What Ethiopia can learn from Africa’s Climate Finance Pioneers
Ethiopia stands at a pivotal moment in its development journey. Through its Climate-Resilient Green Economy strategy, nationally determined commitments, and substantial investment in renewable energy and sustainable land use, the country has demonstrated clear climate ambition. Major hydroelectric projects, expanding solar installations, and reforestation initiatives signal commitment to a green growth pathway. The ambition is evident and commendable.
Yet ambition alone does not guarantee delivery. Over 10 million Ethiopians face acute food insecurity amid recurring climate shocks, while erratic rainfall and land degradation continue to pressure agricultural systems and rural livelihoods. Infrastructure in flood-prone areas requires repeated reconstruction. These challenges are not temporary setbacks but persistent stresses that increasingly shape economic outcomes and development planning.
The gap between Ethiopia’s climate goals and current realities points to a crucial challenge: mobilizing and deploying the financial resources needed to turn commitments into concrete adaptation and mitigation projects. Climate strategies require billions of dollars in investment—for drought-resistant agriculture, renewable energy infrastructure, early warning systems, and resilient water management. The critical question is not whether Ethiopia has articulated ambitious climate plans, but whether it can build the financing systems—credible, coordinated, and capable of operating at scale—to make those plans reality.
This challenge is not unique to Ethiopia. Across Africa, experience points to a common lesson: climate ambition without credible climate finance systems struggles to achieve scale. Countries making meaningful progress have invested systematically in institutions, coordination, and credibility. Climate finance proves to be less about fundraising campaigns and more about building systems that mobilize, manage, and account for resources consistently and transparently.
Ethiopia’s institutional foundations—including the Environment, Forest and Climate Change Commission and sectoral ministries—provide a starting point. The challenge lies in translating climate commitments into coordinated finance flows that reach implementation. Valuable lessons emerge from peer countries across Africa that have built effective climate finance systems through deliberate institutional investment.
Rwanda: Building a national climate finance engine
Rwanda offers one of Africa’s most instructive experiences. Rather than treating climate finance as donor-driven projects, Rwanda invested early in building a national mechanism through FONERWA, the Rwanda Green Fund. This institutional platform standardized project preparation, strengthened fiduciary oversight, and created a pipeline of investable climate projects across sectors.
Rwanda’s significance lies in credibility built over time. By pursuing direct access to international climate funds and embedding monitoring requirements into its systems, Rwanda reduced reliance on intermediaries and reinforced national ownership. The lesson is straightforward: climate finance scales when institutionalized. For Ethiopia, sustainable climate finance requires a durable institutional backbone that coordinates ministries, engages development partners, and gradually crowds in private capital.
Kenya: Taking climate finance closer to people
Kenya illustrates the importance of local ownership through its County Climate Change Fund mechanism. This devolved approach places decision-making closer to communities most exposed to climate risk. County-level planning committees, participatory prioritization, and structured monitoring helped align climate investments with real adaptation needs, particularly in arid and semi-arid regions.
Kenya’s experience underscores that climate finance effectiveness depends as much on legitimacy as efficiency. When communities understand fund allocation and see tangible benefits, investments endure. For Ethiopia, with constitutionally empowered regional states and woreda-level administration, designing climate finance pathways that meaningfully engage subnational actors is central to impact and resilience.
South Africa: Translating commitments into financed partnerships
South Africa’s Just Energy Transition Partnership represents a breakthrough in linking climate ambition to structured finance. Announced at COP26, this pioneering model secured commitments exceeding $11 billion from developed countries to support South Africa’s transition from coal-dependent energy. What distinguishes it is strategic coherence: South Africa developed a detailed Just Energy Transition Investment Plan before seeking finance, quantifying sector-specific needs and mapping them to economic transformation goals including green hydrogen and electric vehicles.
Critically, South Africa established the Presidential Climate Commission to build consensus across government, labor, business, and civil society before negotiating externally. This ensured the transition framework was country-owned rather than donor-imposed. The Development Bank of Southern Africa serves as implementing hub with direct accreditation to international climate funds, providing institutional credibility.
For Ethiopia, South Africa’s experience demonstrates that large-scale climate finance follows institutional preparedness and stakeholder alignment. Climate strategies must translate into detailed investment plans that speak the language finance ministries and investors understand, while coordination mechanisms must exist before capital flows begin.
