This chapter analyses the current state of finance for the energy sector throughout Africa and several scenarios that underscore the importance of the involvement of both private and public debt markets to achieve climate goals aligned with announced pledges. Regional scenario analysis, focused on North and Sub-Saharan Africa, highlights potential opportunities and risks for policy makers. The breakdown of these scenarios by region also accounts for heterogenous shifts in key economic and financial variables, such as domestic public and private investment growth, foreign direct investment, public debt-to-GDP, international climate finance for developing countries, and the capital structure of the energy sector, highlighting decisive levers for financing the climate transition in Africa.
Africa Capital Markets Report 2025
Abstract
This chapter examines the financing needs for transitioning to a lower-carbon economy in Africa, based on scenario analysis aligned with the Announced Pledges Scenario (APS) defined by the International Energy Agency (IEA), and focusing on corporate bonds. Its primary objective is to identify the necessary developments in corporate bond markets, regional capital market integration, foreign direct investment, and international climate finance to enable energy sector companies to undertake the investments required for the climate transition. The analysis considers North and Sub-Saharan Africa separately.
According to the IEA’s Announced Pledges Scenario (APS), clean energy investment must rise to 2.4 times current levels in North Africa and 1.8 times in Sub-Saharan Africa to meet the required 2026 targets. While their 2024 investments of USD 14 billion and USD 33 billion, respectively, fall short of these requirements, they grew at 16% and 14% annually in the last three years, exceeding GDP growth of 3.3% and 2.2% in each region.
Investment trajectories will vary significantly depending on whether most investments come from the public or private sector. Scenarios do not prescribe recommendations for governments, nor do they represent the most likely projections of future developments. Instead, a scenario analysis may quantify the implications of public-sector-led versus capital-market-driven scenarios, helping governments assess their feasibility and determining policy actions.
In our baseline scenario, assuming climate investment growth in both public and private sectors continues along recent trends, North and Sub-Saharan Africa face medium-term investment shortfalls (until 2044 and 2037 respectively) but subsequently develop investment surpluses exceeding the IEA's APS targets. However, the APS falls short of Paris Agreement ambitions, which require substantially higher annual investments through 2050.
In a scenario where the public sector provides additional financing to meet investment needs through debt issuance or climate finance support beyond the New Collective Quantified Goal on Climate Finance agreed at COP29, North Africa requires annual average additional support of USD 9 billion (2025-50) once public debt becomes unsustainable, while Sub-Saharan Africa finances required investments without further development finance.
In a scenario where the private sector provides all the additional financing to meet investment needs, capital markets in North and Sub-Saharan Africa would need to develop substantially. This is particularly critical for marketable debt of energy companies in both regions, which would need to grow at annual rates of 20.4% and 14.9%, respectively, from 2024 to 2050.
In all three scenarios analysed, energy companies’ marketable debt grows at least three times faster than GDP in North Africa and five times faster in Sub-Saharan Africa, highlighting both the challenge of leveraging debt markets for the low-carbon transition and the private sector’s potential to drive this transformation.
Integrated African capital markets could play a key role in Africa's energy transition. The African Exchange Linkage Project, which recently expanded to connect ten major exchanges covering 90% of the continent's total market capitalisation, could diversify and expand financing opportunities, following integration models like the Nuam Exchange in South America.
This section examines recent climate transition investments and the funding needed to achieve the IEA's Announced Pledges Scenario, segmented by energy sector and region.
4.2.1. Past and future investments in the climate transition
The IEA offers a granular breakdown of recent climate transition investments and future investment needs to meet North and Sub-Saharan Africa, detailing requirements across subsectors and African regions. While the IEA’s investment scope focuses on climate change mitigation and partially includes cross-cutting elements (i.e. investments accounting for both climate change mitigation and adaptation goals), it does not comprehensively capture climate change adaptation investments, compensation for loss and damage, and nature preservation. Investments in climate adaptation and nature preservation are not part of the main analysis in this chapter.
The IEA describes total climate transition investments as "Total clean energy" investments and disaggregates them into renewable power generation, electricity networks, battery storage, clean fuels & air capture, energy efficiency and end-use in transport, buildings and industry. Renewable power generation includes solar, wind and nuclear energy, and other renewable energy sources. Clean fuels include hydrogen and biofuels. Figure 4.1 shows that growth in clean energy investments in both North and Sub-Saharan Africa has surpassed that in high-emitting energy sectors, with this trend projected to continue through 2050 in the IEA APS.
In North Africa, clean energy investment has risen from USD 10 billion in 2015 to USD 14 billion in 2024, representing a compound annual growth rate (CAGR) of 3.8%, while high-emitting energy investment has declined from USD 46 billion to USD 23 billion over the same period (CAGR of -7.4%). However, in the last five years, clean energy investments have accelerated and grown at a CAGR of 11.8%, following a decline in investments from 2015 to 2019. Conversely, high-emitting asset investments declined at a CAGR of 8.1% in the last five years.
Looking ahead, clean energy investments in North Africa will need to reach USD 89 billion by 2050 (CAGR of 7.4%), while high-emitting energy investments will continue declining to USD 11 billion (CAGR of -2.4%).
