Alongside social inequalities, environmental degradation, and economic stress, the World Economic Forum presents climate change as one of the greatest threats to humanity in the present times. Recently, the Intergovernmental Panel on Climate Change released a special report on global warming which indicted that of the 1.5°C rise in global warming, around 1°C has been caused by human activities thus increasing the amount of greenhouse gases in the atmosphere.
People and ecosystems worldwide are already feeling the impact of these changes; warming has contributed to more frequent and intense extreme weather events such as heat waves and heavy rainfall. Climate change also has economic ramifications. According to the World Meteorological Organization’s Atlas, weather catastrophes caused global economic losses worth $4.3tn between 2000 and 2020.
Uganda is not spared; according to the National Meteorological Authority, there is a general warming trend over the country. Average temperatures in Uganda have increased by 1.3°C since the 1960s. Daily temperature observations since 1960 show significant increasing trends in the frequency of the number of hot days, and much larger increased trends in the frequency of hot nights. Annual rainfall has also decreased at an average rate of 3.4 mm per month, equivalent to 3.5 mm per decade.
The Advocates Coalition on Development and Environment warns that climate change will have a significant impact on Uganda’s economy, which is heavily reliant on natural resources. Primary sectors such as agriculture, water, energy, and fisheries are highly vulnerable to the impacts of climate change.
Agriculture is the backbone of Uganda’s economy, according to the third national development plan. It also forms a major part of the climate problem, currently generating 19–29 per cent of total greenhouse gas emissions, the highest when compared to other sectors. It should also be noted that over 70 per cent of Ugandans are employed in small and medium enterprises in the agriculture sector, yet these usually have less capacity to withstand financial shocks.
To adapt to climate change and sustain future economic growth, Uganda will have to make significant investments in green and low carbon technologies, financial products, and infrastructure. Accordingly, green finance will be central to providing the flows of capital required. This is primarily driven by the fact that most green technologies are characterized by high capital intensity and consequently high upfront financing requirements.
What is green finance?
The concept of green finance was popularised by the launch of the Paris Agreement and Sustainable Development Goals in 2015. Green finance is any economic activity that provides for investment, operation, and risk management in the fields of environmental improvement, climate action, and resource use efficiency.
Examples of these activities can be in the fields of climate smart agriculture, renewable energy conservation, and green transportation or infrastructure. These can take the form of financing green products and services or green production and business processes that contribute specifically to climate change mitigation or adaptation, broader environmental sustainability, and a low carbon, and climate resilient pathway.
Adapting to climate change goes beyond just funding green projects to ensuring climate and environmental factors are fully integrated into mainstream financial decision making across all sectors. Green finance should incorporate new technologies, financial products, industries, and services that consider environment, energy efficiency, and reduction of pollutant emissions. Some of the products can take the form of green loans, green bonds, green equity, green trade financing, and green asset financing among others.
With increasing recognition of the need to integrate climate and environmental factors into mainstream financial decision-making, the Uganda Development Bank is positioning itself to fill the current financing gap and boost the level of green investment. The bank has established a green finance unit, developed an enabling policy environment for green investments, and is strengthening collaborations for climate action.
In partnership with the United Nations Food and Agriculture Organization, the bank is in the process of establishing a climate finance facility, through which a dedicated green finance pipeline will be developed. UDB aims to mobilise green finance, increase access to credit for green investments, manage risk, and act as a financial intermediary contributing to the goal of achieving a low carbon resilient pathway for Uganda.
Pius Wamala is a green finance officer at the Uganda Development Bank