Morocco: Mobilizing private capital strategically
While public finance plays a catalytic role, long-term climate investment requires domestic private capital from banks, insurers, pension funds, and capital markets. Morocco embedded climate finance objectives into broader financial sector development through regulatory reforms, market infrastructure, and disclosure frameworks aligned to reduce uncertainty and encourage green finance participation. The result has been gradual but meaningful private sector engagement.
The lesson is practical: private capital follows credibility. It responds to clear rules, reduced risk, and predictable policy signals. For Ethiopia, this means working with the National Bank of Ethiopia, commercial banks, and emerging capital market institutions to create enabling conditions. With major banks holding substantial deposits and pension funds managing growing assets, potential exists—but only if regulatory clarity, risk-sharing mechanisms, and transparent project pipelines are established.
Bangladesh: Governance as foundation
Bangladesh’s experience with its national climate trust fund offers important lessons about governance foundations. Recent assessments have identified significant challenges including weak oversight mechanisms, procurement irregularities, and transparency gaps that have eroded both public trust and donor confidence. These governance weaknesses have reduced fund effectiveness and increased transaction costs for accessing future climate finance.
The experience underscores a fundamental principle: governance is not a technical add-on but the foundation of climate finance credibility. Strong fiduciary controls, transparent monitoring systems, and robust accountability mechanisms are essential infrastructure for sustainable climate finance. Without these foundations, even well-intentioned climate finance initiatives risk undermining long-term institutional reputation and future funding access.
What these experiences mean for Ethiopia
These peer experiences point to principles that matter for Ethiopia today. Climate finance must be institutionalized through durable coordination mechanisms rather than fragmented projects. Inclusion must be designed through devolved and gender-responsive pathways that strengthen legitimacy. Public finance must lead if private capital is to follow, where risk-sharing instruments and clear rules matter more than rhetoric. Direct access capability builds autonomy and reduces transaction costs over time. Credibility begins with measurement through robust tracking, reporting, and verification systems. Finally, sequencing matters: financial instruments should follow institutional readiness rather than global fashion.
For Ethiopia specifically, these lessons suggest a staged approach. First, establish or strengthen a central coordination mechanism—whether embedded in the Ministry of Finance or structured as an independent entity like Rwanda’s FONERWA—with clear authority to align climate finance flows across ministries and development partners. Second, invest in direct access accreditation to international climate funds, learning from Senegal’s experience that this requires upfront investment in fiduciary systems but yields long-term benefits in autonomy and reduced intermediation costs. Third, pilot devolved finance mechanisms in select regions, drawing on Kenya’s county-level experience to test approaches that give communities voice in priority-setting while maintaining accountability.
Fourth, develop a comprehensive climate finance strategy that quantifies investment needs by sector and maps them to potential funding sources, following South Africa’s model of translating commitments into investable propositions. Fifth, work with the National Bank of Ethiopia and financial sector regulators to create enabling frameworks for green finance, recognizing that private capital mobilization requires regulatory clarity and risk mitigation instruments before it can scale. Finally, prioritize governance systems from the outset—transparent procurement, independent monitoring, public disclosure—understanding that governance failures, as Bangladesh’s experience shows, can undermine years of institutional building and erode both domestic and international confidence.
From ambition to delivery
Ethiopia’s climate ambition provides a strong foundation for action. What matters now is whether the systems needed to finance and deliver that ambition will be built with appropriate urgency and institutional discipline. Experience from peer countries demonstrates that climate finance succeeds when institutions are aligned, responsibilities are clear, financing pathways are realistic, and results can be credibly tracked.
The path forward requires strategic choices about how to act. By investing systematically in coordination, governance, inclusion, and measurement, Ethiopia can move climate finance from aspiration to execution. The opportunity remains open. African countries are demonstrating that with the right institutional investments, climate finance can become a foundation for resilience and development rather than a persistent constraint. The question is not whether Ethiopia has the ambition—that is already demonstrated—but whether it will invest in the systems that turn ambition into measurable impact.
Tesfaye T. Lemma (PhD) is a tenured Full Professor of Accounting at Towson University and a multi-award-winning scholar whose research focuses on sustainability, climate-related governance, and sustainable finance in emerging and developing economies. He serves as an Associate Editor of Business Strategy and the Environment, one of the world’s leading journals in sustainability research, and his work informs policy and practice on climate finance design, institutional capacity, and the implementation of sustainability strategies.
