UDB sets up climate finance facility to promote green economy 

According to the ministry of Finance, Uganda needs $28 billion to finance its climate change mitigation measure according to its Nationally Determined Contribution (NDC), a commitment it made in line with the 2015 Paris Agreement for the period 2020– 2030.

Of this, 85 per cent will be mobilized from international partners, whereas the remaining 15 per cent ($4.1 billion) will be mobilized locally from both government and private sector players.

To aid in this financing, Uganda Development Bank (UDB) has committed Shs 50 billion towards the capitalization of the newly set-up UDB Climate Finance Facility (CFF), a strategic fund that will make available affordable finance that aims to promote climate-smart agriculture, ensure climate-resilient infrastructure, and promote low-carbon industries.

The facility is a special-purpose vehicle with a unique and specific focus on finance to unlock and catalyze private sector investment in enterprises that drive green impact and financial inclusion.

While launching the fund, UDB’s managing director Patricia Ojangole noted that the increasing threat of climate change and environmental degradation has the potential to present high socio-economic risks to the economy, and as the impacts continue to manifest through floods, droughts, landslides, animal and crop epidemics, among other signs in different parts of the country, they are more deleterious to the poor and marginalized, who depend largely on natural resources for their livelihoods.

“Over 70 percent of Ugandans depend heavily on micro, small, and medium enterprises (MSMEs) for employment, and these generally have less capacity to withstand financial shocks. The vulnerability of Uganda’s population requires the urgent need to adapt and maintain future economic growth opportunities by transitioning to a low-carbon (green) economy. This will require massive investment in green technologies. Green finance will be central to providing the flows of capital required. This is primarily driven by the fact that the greenest technologies are characterized by high capital intensity and consequently high upfront financing requirements,” she said.

According to Ramadhan Ggoobi, the secretary to the Treasury, Uganda loses up to three per cent of its GDP as a result of climate change and, therefore, the potential of climate finance is significant in providing targeted finances for climate adaptation and mitigation and critical to significantly reducing the impact of climate change on our economy.

“This will improve, among other things, supporting the development of climate-resilient practices, especially in agriculture, mining, energy, forestry, fisheries, tourism, manufacturing, rebuilding ecosystems, among others, as well as promoting renewable energy development and improving water management practices.”

He noted, however, that recognizing the need to address the impact of climate change, the government launched a climate change financing framework in 2021 that provides a clear road map for mobilizing and managing climate finance in Uganda and also established a climate finance unit in the ministry of Finance to enhance mobilization of climate finance resources.

“It outlines a number of key priority areas for climate funding, including building climate-resilient infrastructure and also promoting low-carbon development in order to reduce national greenhouse emissions by 24 per cent by 2030,” he said.

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