In Sub-Saharan Africa, clean energy investment has risen from USD 19 billion in 2015 to USD 33 billion in 2024, representing a CAGR of 6.3%, while high-emitting energy investment has declined from USD 78 billion to USD 47 billion over the same period (CAGR of -5.5%). In the last five years, clean energy investment has accelerated and grown at a CAGR of 14.2%, following a decline in investment from 2015 to 2019. High-emitting asset investments in Sub-Saharan Africa increased at CAGR of 5.5% in the last five years, contrasting with the decline in these investments in North Africa over the same period
Looking ahead, clean energy investments in Sub-Saharan Africa will need to reach USD 202 billion by 2050 (CAGR of 7.3%), while high-emitting energy investments will need to decline to USD 10 billion (CAGR of -4.8%).
Total clean energy investment in North and Sub-Saharan Africa will need to continue growing at annual rates of 7.4% and 7.3% from 2025 to 2050, respectively, to meet announced pledges.
Source: IEA, Proprietary database.
Figure 4.2 shows a breakdown of clean energy investments by energy sector. In North Africa, renewable power generation investment has risen from USD 2 billion in 2019 to USD 5 billion in 2024 (CAGR of 20.1%) and is projected to reach USD 27 billion by 2050 (CAGR of 6.6% from 2024-2050). However, this masks steep initial growth requirements, with investments needing to quadruple to USD 20 billion by 2026 before peaking at USD 28 billion in 2034 (CAGR of 19.0% from 2024 to 2034) and gradually declining before rising again from 2041 to 2050. Renewable power generation requires front-loaded investment to prevent emissions lock in, leading to an initial peak. The following rise in investment requirements in this category is later driven by replacement and repair costs of the initial solar and wind power facilities.
Energy efficiency and end-use investments in North Africa have grown from USD 2 billion in 2019 to USD 5 billion in 2024 (CAGR of 20.1%), projected to reach USD 31 billion by 2050 (CAGR of 7.2%) and accelerate throughout the period to become the dominant investment category by 2050. Electricity networks investment remained relatively stable from USD 4 billion in 2019 to USD 5 billion in 2024 (CAGR of 4.6%) and is expected to reach USD 18 billion by 2050 (CAGR of 5.1%), though growth plateaus from 2040 onwards. Battery storage and clean fuels/air capture remain relatively minor components, reaching only USD 1 billion and USD 12 billion, respectively, by 2050.
In Sub-Saharan Africa, renewable power generation investment has more than doubled from USD 7 billion in 2019 to USD 16 billion in 2024 (CAGR of 18.0%), projected to reach USD 69 billion by 2050 (CAGR of 5.8%). As in North Africa, this requires steep initial growth to USD 36 billion by 2026, peaking at USD 50 billion in 2031 (CAGR of 12.1% from 2024 to 2031) before stabilising. Energy efficiency and end-use investments have grown from USD 5 billion in 2019 to USD 9 billion in 2024 (CAGR of 12.5%), expected to surge to USD 97 billion by 2050 (CAGR of 9.5%), with continuously accelerating growth making it the dominant category, representing nearly half of total clean energy investments by 2050. Electricity networks investment has more than doubled from USD 4 billion in 2019 to USD 9 billion in 2024 (CAGR of 17.6%), projected to reach USD 20 billion by 2050 (CAGR of 3.1%), maintaining steady growth throughout the period unlike North Africa's plateau. Battery storage will grow to USD 10 billion and clean fuels to USD 2 billion by 2050, remaining relatively marginal in the overall investment mix for both regions.
While renewable power generation investments require steep initial growth before flattening in the 2030s, energy efficiency and end-use investments grow steadily throughout the period.
Source: IEA, Proprietary database.
4.2.2. Methodology and underlying IEA APS scenario
The analysis of Africa is based on the IEA APS scenario because it represents an ambitious yet pragmatic target. Although the required long-term clean energy investment growth for the APS (7.4% in North Africa and 7.2% in Sub-Saharan Africa) substantially exceeds the respective regions’ long-term GDP growth rates (2.2% and 4.1%, respectively), these growth rates remain below, yet close to, the historical clean energy investment growth observed since 2019.
Readers should be aware that while the APS incorporates all announced climate commitments, including Nationally Determined Contributions and long-term net-zero pledges, it does not achieve global net-zero emissions by 2050. Instead, global emissions are expected to reduce from 38 GtCO2 in 2023 to 17 GtCO2 in 2050. The APS is only aligned with limiting global warming to around 1.7°C by 2100, which exceeds the 1.5°C limit targeted by the Paris Agreement by 2050 (IEA, 2023[1]). Consequently, the APS reflects an ambitious yet insufficient pathway requiring further action beyond currently announced pledges to reach full net-zero by mid-century.
While Africa-specific data for the IEA Net Zero Emissions by 2050 (NZE) scenario is not available, the investment requirement and ambition differences between the NZE and APS scenarios for emerging market and developing economies (EMDEs) other than China is relevant. In these economies, investment needs under the NZE scenario are estimated to be approximately 32% higher than the APS for 2026 to 2030, 45% higher for 2031 to 2035, and 28% higher from 2036 onwards.
This section explores the current capital structure of companies in the energy sector (which includes both energy and energy-related utilities, following the same methodology as the analysis in the fourth chapter of the OECD Global Debt Report 2025 (OECD, 2025[2])), focusing on their use of conventional and sustainable bonds.
4.3.1. Public and private sector investments
Africa-specific data on the distribution of public and private contributions to clean energy investment were not available at the time of publication. The analysis therefore relies on estimates for EMDEs excluding China, which also cover the Africa region. Within this group, public sources accounted for an estimated 22% of clean energy investment in 2023, a share that has remained broadly stable in recent years (IEA, 2024[3]; 2024[4]).
