Sustainable finance is growing in Africa, but volumes fall short of addressing needs

Estimates of Africa’s financing gap vary depending on scope and coverage. According to the African Development Bank and the UN Economic Commission for Africa, countries in this region need up to $1.3 trillion per year to fully implement sustainable development goals. Sustainable finance instruments may help close this gap by providing more transparency on the link between financing and relevant social and environmental challenges, along with additional commitments toward annual reporting on allocation and impact. Combined with blended finance approaches, these instruments could further mobilize private capital. 

Labeled debt raised by African issuers totaled approximately $13 billion in 2024, according to the Environmental Finance database (see footnote). Almost 40% of this amount was raised through green instruments, or bonds and loans where issuers or borrowers commit to allocating an amount equivalent to net proceeds toward financing projects with clear environmental benefits. 

We expect 2025 bond placements to be similar, making Africa one of the few regions where sustainable bond volumes have remained resilient despite the challenges affecting sustainability initiatives worldwide. 

Traditionally, sustainability-linked instruments have dominated the loans space. These instruments are useful for companies in hard-to-abate sectors, allowing them to link their sustainability journey to specific key performance indicators. African governments can use sustainability-linked bonds and loans to formalize and strengthen sovereign sustainability commitments to external stakeholders. For instance, Cote d’Ivoire secured a $504.6 million sustainability-linked loan from Standard Chartered Bank in September 2025, covered by a dual guarantee from the World Bank through the International Bank for Reconstruction and Development and the Multilateral Investment Guarantee Agency. The loan’s financial characteristics (interest rate variation) are tied to whether the country achieves environmental targets, including increasing the country’s share of non-hydro renewable energy to 11% of installed electrical capacity by 2030 from 1% in 2023. 

S&P Global Ratings Second Party Opinions (SPOs) are a point-in-time analysis of a sustainable finance instrument, program or framework and the characteristics of the issuing entity relevant to implementation. Most SPOs on sustainable financing in Africa have been provided for frameworks including a mix of green and social projects.

S&P Global Ratings has published 17 SPOs for financial institutions, corporates and sovereign governments across Africa. Financial institutions account for the majority of SPOs, reflecting overall market dynamics; over the past five years, these issuers have dominated the sustainable bond space in Africa. We expect sovereign issuance across the continent to grow over the next few years, driven by investor appetite and governments’ efforts to address environmental and social challenges.

Most assessed frameworks were use-of-proceeds frameworks with eligible green and social categories. This choice is driven by the fact that financial institutions and sovereigns usually finance a broad range of activities across the economy. In these frameworks, renewable energy, energy efficiency, pollution prevention and control were most commonly observed in the green category. Social frameworks most frequently included access to essential services such as healthcare and education, affordable basic infrastructure, and affordable housing. 

Most sustainable finance allocation supports projects that grow renewable energy capacity and broaden access to essential services such as healthcare and education.

Green, social and sustainable bonds aligned with International Capital Market Association principles require issuers to report on proceeds allocation annually until full allocation. This enhances transparency on how proceeds are used, which strengthens investor confidence. Reviewing allocation and impact reports also provides insight into the environmental and social challenges issuers aim to address. 

We collected data from 52 public allocation and impact reports published by African issuers since 2016, representing $9.1 billion in total allocated proceeds. These issuances were spread across 14 African countries, the majority in South Africa, Morocco, Mauritius and Namibia. Most of the financing raised over this period was directed toward renewable energy, access to essential services and affordable basic infrastructure. 

Our analysis of allocated proceeds shows that energy transition and basic infrastructure receive the most funding proportionally, while three key areas remain underfinanced: access to clean water, climate change mitigation, and deforestation and biodiversity loss. 

• According to various estimates, about 30% of the population in Africa lacks basic drinking water services. Even when water is available, contamination is common due to poor sanitation, industrial waste and agricultural runoff. However, our analysis shows that projects related to sustainable water are not receiving a meaningful proportion of this funding and remain underfinanced.

• There is a 90% likelihood that, by 2040, the average global temperature will exceed the Paris Agreement on climate change’s goal of limiting global warming to 1.5 degrees C above pre-industrial levels. There is also a 50% likelihood of it exceeding 2.3 degrees C. Yet climate adaptation and resilience needs remain largely unmet. For Africa, water stress, extreme heat and wildfires are typical acute weather events that can negatively impact economic development. The climate change mitigation category only received 1% of the overall reported allocation. 

• Deforestation and biodiversity loss are advancing rapidly and may become irreversible. The UN Food and Agriculture Organization reported that Africa loses nearly 4 million hectares of forest annually, largely due to agricultural expansion and demand for fuelwood. Nearly 1 billion people on the continent still rely on polluting fuels for cooking, which drives fuelwood use and contributes to deforestation, especially in sub-Saharan Africa. This category, although frequently listed in sustainability frameworks, also only receives 1% of the overall allocation.  

While sustainable finance in Africa is growing, volumes remain well below what is required to address the continent’s development and infrastructure needs. Some pressing topics, such as climate change adaptation or measures against deforestation and biodiversity loss, receive virtually no financing through sustainable debt markets. We believe that this is likely to change: Africa is one of the few regions where sustainable bond issuance has remained resilient despite global challenges. 

Although financial fundamentals such as high borrowing costs and foreign currency risks are not addressed through sustainability labels, green or social bonds can foster greater transparency in allocation and actual impact. They can also attract specialized investors, such as multilateral financial institutions and thematic funds. These instruments may serve as catalysts for blended finance, mobilizing more private capital, especially when paired with credit enhancements provided by multilateral financial institutions. While sustainable finance alone cannot solve all of Africa’s financing challenges, it could be an important element of unlocking new opportunities for development across the continent.  

• Consistent with our previous reports about sustainable debt issuance, this market overview draws on Environmental Finance's database of global sustainable debt issuance for nonfinancial corporates, sovereigns, financial institutions and international public finance, but excludes structured finance issuers. Because the database is continuously updated, some figures may not exactly match those cited in previous years. Our sustainable bond forecasts in this commentary are informed by S&P Global Ratings’ global bond forecasts, issuer and intermediary surveys, as well as market intelligence gathered by our sustainable finance and credit ratings analysts. Back to section

This article was authored by a cross-section of representatives from S&P Global and in certain circumstances external guest authors. The views expressed are those of the authors and do not necessarily reflect the views or positions of any entities they represent and are not necessarily reflected in the products and services those entities offer. This research is a publication of S&P Global and does not comment on current or future credit ratings or credit rating methodologies.