By Simon Okola
Why turning good climate ideas into investable projects may be one of Africa’s most important financing challenges
Imagine a project developer somewhere in Africa with an excellent climate solution. It could be a solar-powered irrigation project for smallholder farmers, a clean-cooking enterprise serving rural households, a waste-to-energy facility, a climate-smart agriculture programme, a community water project or a wetland restoration initiative creating livelihoods while strengthening climate resilience.
The climate problem is real. The communities need the intervention. The environmental and social benefits may be compelling. The organisation has developed a concept note, perhaps even an impressive funding proposal, and is ready to approach investors, climate funds or development partners.
Then the financier begins asking questions.
Where is the feasibility study? Who will pay for the service? What are the projected cash flows? What happens if the local currency depreciates? Who owns the assets? What permits have been secured? What are the project’s major risks? How will climate results be measured? Can the organisation actually deliver a project of this size?
Suddenly, an excellent climate idea discovers that being important is not the same thing as being investable.
This is one of the uncomfortable realities of climate finance in Africa. We frequently speak about the continent’s climate-finance gap, and rightly so. But beneath that financing gap sits another challenge that deserves much more attention: the project bankability gap.
Climate Policy Initiative estimates that African countries require approximately US$190 billion annually to meet climate-investment requirements contained in their current Nationally Determined Contributions. Yet tracked climate-finance flows averaged only about US$43.7 billion per year in 2021 and 2022. This means that less than a quarter of estimated annual climate-finance needs were being met.
Private finance remains particularly limited. Private climate-finance flows to Africa increased significantly compared with earlier years but amounted to only around US$8 billion annually in 2021/22, representing roughly 18% of tracked climate finance on the continent.
There is another revealing statistic. The average tracked climate-finance project in Africa was worth less than US$2 million, significantly smaller than comparable projects in regions such as East Asia, South Asia and Latin America. Among the factors associated with this challenge are restricted access to private capital, high perceived risks, regulatory weaknesses, limited institutional capacity and an insufficient pipeline of investment-ready projects.
Africa therefore does not simply need more money. It needs more projects capable of absorbing, deploying and accounting for that money effectively.
This is where project bankability becomes critical.
Project bankability is sometimes misunderstood as simply demonstrating that a project can make a profit. It is much broader than that. Bankability is fundamentally about whether a financier can have sufficient confidence in the project’s technical, financial, institutional and implementation arrangements to commit capital.
A project does not become bankable because it has an attractive proposal. It does not become bankable because the beneficiaries desperately need it. It does not become bankable because it contributes to the Sustainable Development Goals or because the words green, climate, resilient or sustainable appear in the project title.
A finance-ready project must answer much harder questions.
A financier needs to understand exactly what is being financed, whether the proposed solution is technically feasible, whether there is genuine demand, whether the organisation can implement it, where revenue or repayment capacity will come from where relevant, what could go wrong, how risks will be allocated and managed, how environmental and social safeguards will be addressed, and how climate and development results will be measured.
Bankability therefore sits at the intersection of technical feasibility, financial viability, institutional credibility, climate integrity, risk management and appropriate financing structure.
This distinction matters enormously for African NGOs, MSMEs, community organisations, municipalities and private project developers.
Consider two organisations pursuing almost identical climate projects. The first organisation has produced a beautifully written proposal explaining the climate problem, describing the beneficiaries and demonstrating alignment with national and international development priorities.
The second organisation has done all of that, but it can also present a validated market assessment, technical feasibility analysis, implementation plan, capital and operating expenditure assumptions, realistic financial projections, environmental and social safeguards, regulatory approvals, governance arrangements, a climate-results framework, risk analysis and an appropriate financing strategy.
Both projects may be valuable. Both may deserve support. But the second project gives a financier significantly more confidence.
The difference is not necessarily the quality of the underlying idea. The difference is project preparation.
This is where many potentially transformative African climate projects become stuck.
The importance of project preparation can be seen in the structures being established by African financing institutions themselves. The African Development Bank and its partners have increasingly invested in project-preparation facilities designed specifically to move projects from early concepts to investment-ready opportunities.
The Alliance for Green Infrastructure in Africa, for example, has been structured to mobilise early-stage blended-finance capital for project preparation and development, with the ambition of catalysing billions of dollars in infrastructure investment. The logic is straightforward: projects need to move through preparation and development before substantial capital can reasonably enter.
The pathway is therefore not simply idea to money.
It is more accurately:
Idea → Preparation → Development → Bankability → Financing.
The experience of African project-preparation facilities demonstrates why this matters. Relatively small amounts invested in feasibility work, engineering, financial modelling, environmental assessments, legal structuring and transaction preparation can unlock significantly larger amounts of downstream investment.
This gives African project developers an important lesson: project preparation should not be treated as an unnecessary administrative expense. It is an investment in the project’s ability to attract capital.
Feasibility studies cost money. Engineering work costs money. Market assessments cost money. Financial modelling costs money. Environmental and social impact assessments cost money. Legal structuring costs money. Climate-risk analysis costs money.
But failing to undertake them can be considerably more expensive.