4.3.2. Capital structure in the energy corporate sector
While climate change mitigation investments encompass various sectors, including energy-efficiency and end-use in transport, real estate and industry, the remainder of the analysis in this section focuses on the energy sector (i.e. excluding end-use and energy-efficiency investments in other sectors). The main reason for this is that energy sector climate transition investments in the IEA’s APS scenario are substantially higher than in alternative scenarios that do not meet the Paris Agreement goals, such as the IEA’s Stated Policies Scenario (STEPS), leading to an increase in the market size of the energy sector. The section “Evolution of bond and equity markets in energy” estimates the resulting energy sector’s bond and equity market sizes.
In contrast, the Transport Outlook 2023 (ITF, 2023[5]) shows that an increasing share of climate transition-related transport investments, as outlined in its High Ambition scenario, lead to lower total investment needs due to more efficient use of infrastructure and a shift towards sustainable transport modes. Core infrastructure investment needs are estimated at 1.7% of global GDP annually through to 2050 under the Current Ambition scenario, and marginally less (1.6%) under the Paris Agreement-aligned High Ambition scenario. Therefore, climate change mitigation investments in the transport sector are unlikely to increase its bond and equity market size substantially.
The capital structure (i.e. the share of financing sources) of listed companies in the energy sector and its subsectors, such as fossil fuels and renewable energy, varies based on the nature of their business models and the development of the banking sector and capital markets in the countries they operate in. This section draws on 55 listed companies, covering the entire African energy and energy-focused utility sectors, and breaks down their capital structure into marketable debt, non-marketable debt (and other liabilities), and equity. Non-marketable debt includes bank loans and finance leases, and other liabilities include, for instance, accounts payable, deferred revenues, pension and other post-employment benefit obligations, and deferred taxes.
The results are presented following two distinct methodologies:
1. With bonds, non-bond debt, and equity as a share of total debt and equity, representing the financing instruments of companies in the sector (Figure 4.3, Panel A).
2. With bonds, non-bond debt, other liabilities, and equity as a share of total assets (i.e. equity plus liabilities) providing a broader view of companies’ sources of financing for their total assets (Figure 4.3, Panel B).
The section “Evolution of bond and equity markets in energy” estimates the development of energy sector assets based on the IEA APS investment requirements, and, using the fundamental accounting identity that assets must equal financing sources, it translates the increase in assets into the sector’s total financing sources, according to methodology 2.
Energy companies in Africa do not exhibit substantial marketable debt, with North African companies employing higher leverage through non-marketable debt, while Sub-Saharan companies relying more on equity financing.
Note: Shares are shown for total values in the sector (i.e. larger companies have a higher weight in the calculations). This analysis is based on company financial data of 2024.
Source: OECD Corporate Sustainability dataset, LSEG.
In 2024, bond financing of energy companies in North Africa represented 5% of total debt and equity, while energy companies in Sub-Saharan Africa did not have outstanding listed bonds. Financial leverage was also higher in North Africa, with companies depending more on both marketable and non-marketable debt (62% and 39%, respectively) and less on equity financing (33% versus 61% in Sub-Saharan Africa).
When considering the relative shares out of total assets (i.e. incorporating other liabilities), as shown in Figure 4.3 Panel B, these regional differences remain consistent, although the absolute percentages of bonds and equity decrease due to the larger denominator. This effect is particularly pronounced in Sub-Saharan Africa, where other liabilities make up a relatively larger share.
4.3.3. Corporate and sustainable bond market trends in the African energy sector
While marketable debt among listed energy companies remained limited at USD 300 billion in North Africa and was non-existent in Sub-Saharan Africa by December 2024 (Figure 4.3), 2025 data indicate an increasing trend. Additionally, analysing marketable debt of non-listed firms shows higher bond activity, particularly from one non-listed, state-owned energy company in Sub-Saharan Africa.
In North Africa, one additional listed company issued marketable debt, bringing total outstanding debt to USD 367 billion as of July 2025. Similarly, one company in Sub-Saharan Africa (listed in Nigeria) issued marketable debt (although it was issued and listed in Europe and the US instead of on its domestic market) worth USD 650 million.
The African energy sector remains absent from the sustainable bond market, with no qualifying issuances outstanding as of July 2025.
4.4.1. Methodology and scenario assumptions
This section presents three scenarios for financing future climate transition investments across all sectors, each offering a distinct angle on how capital markets might evolve, depending on fundamentally different choices made by governments and the private sector. These scenarios comprise a Baseline Scenario (BLS), a Public Sector Scenario (PSS), and a Capital Markets Scenario (CMS). Each scenario incorporates varying assumptions about overall climate mitigation investment growth, public-private sector investment split, climate finance for developing countries and greenfield FDI. Table 4.1 summarises the underlying assumptions and output metrics, which are also explained in greater detail in the following sections and in Annex 4.A.
These scenarios do not prescribe specific recommendations for governments to adopt any particular approach, nor do they represent the most likely projections of future developments. If anything, the BLS is a more realistic scenario in the short term, with capital markets likely to be somewhere between the two extremes of the PSS and CMS cases in the long term. In fact, part of the value of this scenario analysis exercise lies in illustrating how impractical an excessive reliance on either the public or private sector would be.
Relying predominantly on public funding could result in unsustainable public sector debt levels and dynamics. Conversely, overreliance on the private sector to bridge the short- and medium-term investment gaps would require private sector investment growth, and the associated increase in market-based debt in North and Sub-Saharan Africa, to increase significantly from current levels. This effort to quantify the consequences of public-sector versus capital market-focused approaches allows to assess their viability and determine appropriate policy actions.
