Climate Blended Finance in West Africa

Section I

Executive Summary

The money required to address climate change in West Africa exists. It sits in pension funds, sovereign wealth funds, and development bank balance sheets, held back by risks that a relatively small amount of the right capital could remove.

Accessing this capital is urgent. Coastal cities and economic hubs across West Africa are experiencing accelerating erosion, flooding, and pollution, while rapid urban growth is intensifying heat stress and straining energy systems, transport, and basic services. Governments face urgent needs to modernize power systems, expand low-carbon transport, and strengthen housing, water, and coastal protection. Declining aid and weaker cross-border investment are limiting their ability to fund these large-scale investments through public budgets alone.¹

Global analyses suggest that developing economies will require roughly US$2.4 trillion per year in climate investment by 2030 to cut emissions, adapt to worsening climate impacts and build long-term resilience.² The latest available data shows international aid fell by around 9% in 2024 and is projected to drop another 9–17% in 2025, cutting grant funding just as government budgets are already stretched and climate-related losses are rising.³

Blended finance offers a practical way to narrow this gap. A relatively small amount of philanthropic funding, placed strategically, can make a project viable enough for banks, pension funds, and development institutions to participate in. It takes on early risks that others will not. This may include grants, program-related investments, or mission-aligned capital, used to mobilize rather than replace commercial finance.

The impact of this approach is already visible. Across emerging markets and developing economies (EMDEs), domestic private actors, from private companies to households, are increasingly financing wind and solar as costs fall and risks become better understood. Blended finance has helped unlock these markets by supporting early projects and building investor confidence. In EMDEs, the share of installed power capacity from renewables has increased from roughly 26% to about 33% over the past decade, contributing to gigaton-scale emissions reductions over the lifetime of these assets.⁴

Recent research from Convergence shows that climate blended finance is continuing to grow. In 2024, these structures channeled roughly US$15.5 billion into climate investments across 84 deals, including US$1.6 billion from institutional investors such as pension funds.⁵ Historically, blended finance transactions have mobilized capital at roughly a 1:4 ratio, with each concessional dollar unlocking four dollars of commercial investment.⁶ These structures are helping expand access to clean energy, strengthen climate-smart agriculture, and improve water and urban services for millions of people in climate-vulnerable regions.

While this marks real progress, it remains a small fraction of the US$2.4 trillion in annual climate investment needed across developing economies. More critically, the majority of funding goes toward reducing emissions, particularly in energy and transport systems, while investments in adaptation, helping communities withstand floods, droughts, and rising temperatures, account for fewer than one in five deals and just 13% of total funding over the past five years.⁷

This disparity is partly structural. Renewable energy projects tend to have predictable revenue, often backed by long-term agreements with utilities, making them easier for commercial investors to finance. Adaptation investments deliver benefits across communities rather than to individual paying users (coastal protection, watershed management, climate-resilient infrastructure) that are harder to monetize directly. Even so, their economic value is high: recent analyses suggest that, on average, every US$1 invested in adaptation generates between US$2 and US$10 in net economic benefits, through avoided losses, higher productivity, and stronger long-term resilience.⁸

There are already examples of how this gap can be closed, as the case studies below illustrate. Adaptation projects start to attract private investment when the structure is right, for example when governments backstop revenue shortfalls, bundle multiple income streams, or when philanthropic capital absorbs early losses to prove a model that larger investors can follow at scale.⁹

For West Africa, the path forward requires a shift in how climate finance is structured. Key priorities include:

• Building scalable, repeatable pipelines rather than one-off deals
• Bundling multiple projects into larger portfolios to achieve efficiency
• Standardizing contracts and documentation to reduce transaction costs
• Strengthening credit profiles through strategic guarantees and blended structures
• Using catalytic capital deliberately to unlock both domestic and international investors

Section II

Blended Finance: A Practical Tool for Climate Action at Scale

These approaches are already emerging across the region in practical, real-world applications. Senegal's guaranteed bond for its national utility and the Renewable Energy and Energy Efficiency Fund (REEF) show how strategic use of grants and guarantees can reduce risk, bundle smaller projects together, and enable local pension funds and banks to invest in clean energy.¹⁰¹¹ Dakar's electric bus rapid transit system demonstrates how government funding, revenue guarantees, and private operators can work together to deliver affordable, low-carbon public transport at scale.¹²¹³ Additional examples from across the region are explored in the sections below.

