Investing in the world’s poorest country

Hello from Singapore, where Patrick and I, along with other FT colleagues, have been hosting the latest in our global series of Moral Money Summit events.

We’ve had two days of stimulating discussion with a cast of first-rate speakers including Nik Nazmi Nik Ahmad, Malaysian natural resources and environment minister, who warned European governments not to act like “sheriffs” with their environmental regulations, which he said risked unwelcome effects for developing economies. Another highlight was a conversation with Ravi Menon, the outgoing head of Singapore’s central bank, which I describe below.

If you missed the event, you can register here to view all the sessions online. And we’re now taking registrations for the next four conferences in the series in New York, Johannesburg, Tokyo and London — all accessible both in person and online. We hope to meet many of you there.

Meanwhile, the high-profile Africa Climate Week has been under way in Kenya. Read on for a report on the key developments by Andres Schipani, who’s been on the ground in Nairobi. We’ll be back in your inbox on Monday with an analysis of the key lessons for business and finance from the Nairobi event, and the outlook for sustainable development funding in Africa. Have a good weekend. — Simon Mundy

Africa Climate Summit pulls in $26bn in deals

The first Africa Climate Summit in Nairobi this week was not just about forging a new “narrative” to bring the continent — which has the world’s lowest per capita carbon emissions but suffers most from the effects of climate change — to the front of the global conversation.

The three-day gathering of heads of state also catalysed dozens of deals and pledges worth $26bn, that, if realised, could prove meaningful for some of the continent’s most fragile nations. It could also open a raft of new investment and financing opportunities for clean energy enthusiasts who have, until now, been wary of investing on the African continent.

One of the deals highlighted by the summit’s host, Kenya’s president William Ruto, was in Burundi, the world’s poorest country, according to World Bank data — and one that was off limits to foreign investors for a long time, mainly due to heightened political risks.

The Burundi project is being developed by Virunga Power, a developer, investor and operator of renewable power generation and distribution networks in parts of eastern and southern Africa. It is controlled by electricity network infrastructure developer Gridworks, owned by British International Investment, the UK government’s development finance wing.

The $60mn deal created Weza Power, the first new private-sector electricity distribution company operating nationally in sub-Saharan Africa for a decade. In its first phase, it will result in some 300,000 Burundians gaining access to grid electricity. Most inhabitants currently burn kerosene and charcoal for energy, while businesses have to rely on highly polluting diesel generators.

Over a seven-year period, the new privately owned and operated electricity distribution company aims to bring grid power to almost 70 per cent of the population of Burundi, mainly through hydroelectric generation. Currently, only 12 per cent of the 12mn population have access to electricity.

“This project should reach more than 9mn people throughout the country,” Martin Ndayizeye, general director at Burundi’s energy ministry, told the Financial Times. He explained that President Évariste Ndayishimiye’s government recently updated the central African country’s regulations by opening up economic sectors “to attract foreign investors”.

This project aims to raise around $1.4bn — or almost 50 per cent of Burundi’s gross domestic product — over seven years to build a network of distribution infrastructure that connects two-thirds of the petit pays (“small country”), as some call it. “Investment in electricity networks is vital to underpin economic development, as well as to support a transition to renewable energy,” said Simon Hodson, chief executive of Gridworks.

There’s still much to do. According to the African Development Bank, more than 640mn Africans have no access to power. One of the targets stated in Wednesday’s “Nairobi Declaration” by heads of state was to boost Africa’s renewable generation capacity from 56GW in 2022 to at least 300GW by 2030, “both to address energy poverty and to bolster the global supply of cost-effective clean energy for industry”.

For Mo Ibrahim, a Sudanese-British billionaire businessman who was a speaker at the summit, the Nairobi gathering has been “a unique opportunity to showcase that it is not only possible but essential to reconcile climate and development — highlighting Africa’s indispensable potential for a global green transition in order to unlock the financial resources still missing.” (Andres Schipani)

Central banker Ravi Menon’s parting words for global leaders

After 12 years at the helm of the Monetary Authority of Singapore — and a total of 36 years at the central bank — Ravi Menon grabbed headlines on Monday with the news that he will depart at the end of this year.

Among leading central bankers, Menon has been one of the most heavily engaged in responding to climate change — a subject that was the focus of our conversation on Wednesday, to open the Moral Money Summit Asia in Singapore.

Since January last year, Menon has served as chair of the Network for Greening the Financial System — a climate-focused grouping of central banks and supervisors. That’s put him at the centre of the debate over how central bankers ought to approach this area. As we’ve highlighted, luminaries including former US Treasury secretary Larry Summers have raised concern that central banks risk getting distracted from their core mandate.

Menon argued that dodging this topic is simply not an option for him and his peers. “I would say it’s everyone’s mandate, and everyone’s business,” he said. “We got into this mess because we all thought it was somebody else’s business. And actually, nobody else was taking responsibility. So everyone needs to lean in.”

A key priority for NGFS members, Menon said, is pushing financial institutions to develop “credible transition plans” — a concept that I asked him to define. To be credible, Menon said, a transition plan needed to be built around a “science-based pathway” that would show, for each sector, how an institution’s investment or lending decisions aligned with the global push for net zero carbon emissions.

But he warned against overestimating the clout of regulators and supervisors in this space, without more ambitious action by policymakers. In particular, he added his voice to the chorus calling for governments to reshape the economic incentives for business by putting a meaningful price on carbon emissions.

“The single most important thing is carbon pricing,” Menon said. “I think collectively, we should all be pressing governments to put in place realistic carbon prices. Central banks can’t do that.”

One of Menon’s final tasks as MAS head will be to attend December’s COP28 in Dubai (where Moral Money will, as usual, be reporting daily from the ground). Last year’s COP27, Menon said, brought a welcome recognition of the need for public capital to play a bigger role in driving investment in clean energy.

“But how exactly are you going to do that?” he asked. The key priority, Menon argued, must be a change in approach by multilateral development banks and other publicly funded institutions. With their current limited risk appetite, he said, they are “competing with the private sector”. Only with a far greater emphasis on blended finance — taking riskier bets on “marginally bankable” projects, to catalyse private sector investment in them too — can these entities achieve their potential impact, he argued.

“This is one of the major breakthroughs I’m looking forward to in the next one, two, three years,” Menon said. “Because time is running out. We need to get this done.” (Simon Mundy)

Smart read

This week’s Africa Climate Summit featured lots of upbeat talk about the continent’s potential to profit from the carbon credit market. This new report from Nairobi-based think-tank Power Shift Africa offers a searing counterargument, calling carbon offsets “a dangerous distraction for Africa”.