The following section presents the BLS, where climate investment growth, public sector investment shares, and greenfield FDI continue along historical trends, while development finance meets COP29 goals by 2035 (UNFCCC, 2024[6]). The subsequent section presents the PSS, where private sector investments are assumed to continue along past trends, and the public sector steps up to finance the remaining gap needed to meet the climate mitigation investment requirements of the IEA APS scenario described in the “Methodology and underlying IEA APS scenario” section. This results in a variable public sector investment contribution and debt-to-GDP ratios, representing output metrics in this scenario.
Lastly, the CMS assumes that governments face debt-to-GDP limits (60% for North Africa and 55% for Sub-Saharan Africa), while capital market-driven private sector investment meets the requirements set by the IEA APS. The debt-to-GDP limit for Sub-Saharan Africa reflects insights from the IMF's debt sustainability analysis for Sub-Saharan Africa, with detailed methodology provided in the appendix. For North African countries, where the IMF has not conducted comparable debt sustainability analysis, the 60% debt-to-GDP threshold from the EU fiscal rules' debt reduction mechanisms is applied (European Parliament, 2024[7]). The EU framework establishes two triggers at 60% and 90% debt-to-GDP ratios. The CMS also assumes that greenfield FDI triples (as a proportion of private sector investment) by 2035.
In contrast to the CMS, the PSS allows both regions greater public debt-to-GDP flexibility by establishing a ceiling of 75% of debt-to-GDP for North Africa, representing the midpoint between the two EU fiscal rule thresholds, and 60% for Sub-Saharan Africa, corresponding to the lower threshold. In 2024, North Africa's debt-to-GDP ratio stood at 72.8% while Sub-Saharan Africa's reached 61.1%. The IMF projects that Sub-Saharan Africa's ratio, absent any additional climate transition-related borrowing, will decline to 54.9% by 2030, thereby providing the region with fiscal space to approach the 60% limit under the PSS.
The PSS and CMS build on debt-to-GDP estimates from the IMF. These baseline figures do not account for public-sector climate transition expenditure in the IEA APS. Therefore, future public-sector financing for climate transition investments in line with the IEA APS represent an additional government debt-burden in the scenario analysis in this chapter. In all scenarios, the public sector debt-to-GDP ratio is assumed to remain at its baseline level in the absence of climate transition investments, abstracting from other pressures on public finances, such as those arising from ageing populations (Guillemette and Turner, 2021[8]).
4.4.2. Baseline scenario
The BLS scenario does not require climate mitigation investments to meet the annual targets set by the IEA APS scenario and instead assumes that investment growth initially follows the average rate of the last three years (2022 to 2024) and converges to GDP growth in the long-term. The difference between projected actual and required investments is described as the investment gap, and annual gaps carried forward result in a cumulative investment gap. This simplified scenario does not account for increased future investment needs due to delayed investments in prior periods.
Initially, continued investments based on past growth rates create financing gaps in North and Sub-Saharan Africa. However, as shown in Figure 4.1, growth of climate transition investment requirement flattens from 2031 in North and Sub-Saharan Africa, facilitating closure of the investment gap and eventual surplus generation. In Sub-Saharan Africa, investment requirements reaccelerate from 2042, but the region's long-term GDP growth drives continued investment capacity, creating an increasing surplus over time. The analysis assumes that climate transition investments converge to GDP growth rates in the long term.
The surplus generation does not indicate that North and Sub-Saharan Africa achieve net-zero emissions. While both regions face short-to-medium term investment gaps relative to their announced pledges under the APS scenario, they eventually meet and exceed these commitments. However, these investment levels remain insufficient to meet NZE requirements.
If investment growth in 2025 and 2026 continues at the average rate of the last three years – 16% for North Africa and 14% for Sub-Saharan Africa – the projected annual investment for 2026 is estimated to fall short of the required levels by 45% in North Africa, and 27% Sub-Saharan Africa. Similarly, current 2024 levels fall short by 59% and 44% compared to 2026 requirements, necessitating a 2.4-times and 1.8-times increase, respectively. The comparatively higher short-term investment gap in North Africa does not preclude gap closure (in 2045), given the region's relatively high investment growth rates in the short and medium-term, before growth converges to long-term GDP growth of approximately 1% by 2050.
In contrast, Sub-Saharan Africa's relatively smaller investment gap closes by 2038 and enables the region to develop a higher cumulative surplus, supported by its higher long-term GDP growth of approximately 4%, to which clean energy investment growth converges in the BLS. If recent growth trends can be sustained and strengthened, African countries might be able to strive beyond their announced pledges and aim to narrow the gap to NZE requirements in the medium and long-term.
Figure 4.4 shows projections for actual and required annual investments (secondary axis) and the resulting cumulative gap or surplus (primary axis). However, projecting recent investment trends does not account for possible spikes and acceleration in investment growth due to renewable energy megaprojects such as Ethiopia’s Grand Ethiopian Renaissance Dam, with installed capacity at ~5,150 MW (Webuild S.p.A., 2025[9]) and costs estimated at USD 5 billion (Webuild Group, 2025[10]), which was primarily financed domestically, although with Chinese Exim Bank providing financing for the purchase of the turbines and electrical equipment for the hydroelectric plants (Brookings, 2020[11]). By contrast, Angola’s Energy Sector Efficiency and Expansion Programme, a USD 530 million project to strengthen transmission infrastructure and integrate renewable power, was financed with USD 480 million from the African Development Bank and USD 50 million from the Africa Growing Together Fund, a co-financing facility backed by the People’s Bank of China (African Development Bank Group, 2021[12]).
