As climate risks in Africa accelerate, the need to understand the challenge clearly is growing ever more critical. Without a firm understanding of the risks the continent is facing in the short- and medium-term, it will be challenging to attract the necessary investment to drive climate adaptation efforts. In addition, providing a data-driven foundation will aid in the development of businesses and solutions that can deliver both climate resilience and commercial returns.
The African Venture Philanthropy Alliance (AVPA) published a series of three white papers on climate adaptation at the end of October 2024, offering a roadmap for turning climate challenges into opportunities. The papers aim to help African communities build resilience, while enabling investors to support and benefit from adaptation solutions. The series bridges the gap between scientific evidence, financing requirements and business innovation, demonstrating how adaptation can move from theory to action for both social and financial benefit. This summary suggests practical, actionable steps that companies can implement to develop climate-proof value chains and livelihoods.
Africa is a minor contributor to climate change, but the continent shoulders the highest burden of rapidly escalating climate costs in agriculture, health, infrastructure and water systems. Although there is potential for adaptation to the changing climate, capital is limited, fragmented and biased towards mitigating climate change. AVPA’s Africa Climate Investing Forum (ACIF) commissioned three white papers to:
- Set up a science-based adaptation agenda in Africa and provide a data-driven foundation for decision-making.
- Explore the current landscape of climate finance in Africa, identifying barriers to growing adaptation funding, highlighting innovations and proposing strategies to mobilise more impactful investment.
- Identify viable private-sector models that can deliver both climate resilience and commercial returns across Africa.
The reports are intended to assist corporate leaders, boards, investors (such as development finance institutions and asset managers), development partners, policymakers and small- and medium-sized enterprises (SMEs) interested in building and funding climate adaptation solutions.
Methodology
The three articles were formulated as part of AVPA’s ACIF programme, synthesising pertinent recent scientific literature, weather data, African policy tools such as nationally determined contributions (NDC), market intelligence, practitioner interviews and case material obtained between 2023 and 2024.
The researchers employed systematic evidence review, expert consultations and the analysis of cross-functional case studies of operating models in significant adaptation areas such as agricultural advisory, water, health, risk/insurance and infrastructure services. The finance landscape was mapped and gaps analysed.
Research teams identified Africa-specific climate impacts and cost drivers, while also modelling cascading risks, prioritising the effects of water. The teams also evaluated the revenue models, risk-sharing arrangements and unit economics of plausible adaptation businesses.
In this summary, the three white papers are synthesised into a single brief for the use of companies and investors.
Key findings
Adaptation funding is limited and biased towards governments
Financing to drive climate adaptation solutions, programmes and businesses is primarily supplied by multilateral organisations, governments and bilateral agencies, with little contribution from private capital. Loans are the primary financing instrument for many adaptation finance structures. More than half (54%) of adaptation finance commitments to Africa in recent years have been delivered as loans, rather than grants or equity investments.
Companies are recommended to mix concessional/public and commercial capital with revenue-backed contracts to de-risk the scale-up of adaptation businesses.
Water stress intensifies health, economic risks and impact
Water stress does not just affect agriculture or households: it amplifies challenges across the entire economy, including food production, health, energy and business operations.
A knowledge gap exists between the current modelling of rainfall in Africa and the empirical data. Data is scarce and multiple sources have been used across satellite estimates, weather station data and modelling on other variables. Most adaptation data dashboards focus narrowly on natural disasters (e.g. temperature rise, disaster frequency), leaving out broader climate impacts such as heat spikes, water scarcity and pest expansion.
The longest and most detailed review of rainfall data on the African continent, covering the period from the mid-19th century to 2014, found a decrease in rainfall and more arid conditions across the continent.
Although the world is experiencing an increased percentage of oceanic moisture contributing to more intense rainfall, the amount in Africa has been steadily declining since 1979. At the same time, the degradation of African soil, reduced plant density, deforestation and accelerated desertification are contributing to increased water stress. Transpiration from plant life, which releases moisture into the air, historically accounts for around 20% of global rainfall, with an additional 15% generated by evaporation from the ground and open water.
However, almost half of the rainfall in Africa is now generated from moisture derived from transpiration. This means it has an above-average dependency on self-generated rainfall from vegetation. A study on African watersheds found their annual dependency on vegetation-sourced precipitation ranged from 19.7% to 53.2%. Meanwhile, temperature-induced soil changes are contributing to poorer water absorption and retention by soils. These are amplified during heatwaves and droughts, with less water vapour available within microclimates. Soil degradation directly affects food nutrients and disease resistance.
