billion for agriculture, forestry and other land use.

Middle-income countries received more than 80% of energy-related climate finance.

Meanwhile, adaptation finance accounted for just 21% of total climate funding, down from 28% in 2021/22.

Barbara Buchner, CEO of Climate Policy Initiative, said African institutional investors could play a greater role in addressing the continent's climate financing gap.

“Africa's climate finance has grown significantly, driven in large part by homegrown private investment. But the challenge is not only volume,” she said.

“African banks, insurers and pension funds manage around USD 3.2 trillion in assets, yet many projects are too small and fragmented for these investors to reach. Clear, predictable policy frameworks and investment vehicles can help bridge this gap, as parts of the renewable energy sector have shown.”

The report highlights the need to strengthen the capacity of African financial institutions to originate, structure and finance climate investments, alongside expanding local-currency financing and risk-sharing mechanisms.

It also identifies consumer financing models, including pay-as-you-go arrangements and local bank lending, as important channels for expanding access to clean energy technologies.

Mark Napier, CEO of FSD Africa, said the findings demonstrated the potential for stronger domestic financial markets to mobilise investment beyond renewable energy.

“It shows that if we build well-functioning, sustainable financial markets we can unlock investment not just in clean energy but in other sectors of the green economy such as agriculture, housing and transport, creating vibrant markets that deliver jobs and basic services as well as climate benefits,” he said.

The report calls for greater mobilisation of African institutional capital, improved investment structures and continued international public financing to address funding gaps in underserved countries and sectors.