The effects of climate change and economic degradation pose significant risks to economic growth and employment in southern Africa – these risks will increase in the medium-to long-term. A just energy transition is all about the transformation of the energy industry, for a cleaner, greener energy sector – while simultaneously mitigating any potential negative socio-economic impacts and creating green jobs, for a sustainable future.
Multinational players seek a pathway to achieving lower carbon emissions or a transition away from largescale coal mining with its carbon-intensive operations towards more future-proof climate-friendly assets like renewable energy. Financial institutions play a critical role in initiatives mobilising capital. Therefore, a greater focus on the green sectors and blended finance is needed for a just energy transition.
Transition finance is a category of finance that is critically important to greening the economy but remains an underdeveloped segment of the sustainable finance market in Africa. Transition finance can help facilitate a move away from high carbon emitting methods of production to more climate-friendly methods, whether it be within a sector such as aviation or agriculture, where a clear transition strategy is needed to facilitate transitioning the economy to a greener path.
The key challenge to transition finance is the lack of private sector financing for decarbonisation projects due to various barriers, including: the lack of a clear definition of transition activities, which may lead to investor fears that their participation may be seen as “green washing,” or claiming to invest in green technology.
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