What Blended Finance Is

Blended finance is not a single financial product; it is a way of structuring deals. Think of it as using philanthropic capital as a lever: a relatively small amount of grant funding or guarantees, strategically placed, can reduce risk enough to attract much larger investments from banks, pension funds, and development institutions.

Rather than funding entire projects outright, philanthropic capital can absorb specific early-stage or higher-risk components that commercial investors cannot underwrite on their own. By taking this catalytic position, philanthropy can unlock three to ten times more capital than it deploys directly. This approach makes scarce grant dollars go further, mobilizing multiples of commercial and development bank capital rather than substituting for it.

Core Instruments and Their Uses

Blended finance uses different tools depending on what's holding back investment:

Each tool addresses a different barrier to investment. The art of blended finance lies in using the minimum catalytic capital necessary to unlock the maximum commercial participation.

Section III

A Narrowing Window for Climate Investment in West Africa

Three forces are colliding in West Africa right now, creating both crisis and opportunity:

1. Climate impacts are accelerating. Coastal cities face worsening floods and erosion, power grids strain under extreme heat, and water systems can't keep pace with climate variability and rapid urbanization. The cost of inaction, in lost livelihoods, damaged infrastructure, and economic disruption, is rising faster than governments can respond.
2. Traditional aid is disappearing. Official development assistance fell 9% in 2024 and is projected to drop another 9-17% in 2025. Grant funding is falling while climate needs are rising, and in several countries, elevated public debt is further limiting governments' ability to co-finance or backstop investments through traditional means. Concessional finance alone cannot meet the scale required.¹⁵
3. Commercial capital is ready to move, if the conditions are right. Institutional investors, pension funds, and development banks are actively seeking climate-resilient investments in Africa.

The Opportunity: Proving What Works

This convergence creates a unique window. Pioneering transactions across Africa are demonstrating that blended finance can bridge the gap, using strategic philanthropic and concessional capital to unlock commercial investment at scale:

• The African Development Bank launched a $211 million climate-resilient agriculture program in Angola, reaching 440,000 farmers with adaptive seed systems and solar irrigation.¹⁶
• SunCulture has reached over 40,000 farmers with solar-powered irrigation systems, tripling incomes for many and saving 1.5 tonnes of CO₂ per pump annually and just launched a $15 million blended finance structure designed to unlock local currency capital at scale.¹⁷
• The West Africa Coastal Areas Management Program (WACA) is now operational across nine countries with $492 million in financing, protecting coastlines that generate 42% of West Africa's GDP and building resilience infrastructure that will enable future private investment in ports, tourism, and the blue economy.¹⁸
• The Green Climate Fund made its largest-ever African equity commitment—$253 million—to the Infrastructure Climate Resilient Fund, a first-loss investment designed to unlock $3.7 billion in climate-resilient infrastructure across 19 countries and benefit 50 million people directly.¹⁹

These initiatives are still early, but they show how climate investments in the region can be structured in ways that reduce risk and attract larger pools of capital.

The Risk of Waiting

Expanding the financial tools that can support these investments will take time, and the choices made over the next few years will influence how quickly climate finance can reach the projects that need it.

Acting now allows philanthropic leaders to:

• Shape market standards. The first transactions establish norms around risk-sharing, governance, and impact measurement. These precedents will guide billions in future capital flows.
• Demonstrate viable models. Early investments can demonstrate business models while they're still cost-effective, before climate impacts make systems too expensive or impossible to protect.
• Crowd in domestic capital. Pension funds and regional banks are watching initial deals closely. Successful early transactions determine whether local capital enters the market or remains sidelined.

Delaying action carries structural consequences. As official development assistance declines and climate pressures intensify, the 'missing middle' will expand. More projects will be too risky for commercial capital but too capital-intensive for traditional grantmaking to cover at the required scale.

Without catalytic philanthropic capital to de-risk and standardize these models now, markets may stall, leaving the countries least responsible for climate change dependent on shrinking grant flows to stem the crisis rather than building sustainable investment ecosystems.

Section IV

What Makes Climate Investments Ready for Blended Finance?

Not every climate challenge is suited for blended finance. The most promising opportunities share specific characteristics that make philanthropic capital catalytic rather than simply substituting for other funding sources.

