Chief Executive Officer and Managing Director of Pro Ally, Tunbosun Afolayan has said Africa’s renewable energy sector is not suffering from a shortage of green capital, but from a lack of projects properly structured to meet Development Finance Institutions’ (DFIs) technical, environmental, social and governance requirements.
  
Afolayan, an energy expert, said nearly 46 per cent of Africa’s DFI portfolio is currently directed towards climate action and environmental sustainability, covering renewable energy, water infrastructure, transport and health.

She argued that the significant allocation showed that capital was available, but increasingly selective, with investors favouring projects that satisfy both development objectives and commercial bankability requirements.

According to her, the binding constraint is not a shortage of investment appetite. It is a shortage of projects architected to meet international standards for technical completeness and financial rigor.

She added: “Structuring failures, not capital scarcity, are what keep African energy deals from closing.”
 
Afolayan said most DFIs assess renewable energy projects against environmental and social risk frameworks, particularly the International Finance Corporation (IFC) Performance Standards and the African Development Bank (AfDB) Integrated Safeguards System.
  
She explained that sponsors were expected to address identified gaps in areas including community consultation, biodiversity management, labour standards and grievance mechanisms through a documented Environmental and Social (E&S) Action Plan before financial close.
  
She noted that the Facility for Energy Inclusion, which operates across African clean energy markets, requires projects to demonstrate compliance with the AfDB Integrated Safeguards System and IFC Performance Standards, with identified gaps addressed through an E&S Action Plan.
  
Afolayan also urged Nigerian renewable energy developers not to overlook regional financing opportunities, particularly the ECOWAS Bank for Investment and Development (EBID).
  
She said EBID adopted an ESG financing framework in early 2023, setting out criteria for evaluating and structuring projects across the 15 ECOWAS member states.
  
“For an integrated energy company with a renewable vertical operating regionally, EBID represents a financing channel with its own distinct ESG evaluation criteria, separate from but complementary to the IFC and AfDB frameworks,” she said.
  
The energy expert identified three commercial implications for African renewable energy developers.
  
She said the first was that the gap between seeking financing and being financeable was often an ESG structuring issue rather than a problem with the technology or commercial viability of a project.
  
Afolayan advised project sponsors to undertake an ESG gap assessment against IFC Performance Standards or AfDB safeguards before approaching DFIs, arguing that this would allow them to address deficiencies on their own timelines rather than under pressure after a financing process had stalled.
  
She further said convergence in governance requirements across DFIs meant that a properly developed governance framework could potentially be applied across multiple financing relationships.
  
“With thirty-five DFIs now sharing a common corporate governance methodology, a renewable energy sponsor that builds its governance framework properly for one DFI relationship is largely, though not entirely, prepared for others,” she said.
  
Afolayan recommended that developers commission ESG gap assessments before approaching development finance institutions, develop E&S Action Plans as living project documents with clearly assigned responsibilities, and explore regional financing channels alongside global DFIs.
  
She also urged renewable energy developers to assess their projects against the IFC Performance Standards, particularly in the areas of community consultation, labour standards, biodiversity management and grievance mechanisms.
  
She said sponsors should be able to provide documented evidence of compliance in these areas before engaging prospective investors.

Her words: “Development finance institutions are not waiting for better projects to appear. They are actively looking for them, with capital already allocated and waiting. The sponsors who close that gap first will be the ones who get funded first.”