Climate finance in Africa is knocking on the door of the insurance sector

Africa is caught in a contradiction that the global climate debate all too often continues to overlook: it has contributed very little to historical emissions, yet pays a very high price in terms of droughts, floods, loss of productivity, food insecurity and social fragility. This is the starting point for Making Climate Finance Work for Africa , a study authored by Margherita Bianchi, Domenico Villano and Duccio Maria Tenti, which highlights a key point: climate finance allocated to the continent is not only insufficient, but also structured in a way that is not entirely appropriate. It is not enough simply to increase funding: we need to change the way in which funds are mobilised, distributed and utilised. Today, Africa finds itself on the front line of the climate crisis, yet at the same time it possesses extraordinary potential for the global energy transition. Renewable energy, strategic minerals, agriculture, biodiversity and a young population make the continent a key player. The problem is that there is a huge gap between this promise and its realisation.

According to the report, Africa still receives too small a share of global climate finance. Flows have increased, but remain largely inadequate in relation to needs. The case of adaptation is emblematic: sub-Saharan Africa would need around $51 billion a year just to tackle the impacts of climate change, but the international public funds that have actually been received cover barely a fraction of the amount required. The problem lies not only in the scarcity of resources, but also in their composition: over half of the funding comes in the form of debt, on a continent where many countries are already under severe financial strain. This highlights one of the report’s strongest criticisms. Climate finance, designed to strengthen resilience, risks exacerbating fiscal vulnerability. Added to this is an unbalanced distribution of capital: funds are concentrated in a few countries and in a handful of projects deemed less risky, whilst the most vulnerable nations are often left on the sidelines.

The authors also highlight another structural issue: the architecture of climate finance is fragmented, slow and costly. Multilateral funds, development banks, public agencies and private investors operate according to different criteria, with complex procedures and lengthy timelines. For governments and local stakeholders, this means having to navigate burdensome bureaucratic processes, which are often incompatible with the need to respond rapidly to climate shocks. The result is that the countries most in need of resources are also those facing the greatest barriers to accessing them.

No less important is the issue of ‘bankability’, that is, the ability of projects to become investable ventures. Many initiatives remain stalled due to a lack of reliable data, feasibility studies, technical expertise or financial structuring tools. In other words, it is not just money that is lacking: what is missing is an ecosystem capable of linking policy priorities, project design and capital.

The report also focuses on the role of insurance, which is seen as a lever that remains underutilised. In theory, it could protect households, businesses and governments from climate shocks and make investment more attractive. In practice, however, insurance take-up remains very low. The authors view parametric insurance – which provides for automatic payouts when certain climate indicators are triggered – with interest, but they also highlight its limitations, starting with the risk of a discrepancy between the index and the actual damage.