# **1. Introduction**

On September 25, 2015, countries appropriated a set of 17 Sustainable Development Goals (SDGs) to end poverty, secure the planet, and ensure prosperity for all (World Bank 2018b). The SDGs are a call for action by all nations—poor, rich, and middle-income—to advance prosperity while protecting the planet (World Bank 2018a). The idea is that ending poverty must run inseparably from efforts to boost economic growth and address a range of social needs, including education, health, social protection, and job opportunities, while being mindful of environmental change and ecological security. For the goals to be reached, all stakeholders—governments, the private sector, civil society, and individual citizens—must be actively engaged (World Bank 2018ab).

Concurrently, efforts by the international community to take action on climate change led to the establishment of the United Nations Framework Convention on Climate Change (UNFCC), which has held annual Conferences of the Parties (COPs) since 1995. In 2015 the Paris Agreement was adopted and ratified by 178 countries, committing virtually all countries to undertake ambitious efforts to combat climate change and adapt to its effects. One of the key requirements of the climate agreement is energy transition to promote greater use of renewable energy.

Sub-Saharan Africa (SSA) is particularly vulnerable to climate change. Its suffers from energy poverty,<sup>1</sup> as well as severe flooding, coastal erosion, prolonged droughts, strong winds, crop damage, and biodiversity loss. Many case studies (IIASA 2014; UNEP 2016) present evidence of the direct link between energy access and socioeconomic benefits and rural poverty reduction in Africa.

A regional study by the World Bank suggests that less than 43 percent of the population of SSA had access to electricity in 2016, with almost two-thirds of the population (more than 600 million people) living without electricity (80 percent in rural areas) (World Bank 2018b). The investment required to implement renewable energy solutions is $1.4 trillion, an annual average of about $100 billion between 2016 and 2030 (IRENA 2016). More than 60 percent of the investment required to provide global universal access to electricity by 2030 is in SSA (OECD 2012).

Most investment can be mobilized by reallocating fossil fuel investments to renewable energies. But because funding from public and concessional sources is scarce, an engaged private sector will be needed to make significant investments in renewable energy technologies (World Bank and Climate Investment Funds 2015). Therefore, most of the international climate finance discussions emphasize the importance of using various instruments, such as derisking, to mobilize additional private sector financing.<sup>2</sup> Resources are also needed for capacity building to prepare and implement projects (Mohieldin and Verbeek 2018), put in place adaptation and mitigation measures, and develop financing instruments for climate resilient and low-carbon projects.

Traditional development financing sources include concessional public finance (domestic

> 1 A 2016 report by the Renewable Energy Policy Network for the 21st Century (REN21) shows that about 1.2 billion people (17 percent of the world’s population) live without electricity, with the vast majority in the Asia-Pacific region (44 percent) and SSA (53 percent).

> 2 This process is usually defined as blending whereby public resources are leveraged in order to mobilize additional private investments allowing for a larger investment to take place if one was to rely on public resources alone.

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