Climate mitigation investments in North and Sub-Saharan Africa balance medium term APS investment gaps and build cumulative surpluses by 2050
Note: Public sector investment includes the new COP29 development finance goals agreed on in November 2024. The scenario assumes a linear increase from USD 115.7bn in 2022 to USD 300bn in 2035 while subtracting the private sector contribution and development finance for climate change adaptation based on their average relative shares over the period 2019 to 2023 (OECD, 2025[13]). It also assumes constant public and private sector shares of climate mitigation investments as of December 2024, consistent with recent trends (IEA, 2024[16])
Source: OECD, IEA proprietary database.
4.4.3. Public sector scenario
The Public Sector Scenario (PSS) assumes that private sector investment continues to grow at the average rate of the last three years (L3Y), while the public sector provides the additional financing needed to meet the annual investment requirements of the IEA APS scenario. As a result, there is no investment gap in this scenario. The analysis assumes that all public sector investment is financed through government debt rather than, for example, through additional taxes. Once private sector investment catches up and reaches adequate levels, public sector investment is assumed to scale back accordingly.
In contrast to the BLS, the PSS imposes a 75% public-debt-to-GDP limit for North Africa, and 60% for Sub-Saharan Africa and assumes that any additional public sector investment required beyond this limit is financed through increased development finance contributions from advanced economies. Figure 4.5 illustrates the resulting projections.
Initially, both regions require increased public sector investments from domestic governments and development finance institutions, while their private sectors and FDI gradually scale up over time. While North Africa requires additional development finance support, as current debt levels are approaching their 75% debt-to-GDP ceiling, Sub-Saharan Africa's greater fiscal headroom with debt levels below 60% allows it to finance APS requirements primarily through domestic public borrowing complemented by multilateral climate finance.
North Africa requires a total public sector investment contribution of 49% in 2026, declining thereafter, representing an almost eightfold increase (including and mostly consisting of additional required development finance) from 2024 levels. Similarly, Sub-Saharan Africa requires a public sector contribution of 41% in 2026, tripling from 2024 public sector investment levels.
While North Africa's public sector would need to support APS clean energy investments through 2050, Sub-Saharan Africa's private sector would generate sufficient investment to cover these requirements from 2039 onwards. Consistent with the BLS results, this suggests that although Sub-Saharan Africa faces significant short-term challenges and requires sustained policy support as in recent years, it possesses the potential to exceed APS targets over the longer term.
The PSS, as well as the CMS, build on baseline debt-to-GDP estimates from the IMF. These baseline figures do not account for public-sector climate transition expenditure in the IEA APS. Therefore, future public-sector financing for climate transition investments in line with the IEA APS represent an additional government debt-burden in the scenario analysis in this chapter.
Lastly, foreign direct investment plays a markedly different role in clean energy financing across Africa’s subregions. In North Africa, it accounts for about 34% of total investment, while in Sub-Saharan Africa it is closer to 9%. The PSS keeps total energy FDI constant as a share of overall energy investments.
Public sector funding would need to increase substantially in the short-term in both regions and cover at least 40% of total funding in 2026-2032 in North Africa and 2026-2028 in Sub-Saharan Africa.
Note: Public sector investment includes the new COP29 development finance goals agreed on in November 2024. FDI comprised approximately 34% of total investments in North Africa and 9% in Sub-Saharan Africa on average in the past 3 years. The scenario assumes a linear increase from USD 115.7bn in 2022 to USD 300bn in 2035 while subtracting the private sector contribution and development finance for climate change adaptation based on their average relative shares over the period 2019 to 2023 (OECD, 2025[13]).
Source: OECD, IEA proprietary database.
4.4.4. Capital markets scenario
The CMS assumes that projected investments meet the annual requirements set out by the IEA APS scenario. Unlike the BLS and PSS, the CMS imposes lower sovereign debt-to-GDP limits of 60% for North Africa and 55% for Sub-Saharan Africa.
Once debt-to-GDP limits are reached, the residual investment gap is closed through capital market-financed private sector investment. Therefore, the split between public and private sector contributions remains constant until the debt-to-GDP limit is reached, after which they become output metrics, reflecting the investment contributions needed to meet climate mitigation targets.
To meet the required investment levels, North and Sub-Saharan Africa would need total private sector (domestic and FDI) investment CAGR of approximately 77% and 51% from 2024 to 2026, respectively, as their debt-to-GDP limits their public-sector investment in 2025 and 2026 at the start of the projection period.
Greenfield FDI as a proportion of private sector investment is assumed to triple by 2035, benefiting from an assumed greater ease with which financial and non-financial companies can make cross-border investments in the CMS. As FDI and domestic private sector investment scale up over time, regions develop investment surpluses as in the BLS.
In the CMS, the proportions of equity, bond, and non-marketable debt financing are assumed to converge toward the patterns observed in other EMDEs excluding China, as described in the OECD Global Debt Report 2025 (OECD, 2025[2]). This implicitly assumes that the regulatory frameworks for capital markets in Africa will achieve quality standards comparable to those of the largest EMDEs other than China, while their reliance on concessional finance as a proportion of total funding will decrease correspondingly.
Figure 4.6 illustrates the evolution of financing sources of listed companies in the energy sector in Africa from December 2024. North Africa’s total long-term financing sources would need to grow by a factor of 22.4 until 2050 or at a CAGR of 12.6%, and bond markets must grow by a factor of 55.6 or at a CAGR of 16.7%, in the same period. This compares to a projected GDP CAGR of 2.2%.