A poorly prepared US$20 million climate project does not become cheaper because the developer avoided spending money on preparation. It simply becomes a poorly prepared US$20 million project that investors are unlikely to finance.
Another major shift is required in the way African project developers think about financing.
Too many organisations prepare projects almost entirely from the perspective of the project developer. The developer asks, “Why is this project important?” The financier also wants to know, “Why should I finance this particular structure?”
The developer asks how many people will benefit. The financier asks whether those benefits can be measured and verified.
The developer asks how much money is needed. The financier asks why that particular amount is required, what it will finance, what assumptions underpin the budget and what will happen if those assumptions change.
The developer sees opportunity. The financier sees both opportunity and risk.
Project bankability connects these two perspectives.
This also means that project developers must become much better at understanding the type of capital they are pursuing. Not every project requires a commercial bank loan. Not every project needs equity investment. Not every climate intervention should be financed through grants.
Some projects may be appropriate for commercial debt. Others may require concessional finance. Some may need grants to fund early-stage preparation. Others may need guarantees to reduce perceived risk, equity to absorb early losses, results-based finance, carbon finance or a blended-finance structure combining several instruments.
Bankability is therefore partly about making the project financeable, but it is equally about finding capital whose risk, return and impact expectations match the characteristics of the project.
This becomes particularly important in adaptation.
Not every climate project will produce direct commercial returns. A wetland restoration project may create enormous economic and ecological value without producing predictable cash flows for a private investor. An early-warning system may save lives and reduce economic losses without generating revenue. Community adaptation, watershed restoration, biodiversity protection and climate-resilient public infrastructure may deliver enormous public benefits but still struggle to meet conventional definitions of commercial bankability.
These projects should not automatically be considered failures.
They may simply require different financing structures.
For this reason, I find it useful to distinguish between project bankability and project fundability.
A commercially oriented clean-cooking company, solar mini-grid, circular-economy enterprise or agricultural processing facility may require a conventional bankability assessment focused strongly on revenues, cash flow, debt-service capacity, investment returns and risk.
A community adaptation project may instead need to demonstrate a compelling climate rationale, measurable adaptation benefits, institutional capacity, value for money, environmental and social safeguards and alignment with the mandate of a climate fund or development partner.
Some projects sit between the two. Their commercial returns may initially be insufficient to attract investors, but concessional finance, guarantees, grants or first-loss capital can improve their risk-return profile and move them closer to bankability.
This is precisely where blended finance becomes important.
The wider financing picture in Africa makes this conversation even more urgent. Africa faces hundreds of billions of dollars in annual financing needs, yet African financial institutions themselves collectively hold trillions of dollars in assets across banks, pension funds, insurance companies, sovereign wealth funds and other institutional investors.
This creates a powerful paradox.
Africa needs capital, but Africa also has capital.
The challenge is not simply finding money. The challenge is creating enough credible investment opportunities capable of attracting it.
Of course, project bankability is not the only reason projects fail to secure finance. Africa continues to face structural constraints including high interest rates, foreign-exchange risk, sovereign risk, regulatory uncertainty, small project sizes and limited domestic capital mobilisation.
Project bankability cannot eliminate these challenges.
But it can prevent project developers from making an already difficult financing environment even more difficult by approaching financiers with projects that have not been adequately prepared.
This is why African organisations should reconsider one of the questions they ask most frequently.
Instead of beginning with:
“Which donor or investor can fund this project?”
they should first ask:
“What would have to be true for a credible financier to confidently say yes to this project?”
That question changes everything.
It shifts attention from proposal writing to project preparation, from funding searches to financing strategy, from compelling stories to credible evidence, from assumptions to financial modelling, from aspirations to implementation readiness and from simply seeking capital to becoming capable of receiving it.
The future of African climate finance will certainly depend on larger international commitments, stronger domestic capital markets, innovative financial instruments and fairer financing conditions.
But part of the solution will also be built project by project.
It will require stronger feasibility analysis, clearer climate rationale, better financial models, stronger institutions, credible risk allocation, stronger monitoring and results systems, better project governance and financing structures designed around the realities of each project.
Africa has no shortage of climate challenges.
It also has no shortage of innovative ideas.
The next frontier is turning far more of those ideas into finance-ready, fundable and bankable projects.
And perhaps before approaching the next investor, development finance institution or climate fund, every project developer should stop and ask one simple question:
Is our project actually finance-ready?
Because finding an investor should not be the first test of a climate project.
Understanding whether the project is ready for investment should be.
Before you approach the next investor or climate fund, find out whether your project is actually finance-ready.
A structured Project Bankability and Fundability Diagnostic can help identify weaknesses in technical feasibility, financial viability, institutional capacity, climate rationale, risk management, financing structure and investment readiness before a project enters formal fundraising or due diligence.
For African project developers, NGOs, MSMEs and institutions, that assessment may be the difference between repeatedly searching for funding and building a project that financiers can seriously consider.
Simon Okola
Climate Finance & Project Bankability Consultant
Founder & Lead Consultant, Agenda Beyond Borders
Agenda Beyond Borders