The first quantitative assessment of groundwater resources in Africa was published in 2021, estimating groundwater recharge rates at 2% for 2024. Early empirical reports on the groundwater depletion of the aquifer under Nairobi have found that abstracting groundwater to meet the city’s projected water demand is unsustainable.
Water scarcity directly impacts health costs through water-borne diseases. It also affects food security and food prices due to agricultural yield losses, infrastructure costs from flooding and heat damage and the variability of farming and manufacturing operating costs.
The implication of these findings for business is the organisational imperative to prioritise water-smart operations. This requires more efficient irrigation, better demand management, flood-resilient logistics, the reuse of wastewater and preventive health services in workforce programmes.
Africa’s climate adaptation financing gap is significant – but it can be solved
The adaptation funding required to tackle climate change in Africa this decade (an estimated US$40 billion a year) is much greater than the current flows of adaptation investment (an average of US$11.4 billion a year); a significant gap exists between what is being provided and what is ultimately needed. Services that provide clear, high-value and practical benefits to communities will, however, attract private investment, especially where revenue matches the value provided.
For businesses, this means designing projects in which the outputs and impact – such as fewer losses, less downtime, or more stable crop yields – can be measured. Payments or profits should be linked directly to these results, using methods like outcome-based payments, pay-as-you-save plans, or built-in insurance to demonstrate impact and effectiveness. This approach aims to attract new investors or compel existing investors to increase their funding or offer more favourable terms.
How adaptation businesses can succeed in Africa
For climate adaptation businesses to succeed, their products and services must deliver direct, tangible benefits to mass-market clients, consumers and communities to facilitate adoption. These businesses should be market-driven, not relying solely on development goals or public sector metrics.
The winning business models have four characteristics:
| Clear, mission-critical utility to end-users |
| Accessible pricing and financial models that match the realities of their target market (e.g. credit options or flexible payment structures) |
| Last-mile delivery and service (e.g. home visits and working with local agents) |
| Revenue streams that match payments to value (e.g. timing of payments or payments that reflect utility). |
Paper 3 offers guidance for business owners and entrepreneurs aiming to build successful climate adaptation businesses in Africa. It emphasises the need to design ventures around clear, measurable value propositions that directly benefit consumers, especially those at the bottom of the pyramid. Businesses must move beyond donor-driven models and, instead, focus on market demand, offering products that solve urgent problems like water access, crop reliability, or cooling, with fast and visible returns. Financial models should be flexible and aligned with how and when customers experience value. Direct engagement with clients through trusted networks and community agents is essential for building trust and driving adoption.
Recommendations
| 1. Support water and sanitation solutions: Prioritise water resilience as a company’s first adaptation key performance indicator. Audit operational water risks from water scarcity, floods and water contamination. Companies should invest in water efficiency, storage, reuse and flood protection at facilities and in their supply chains. |
| 2. Performance-based resilience rewards: Develop performance-based business models and utilise contracts that reward measurable improvements in resilience. Companies should tie payments to losses avoided (e.g. reduced crop failure or flood damage) or performance (e.g. improved water efficiency, increased yields, or reduced downtime). |
| 3. Scale with blended financing: Leverage blended financing by partnering with philanthropic and public organisations (e.g. combining grants, concessional tranches, loans and private investment) to expand the reach and impact of adaptation solutions. This will reduce risk, unlock concessional capital and facilitate the scaling of adaptation businesses and solutions. |
| 4. Develop strong last-mile delivery offerings and post-sales service: Adaptation businesses should collaborate with agribusinesses, retailers, microfinance institutions, local agents and community organisations to reduce customer acquisition costs, guarantee uptake and service assets (pumps, storage, diagnostics). Build strong partnerships and regional networks to ensure products and services reach end-users in remote and underserved areas. |
| 5. Report and measure resilience outputs: Companies and new businesses should develop clear, context-specific resilience goals, with the metrics tied to climate risk reduction. Businesses should report outcomes in ways that reflect real-world impact for consumers – not just donor priorities. |
Find out more
Access the full reports:
- Empirical Insights on Climate Change Impacts in Africa: An Adaptation Agenda is available at;
https://www.avpa.africa/empirical-insights-on-climate-change-impacts-in-africa-an-adaptation-agenda/ - The Climate Finance Equation in Africa is available at;
https://www.avpa.africa/the-climate-finance-equation-in-africa/ - Building Private Sector Businesses in Adaptation in Africa is available at:
https://www.avpa.africa/building-private-sector-businesses-in-adaptation-in-africa/ - Contact: learning@avpa.africa
