1.1 Impact Objectives
The Fund seeks to have a positive ESG impact which starts with the premise that debt finance is necessary to progress a global effort to reduce GHG emissions through promoting renewable energy and energy efficiency. The Fund is committed to Economic sustainability:
By financing economically sound investments, the Fund ensures that its capital is reused several times, thus increasing its environmental and social impact
By introducing or enhancing innovative climate lending products of local banks, AGG would help the financial sector to expand into the green energy financing space.
With its economically sustainable set-up and measurable impact, AGG could establish itself as an attractive investment opportunity or both public and private investors
The Fund’s approach is to provide debt financing, in the form of project or corporate finance.
Increased and Sustainable Financing
The renewable energy sector in Africa is growing rapidly but the availability of sufficient and appropriately structured finance remains a bottleneck. This is true across the industry; US$60-90bn per year in new investment is required to achieve electrification of the continent by 2025. However, the issue is particularly apparent for traditionally underserved segments of the market, including those that AGG is targeting. In so doing, AGG is promoting flexible and tailored capital to be a source of transformative capital to demonstrate the commercial viability of green finance, the Fund will provide medium- and long-term financing in the form of debt and mezzanine capital as well as guarantees to FIs that are committed to building a EE/RE lending portfolio;
AGG is also promoting additional finance sources to maximize the impact generated. the Fund is designed to offer financing solutions that are not readily available in the market and, in ways other investors or banks might not, provide finance and strategic benefits. The Fund will be a source of capital that can co-invest with other finance providers to close a project funding gap or that has a strong demonstration effect showcasing the viability of EE/RE projects.
Reduction in Greenhouse Gas Emissions
It is a global goal to address climate change by reducing GHG emissions. No continent or country can be excluded from this challenge. While the continent has the lowest per capita CO2 emission today, rapid industrial development and a growing population risks turning Africa into a major GHG emitter, unless mitigating steps are taken. Africa is in the fortunate position to side-step many polluting technologies and move directly to a low carbon economy. This requires investment to support innovative business models and adoption of technologies available in developed economies.AGG is one of the first funds targeting energy efficiency in Africa and is well positioned to play a pioneering role in promoting low carbon economies on the continent.
1.2 Impact Framework
A framework is derived to provide the analytical basis for assessing whether and how the Fund is meeting the objectives, each measured by several indicators (defined in more detail in Appendix G). The framework is based on an analysis of the fund strategy and best practice impact assessment as used for comparable investment funds and principals in the renewable energy sector.
The Fund in general focuses on metrics that are quantitative but recognizes that certain assumptions have to be made for indicators in particular related to certain market development parameters and the additional benefits of improved energy access, e.g. reduced/avoided greenhouse gas emissions. The Fund will itself not conduct separate industry studies to assess these impact indicators and will instead rely on and promote market best practice and information provided by the investees. In certain circumstances, the Fund may rely on its TA Facility to fund third party reviews to support its impact reporting