In Sub-Saharan Africa, total long-term financing sources would need to grow by a factor of 26.5 by 2050 or at a CAGR of 13.4%. While in December 2024 no listed Sub-Saharan African firm had outstanding marketable debt, the region would need to develop an underlying market with a size of approximately USD 52 billion, exceeding that of North Africa in 2050 by three times.
The absolute difference by 2050 and the faster increase in Sub-Saharan Africa's financing sources are driven by two factors. First, Sub-Saharan Africa's total cumulative APS investment requirements are 32% higher at USD 3.7 trillion, compared to USD 2.8 trillion in North Africa. Second, North Africa's greater reliance on FDI reduces its need for domestic capital market financing.
Long-term financing instruments of listed firms in North and Sub-Saharan Africa would need to grow 22.4 and 26.5 times, respectively, from 2024 to 2050 (CAGRs of 12.7% and 13.4%).
Note: Figure excludes liabilities other than debt. Equity represents book equity.
Source: OECD, IEA proprietary database, LSEG.
The analysis in Figure 4.6 above begins with the book value of bonds and non-bond debt of listed energy companies as of December 2024, as well as the book value of their shares (see more about their capital structure in the Public and private sector investments section). It incorporates new equity and debt financing necessary to meet the investment requirements for clean energy and high-emitting energy assets based on the IEA APS. The analysis assumes that companies will be profitable in all years (i.e. revenues will be higher than costs), allowing them to reinvest revenues equivalent to depreciation, which is kept constant as a proportion of non-current assets throughout the period. The source of equity financing in the analysis can be either the reinvestment of profits or the issuance of new shares, so there is no assumption in relation to how profitable companies in the energy sector will be.
Analysing the energy sector effectively means that as the combined energy asset base (both low- and high-emitting) depreciates, the existing, relatively higher-emitting assets are gradually replaced by an increasing share of low-emitting ones, resulting from the IEA APS investment shares in low- and high-emitting assets. Additionally, the CMS assumes that listed companies finance 45% of all future private sector investments. According to the European Investment Bank, private equity, venture capital and infrastructure investments account for approximately 55% of total capital raised by corporates in Africa, with capital markets comprising the remaining 45% (EIB, 2024[14]).
4.4.5. Cross-border investments and climate finance from international providers
All scenarios account for cross-border investments in North and Sub-Saharan Africa by reducing their domestic investment needs (as defined by the IEA APS) based on FDI. In the BLS and PSS, greenfield FDI is assumed to remain constant as a proportion of private sector investment in North and Sub-Saharan Africa, respectively.
In 2022 to 2024, FDI in renewable energy directed to North and Sub-Saharan Africa represented on average 34% and 9% of total energy investments, respectively. These percentages were applied to the expected investments in the energy sector in the projection period in the BLS and PSS.
In the CMS, the share of FDI over total APS investments will triple by 2050, reaching approximately 101% in North Africa and 28% in Sub-Saharan Africa. The scenario allows FDI to surpass 100% of APS investments because APS investment requirements will still be well below annual and cumulative NZE requirements.
Total FDI to North and Sub-Saharan Africa in 2024 is estimated at USD 14 billion and USD 7 billion respectively, of which USD 6 billion and USD 4 billion can be attributed to clean energy investments.
Figure 4.7 illustrates greenfield FDI to North and Sub-Saharan Africa across all three scenarios. In North Africa, in the CMS, total FDI grows at a CAGR of 10.7% and reaches USD 90 billion in 2050 (an increase 14.1 times larger than the corresponding 2024 value). In contrast, in the BLS and PSS, greenfield FDI grows at a CAGR of approximately 6% and does not exceed USD 33 billion. This compares to an increase of 2.2 times (corresponding to a CAGR of 9.3%) in EMDEs over the last decade (UNCTAD, 2025[15]). These results indicate that stronger capital market resilience and institutional frameworks can significantly enhance Africa's potential to attract foreign investment, reducing the continent’s reliance on additional foreign public funding to meet APS and net-zero targets.
Total energy FDI increases to USD 90 billion and USD 56 billion in North and Sub-Saharan Africa, in the CMS, corresponding to compound annual growth rates of 10.7% and 11.4%, respectively
Source: OECD, IEA proprietary database, UNCTAD (2025[15]), World Investment Report 2025 database, https://unctad.org/publication/world-investment-report-2025.
4.4.6. Evolution of bond and equity markets in energy
The investments in each scenario are accompanied by a distinct evolution of equity and bond markets across the two regions analysed in this chapter. The share of each financing source—equity, bonds and non-bond-debt and other liabilities—in the energy sector was determined by analysing the capital structure of 55 listed energy and energy-related utilities companies, comprising 10 companies in North Africa and 45 companies in Sub-Saharan Africa (see in the above section “Capital structure in the energy corporate sector”).
As of December 2024, the share of bond debt relative to total assets of listed companies in the energy sector stands at 3% in North Africa and 0% in Sub-Saharan Africa. While these proportions remain constant under the BLS and PSS scenarios, they converge toward the capital structure of companies in EMDEs other than China under the CMS, achieving parity by 2050.
As noted in the “Financing sources of recent investments in the energy sector” section, non-listed companies in Sub-Saharan Africa hold a relatively high volume of marketable debt. This is driven by one state-owned non-listed company in South Africa with USD 11.7 billion of outstanding marketable debt (25% of its total assets) of which 74% is listed on domestic capital markets. Because the company’s financial position is characterised by debt distress and overhang—reflected in repeated government debt relief and restructuring—the analysis normalises its marketable debt to 9% of total assets in 2024. This corresponds to USD 4.1 billion, of which 74% (USD 3.1 billion) is assumed to be listed domestically. This adjustment aligns the company’s balance sheet with the common capital structures observed in the largest EMDEs other than China.
