Green Financing for Sustainable African Aviation

Achieving a low-carbon economy depends significantly on the availability of financing which facilitates the allocation of capital to environmentally friendly projects and initiatives. Green and sustainable lending strategies play a vital role in channeling funds towards environmentally beneficial activities. The financial sector holds significant influence in the global effort to combat climate change, with estimates suggesting that approximately $200 trillion in investments are required to achieve net-zero emissions by 2050. As a key player in the financial sector, the banking industry has the power to shape the low-carbon transition by controlling the allocation of capital to companies.

As the aviation industry continues to grow globally, Africa is poised to play a significant role in the sector's expansion. However, with this growth comes increased environmental concerns, particularly carbon emissions. Green financing or Sustainability financing is  becoming a vital instrument in supporting Africa’s transition to sustainable aviation.

Africa's aviation sector faces unique challenges, including limited infrastructure, high operating costs, and strict regulatory requirements. Green financing offers a solution by providing access to capital for environmentally friendly projects, such as:

1. Sustainable Aviation Fuels (SAF): Green financing can support the development and deployment of SAF, reducing greenhouse gas emissions.

2. Energy-efficient aircraft: Financing can be secured for the acquisition of modern, fuel-efficient aircraft, minimising carbon emissions and operating costs.

3. Green airport infrastructure: Financing can support the development of sustainable airport infrastructure, including solar-powered terminals and energy-efficient lighting.

4. Carbon offsetting: Financing can be used to support carbon offsetting initiatives, enabling airlines to compensate for their emissions by investing in renewable energy projects.

Green financing mechanisms, such as green bonds, impact investing, and carbon credits, can be explored by African airlines, airports and its value chain. However, challenges persist in the African aviation sector's transition to green financing, including limited access to funding, inconsistent regulatory frameworks, and a lack of awareness and capacity among stakeholders. African aviation entities often face significant barriers in accessing green financing due to high transaction costs and limited creditworthiness, hindering their ability to invest in sustainable technologies and practices

 As referenced from the African Development Bank (AFDB), African Green Bank Initiative (AGBI) was established to create an ecosystem of green banks in across Africa with the aim to mobilise additional climate finance geared towards green and sustainable growth in the continent as the climate finance flows in Africa remain insufficient with only $30 Billion mobilised in 2021 representing less than 5% of the total climate finance investment worldwide.

 To overcome these obstacles, collaboration is crucial. Stakeholders must work together to develop tailored green financing solutions that address the unique needs of African aviation entities. Enhancing regulatory frameworks is also essential, creating an enabling environment that supports the growth of green financing mechanisms.

 Building capacity and awareness among stakeholders is equally important, educating them on the opportunities and benefits of green financing.

As Africa's aviation sector continues to grow, green financing will play a vital role in ensuring a sustainable future. By embracing green financing, African aviation can reduce its environmental impact, improve operational efficiency, and contribute to a more sustainable future for the continent.

Toni Ukachukwu

Founder/ Chief Sustainability Officer

Aviators Africa