The Right Conditions

The economics are sound, but the risk profile deters commercial investors.

The strongest candidates have underlying cash flows (electricity sales, transport fees, agricultural revenues, municipal bond repayments) but face barriers that commercial investors won't accept: payment risk from weak utilities, demand uncertainty for new services, currency mismatches between hard-currency debt and local revenue streams, or long payback periods that exceed typical commercial terms.

Philanthropic role: Guarantees, first-loss positions, or concessional debt that absorb the specific risks keeping commercial capital away. This can help unlock low carbon investment in markets where unsustainable debt burdens have narrowed the fiscal space to act.

Projects can be aggregated and standardized.

Individual $1-10 million projects struggle to attract institutional investors because transaction costs are too high. But when projects are bundled into funds, use standardized contracts, or create repeatable templates, they become investable at scale.

Philanthropic role: Fund setup costs, project preparation facilities, and technical assistance to develop standardized documentation, small investments that unlock entire pipelines.

Local or regional capital is available but needs de-risking.

West Africa's pension funds, regional development banks, and emerging institutional investors hold significant capital but have strict fiduciary requirements and limited experience with climate investments. Recent deals have shown that they will participate when risks are adequately mitigated.

Philanthropic role: Credit enhancements and capacity building that enable domestic capital markets to finance their own climate transitions, reducing long-term dependence on external funding.

The Adaptation Opportunity

Adaptation investments require a different lens. Benefits are often spread across whole communities rather than individual paying customers: coastal protection shields entire neighborhoods and ports, climate-resilient agriculture stabilizes food systems, and urban drainage reduces city-wide flood risk. That makes it hard to charge users directly, even though these investments often deliver very high economic returns in avoided losses. Developing countries are expected to need about US$310–365 billion per year for adaptation by 2035, but current international public funding is only around US$26 billion per year, a shortfall of roughly 12–14 times the present level of support with particularly acute implications for highly exposed regions like West Africa's coasts and rain-fed farming systems.²⁰

Philanthropic capital plays a unique role in advancing these types of transactions. Commercial investors increasingly understand mitigation, renewable energy and efficiency "pencil out" on familiar revenue and risk terms, but they are still learning how to value resilience, especially where cash flows are indirect or bundled into public services. The emerging evidence from least developed countries and small island states shows what is possible when catalytic, patient capital participates:

• Debt-for-climate deals use guarantees and grants to lower a country's debt payments and set aside reliable funding for water security and climate resilience.
• Green bonds issued by local utilities (such as Tanga's water bond in Tanzania) show that towns and cities can borrow directly from investors to fund climate-resilient water and other services when they have clear rules and good support.
• Locally led adaptation programs put money and decision-making in the hands of communities themselves, which makes projects more relevant and effective, but they still depend on grants and other flexible funding to get started.

Philanthropic capital can help move these approaches beyond isolated examples by backing early projects, testing new models, and taking on risks others avoid.

Questions to Ask

When evaluating blended finance opportunities, philanthropic funders should ask:

• Is there genuine additionality? Would this capital flow without philanthropic participation, or are we truly unlocking something new?
• What's the leverage ratio? How much commercial and DFI capital does each philanthropic dollar mobilize? Effective structures achieve 3:1 to 10:1 or higher.
• Is this replicable? Does the transaction create a template, standard, or proof point that enables future deals?
• Does it build local capacity? Are we strengthening domestic financial institutions, project developers, and markets?
• What happens to adaptation? Given its severe underfunding, are we actively creating pathways for adaptation investment?

The case studies that follow demonstrate how these principles work in practice and why this moment offers philanthropic leaders an outsized opportunity to shape the next decade of climate finance in West Africa.

Section V

Case Studies: Proven Models Ready to Scale

Across these examples, philanthropic capital plays a critical role, helping projects reach the point where other investors are willing to come in. It often pays for upfront work and absorbs risks that governments and commercial investors are not set up to take, opening the door to larger-scale investment.

Section VI

Unlocking Scale Through Strategic Philanthropy

The Moment to Act

The blended finance architecture being built across West Africa today will shape how climate capital flows in the region for the next decade. The guarantee structures, fund designs, and market standards established now will determine whether billions in commercial and institutional capital enter this market or remain on the sidelines. The philanthropists who engage now will not just be funding climate resilience; they will be building the market infrastructure that makes it possible at scale.