This section’s projection of public markets begins with book value equity and total outstanding bonds as of December 2024. Subsequently, the analysis incorporates investments for clean energy and high-emitting energy assets based on the IEA APS and assumes constant depreciation as a proportion of non-current assets. As in Figure 4.6, this implies that depreciation is effectively “reinvested,” and the projected reduction in investments in high-emitting assets partially offsets higher investment needs in clean energy. Such reinvestment can occur either directly, through an energy company engaged in both fossil fuels and clean energy, or indirectly, through an investor who channels financial returns from fossil fuel companies into clean energy enterprises.
Evolution of bond markets in energy
The following figures depict the evolution of bond and equity markets in the three scenarios and regions. The analysis includes 2024 data on bonds issued by listed and unlisted companies in the energy sector and assumes that the outstanding amounts of bonds issued by unlisted companies grows in line with those issued by listed companies to illustrate the overall bond market development.
The total energy bond markets in North and Sub-Saharan Africa would need to grow at CAGRs of 20.4% and 14.9% in the CMS by 2050, respectively, to meet APS commitments.
Note: GDP in Volume Terms at 2015 Purchasing Power Parities. BLS and PSS bond outstanding trends overlap in panel A.
Source: OECD, IEA proprietary database, LSEG.
In North Africa, energy bond markets stood at USD 0.3 billion in 2024 and are projected to expand to USD 10 billion in the BLS and PSS, and USD 37 billion in the CMS by 2050. This corresponds to increases of around 30-times in the BLS and PSS (CAGRs of approximately 14-15%) and 124-times in the CMS (CAGR of 20%), respectively. This compares to a projected GDP CAGR of 2.2% over the same period.
In Sub-Saharan Africa, adjusted bond markets were valued at USD 3.1 billion in 2024 and are projected to reach USD 77 billion in the BLS, USD 72 billion in the PSS, and USD 114 billion in the CMS by 2050. This represents increases of 25-times, 24-times, and 37.5-times, corresponding to CAGRs of 13%, 13% and 15%, respectively. This compares to a projected GDP CAGR of 4.0%.
The trends in the CMS diverge because the share of FDI over total investments in North Africa triples from 34% to above 100% by 2050, reducing the necessity for domestic capital market development. However, because the CMS allows investments to exceed APS requirements (with growing FDI and domestic private sector investment combined) and assumes a converging capital structure to that of EMDEs other than China—with 9% of investments funded by marketable debt—North Africa's capital market still develops significantly, albeit tempered by the balancing effect of increased FDI.
In contrast to North Africa, Sub-Saharan Africa's higher relative starting point—driven by a state-owned energy firm with (normalised) outstanding domestic marketable debt exceeding USD 3 billion in 2024—anchors the sustained increase and absolute difference in its projected bond markets. This established baseline, combined with the region's higher required investments in the IEA APS scenario, leads to substantially higher overall capital mobilisation and bond market growth required to support the region’s energy development and transition.
4.4.7. Evolution of sustainable bond markets in energy
As of December 2024, sustainable bonds in the energy sector were not yet established in African markets. The following figures estimate the sustainable bond market size per region by assuming that sustainable bonds entirely finance new clean energy investments. Investments in high-emitting assets are assumed to be financed by conventional bonds. Lastly, the analysis assumes that existing conventional bonds retire linearly based on their value-weighted average maturity.
In North Africa, sustainable bond markets in the energy sector are projected to rise to USD 6.7 billion in the BLS, USD 6.3 billion in the PSS, and USD 34 billion in the CMS by 2050. The share of sustainable bonds within total energy bond markets would need to increase from 0% in 2024 to 71% in the BLS, 63% in the PSS, and 94% in the CMS by 2050. Over the same period, and growing at CAGRs of 9-10% depending on the scenario, conventional marketable debt would reach USD 3-4 USD billion, reflecting continued reliance on high-emitting energy sources in the APS.
In Sub-Saharan Africa, energy sector sustainable bond markets are projected to grow to USD 62 billion in the BLS, USD 55 billion in the PSS, and USD 91 billion in the CMS by 2050. The share of sustainable bonds would need to increase from 0% in 2024 to 80% in the BLS, 77% in the PSS, and 81% in the CMS by 2050. Conventional energy bond markets are projected to expand at CAGRs of 7-8%, reflecting again the region’s continued reliance on high-emitting energy sources in the APS.
The sustainable energy bond market share would need to rise to 90% in North Africa and 81% in Sub-Saharan Africa by 2050 in the CMS.
Note: GDP in Volume Terms at 2015 Purchasing Power Parities.
Source: OECD, IEA proprietary database, LSEG.
Evolution of equity markets in energy
In North Africa, energy sector equity markets totalled USD 10.6 trillion in 2024 and are projected to increase by factors of 7.1 (7.8% CAGR) in the BLS, 7.5 (8.1% CAGR) in the PSS, and 10.1 (9.3% CAGR) in the CMS. In Sub-Saharan Africa, energy equity markets stood at USD 11.9 trillion in 2024 and would increase by factors of 21.5 (12.5% CAGR) in the BLS, 20.2 (12.2% CAGR) in the PSS and 25.9 (13.3% CAGR) in the CMS.
