By Tola Akinmutimi
The Africa Risk Capacity (ARC) and the United Nations Convention to Combat Desertification (UNCCD) have announced their plans to collaborate for the purposes of supporting the development of financial tools to help Africa adapt to and become resilient to future drought and other extreme weather events.
Available statistics on the level of drought in the continent showed that this year alone, over 45 million people across Africa, mostly in Eastern and Southern Africa, are food insecure due to prolonged droughts.
Specifically, it is designed to support African countries in managing the impact of extreme weather events, including drought as well as seek to leverage private sector resources through the development of new financial instruments that can provide insurance protection and other funding to mitigate these risks.
The workshop is reviewing the proposed principles and work of the eXtreme Climate Facility (XCF). XCF is a new financial vehicle aiming to tap into capital market resources to provide financial support to countries affected by extreme weather events.
Technical experts gathered at the workshop are exploring the robustness of the core elements of the XCF. These include the financial products and their underlying index, viable alternative market-based solutions and the partnerships that are essential to deliver both the product and the aims.
The process for the XCF began in March 2014 when the African Union Conference of Ministers of Finance requested the ARC, by decision no. 927(XLVII), at the Seventh AU-ECA Joint Annual Meetings in Abuja, Nigeria, to develop a financing mechanism to enhance Member States’ response to the impacts of increasing climate volatility.
The first ‘Special Report on Climate Change and Land’ released just three months ago by the authoritative Intergovernmental Panel on Climate Change cautioned that droughts may increase in frequency and intensity in much of Africa.
Commenting on the latest deal during the ceremony, the UNCCD boss, said: “The message is clear. We will see an increasing number of droughts with unprecedented severity, which are exacerbated by climate change. No country or region, rich or poor, is immune to the vagaries of drought. The ARC-led XCF will become an important tool to help African countries to cope effectively with the impacts of drought.
“Currently, through the Drought Initiative, the UNCCD is helping 35 of Africa’s 57 countries to create the mechanisms they need to take early action to avert drought disasters. Today, Africa is ramping up pre-emptive actions as a unified front against future drought and climate-induced disasters in the region,” Thiaw added.
In his remarks, the ARC director general commented: “Reducing the impacts of drought and other natural disasters by helping Member States’ improve climate resilience through innovative mitigation and risk financing instruments are key to our mandate.
“The Agreement signed today with UNCCD will create a functional synergy in our efforts to help countries better understand their risk profiles, improve knowledge and strengthen capacities for climate adaptation and food security”, Beavogui stressed.
As designed currently, the XCF has a three-point agenda, namely to connect to private sector financing, to encourage best practice in public policy and to integrate climate science into its functions.
capital market February 24, 2020