Euro 300m funding initiative for Rwanda’s climate resilience unveiled at Paris Summit

On 23 June 2023 at 11:06

The Government of Rwanda, in collaboration with key international partners, has announced a groundbreaking plan to mobilize €300 million for enhancing climate resilience in the country. The initiative, revealed during the Paris Summit for a New Global Financing Pact, aims to leverage public-private partnerships and attract private sector investments to scale up climate finance in Rwanda.

This ambitious endeavor builds upon the Resilience and Sustainability Facility (RSF) arrangement with the International Monetary Fund (IMF), which has already secured USD 319 million in financing for the Rwandan government. The partnership involves the Agence Française de Développement (AFD), the European Investment Bank (EIB), Cassa Depositi e Prestiti (CDP), and the International Finance Corporation (IFC), signaling a collaborative approach to address climate change challenges and foster sustainable development.

The initiative aligns with the global efforts to reshape the climate finance architecture, moving beyond small-scale projects towards substantial long-term investments that can make a significant impact. By capitalizing on existing mechanisms and facilitating public-private partnerships, the partnership aims to attract private climate investments and contribute to the worldwide transition to a climate-resilient economy.

The primary objective of the collaborative support is to fortify Rwanda’s response to climate change and its effects on vulnerable communities. It will further enhance the catalytic effect of the IMF’s RSF arrangement by attracting additional budget support from partners. The plan also introduces a programmatic approach for climate investments and seeks to scale up Ireme Invest, a unique investment facility dedicated to private sector green investment launched by President Paul Kagame in November 2022 at the UN Climate Change Conference (COP27) in Egypt.

The initiative revolves around a three-pronged approach, focusing on policy reforms, capacity development, and financing arrangements. By implementing policy reforms, Rwanda aims to address challenges posed by climate change, integrate climate risks into fiscal planning, enhance public investment management’s sensitivity to climate issues, strengthen climate-related risk management for financial institutions, and bolster disaster risk reduction and management efforts.

Additionally, the partnership aims to support capacity development initiatives in Rwanda and attract and manage climate capital more effectively. It plans to consolidate and mobilize various climate finance resources for Rwanda, including programmatic budget support for green public financial management. The AFD will provide EUR 50 million in programmatic budget support, complemented by a EUR 3 million technical assistance grant. The International Finance Corporation, in collaboration with the Rwanda Green Fund (FONERWA), will develop long-term investment plans for climate smart agriculture and sustainable urbanization. Moreover, Ireme Invest, the green investment facility powered by the Rwanda Green Fund and the Development Bank of Rwanda, will be scaled up to facilitate private sector investments.

To ensure the success of the initiative, the European Investment Bank is expected to contribute EUR 100 million, backed by the European Union’s support under the Global Gateway strategy. Cassa Depositi e Prestiti, the Italian Development Finance Institution, is engaged in discussions with the Government of Rwanda and the Development Bank of Rwanda to bridge public and private investments in climate finance. Furthermore, Ireme Invest private stakeholders will contribute EUR 130 million in private equity, augmenting the creation of private green assets in Rwanda and attracting future private investment.

The coordinated efforts of the partnership, along with the policy reforms facilitated by the IMF’s RSF arrangement and capacity development support, are expected to strengthen Rwanda’s resilience to economic shocks and climate change impacts. This collaboration exemplifies the power of partnerships in addressing global challenges and sets a precedent for other nations and financial institutions to explore innovative financing mechanisms and work together towards a sustainable and climate-resilient world.

Moreover, the World Bank, along with the Governments of Germany, the United Kingdom, Sweden, and Denmark, has been providing substantial financial and technical support to Rwanda’s climate resilience efforts. The support from the World Bank, specifically the International Development Association (IDA), aims to enhance Rwanda’s climate resilience, protect its natural assets, promote green finance and trade, and unlock private investments.

The announcement of this collaborative initiative has garnered positive responses from key stakeholders. The Prime Minister of Rwanda, Dr. Edouard Ngirente, expressed gratitude to the partners involved and emphasized the significance of the partnership in realizing Rwanda’s Nationally Determined Contributions (NDCs) estimated at USD 11 billion by 2030.

Kristalina Georgieva, Managing Director of the International Monetary Fund, praised the partnership as a transformative shift in climate finance provision and commended Rwanda’s long-term climate action strategy. She highlighted the collaborative approach’s potential to accelerate investment for a greener and more prosperous future worldwide.

Jutta Urpilainen, European Commissioner for International Partnerships, emphasized the importance of international cooperation in addressing the climate crisis. She highlighted the European Union’s commitment to bridging the investment gap and supporting partner countries, particularly in Africa, in their efforts to mitigate and adapt to climate change. Urpilainen stressed the need for a multilateral approach to achieve a fair and sustainable green transition.

Werner Hoyer, President of the European Investment Bank, praised the close cooperation between the Government of Rwanda, the IMF, and international financing partners. He emphasized the strategic use of Special Drawing Rights (SDRs) to amplify climate action investments, showcasing the EIB’s commitment to combating climate change and supporting sustainable development in Rwanda and beyond.

Makhtar Diop, Managing Director of the International Finance Corporation, highlighted the innovative nature of the partnership, which aims to maximize public finance to attract private capital for climate-related projects. He emphasized the joint efforts to develop an investment pipeline that focuses on sustainable cities and climate-smart agriculture, fostering a resilient, low-carbon economy in Rwanda.

Remy Rioux, Director General of Agence Française de Développement, commended the cooperation between AFD and Rwanda’s financial ecosystem on climate finance. He underscored the alignment between Rwanda’s vision and the international community’s efforts to channel investment flows towards climate change mitigation and adaptation.

The partnership serves as a testament to the power of collective action and exemplifies the urgent need for international cooperation to combat climate change and build a sustainable future for all.

Rwanda is among countries affected by climate change. This photo shows some of houses ravaged by recent landslides and flooding in Rwanda's Western Province.