As African economies, and North Africa in particular, are expected to rely less on secured concessional finance in the long-term under the CMS, their capital structure is expected to show higher equity requirements akin to other EMDEs. As a result, equity capital markets develop more steeply in the CMS.
Energy sector equity markets in North Africa and Sub-Saharan Africa expand by factors of 10.1 and 25.9 in the CMS respectively, reflecting higher equity requirements as reliance on concessional finance declines across the continent.
Note: Equity represents market value; GDP in Volume Terms at 2015 Purchasing Power Parities.
Source: OECD, IEA proprietary database, LSEG.
The latest numbers on climate transition investments in Africa provide a mixed picture . Total clean energy investments in North and Sub-Saharan Africa stood at USD 14 billion and USD 33 billion in 2024, growing at 15.7% and 14.2% annually in the last three years, and exceeding GDP growth of 3.3% and 2.2%, respectively. However, these recent investments only represent around half of the projected investment needs of USD 34 billion in North Africa and USD 59 billion in Sub-Saharan Africa by 2026 according to the IEA APS. While bridging this gap poses significant challenges for both regions in the medium term, their projected investment growth trajectories enable them to eventually develop investment levels that surpass their announced pledges. Although investments required to achieve net-zero emissions by 2050 will likely remain substantially higher, these results are nonetheless encouraging.
Additionally, focusing solely on investment needs for the climate transition does not provide a complete picture of the challenge. Foreign investment in Africa surged by 75% to reach an all-time high of $97 billion in 2024, with the continent representing 6% of global FDI, compared to a 4% share the year before (UNCTAD, 2025[16]), showing growing investor confidence in the continent. Similarly, megaprojects with successful government financing through bond issuance, such as Ethiopia's USD 5 billion Grand Ethiopian Renaissance Dam, where construction was largely funded by domestic resources and a government bond programme subscribed to by the population and local institutions (Webuild Group, 2025[10]), illustrate the continent’s domestic financing potential.
Second, framing investments by 2050 solely for a net-zero transition or for meeting countries’ announced pledges overlooks the broader need for energy investments in African regions with growing populations or dynamic economies, particularly in Sub-Saharan Africa.
Scenario analysis helps to pragmatically assess the challenge of financing the APS investment requirements which contribute to the net-zero transition while considering the aforementioned points. The financing trajectories will look different depending on whether the public or private sector finances most of the investment. In a baseline scenario, assuming climate investment growth and public sector investment continue along recent trends, North and Sub-Saharan Africa are on track to align with their announced pledges by 2044 and 2037 and subsequently develop investment surpluses. However, these investments still fall short of net-zero requirements.
In a scenario where the public sector provides the necessary additional financing to meet the investment—through debt issuance or support beyond the COP29 New Collective Quantified Goal—North Africa would need an additional USD 9 billion per year on average between 2025 and 2050. This need arises once further public debt issuance becomes unsustainable from 2026. In contrast, Sub-Saharan Africa can cover its investment needs largely without additional development finance. North Africa’s debt-to-GDP ratio rises from 73% in 2024 to 75% in 2026, while Sub-Saharan Africa’s ratio falls from 61% in 2024 to 54% by 2050. This decline is driven by narrowing fiscal deficits (IMF, 2025[17]) and strong long-term GDP growth of around 4% through 2050 (OECD, 2025[18]).
In the opposite scenario where the private sector provides the additional financing to meet the investment requirements, public debt levels remain stable or decline, but capital markets would need to develop substantially. This is especially true for marketable debt of energy companies, which would need to grow at an estimated annual rate of 20.4% and 14.9% between 2024 and 2050 in North and Sub-Saharan Africa, respectively. While this growth is theoretically feasible, it would be even higher than the noteworthy growth in China’s corporate bond markets in the last decade (12% per year on average). An annual increase of 15% or 20% would require favourable macro-economic conditions, capital market integration and significantly improved regulatory frameworks in North and Sub-Saharan Africa.
In all three scenarios in this chapter, energy companies’ marketable debt grows at least three times as fast as GDP in North Africa and five times in Sub-Saharan Africa. In North Africa, growth in marketable debt for energy companies is projected to far outpace GDP. While long-term GDP expands at 2.2% annually, marketable debt grows by 14.2% in the Baseline Scenario (BLS), 14.5% in the Public Sector Scenario (PSS), and 20.4% in the Capital Markets Scenario (CMS). In Sub-Saharan Africa, the trend is similar but set against a higher GDP growth rate of 4% annually. Marketable debt is projected to grow by 13.2% in the BLS, 12.9% in the PSS, and 14.9% in the CMS.
The potential for growth in the sustainable bond market is even greater than that of the overall bond market, given the role of sustainable bonds in financing climate transition investments. In North Africa, there were no sustainable bonds issued by energy companies as of December 2024, yet their share of marketable debt is projected to rise to between 62% and 90% by 2050 depending on the scenario. The higher end of this range reflects lower domestic high-emitting energy investment and higher corresponding foreign direct investment, in the CMS. In Sub-Saharan Africa, the share also grows from zero in 2024 to between 77% and 81% by 2050.
These scenarios underscore the immense challenge of leveraging debt markets for the transition to a low-carbon economy. However, they also reaffirm the private sector’s potential to drive this transformation. To unlock this potential, capital market integration and financial regulatory reforms will be essential. With smart policies and well-functioning markets, countries can mobilise the necessary domestic investment and continue to attract substantial foreign investment for growth and build a financial system that is not only resilient but also catalytic for a sustainable transition. African economies could greatly benefit from integrating their capital markets to mobilise funds for the climate transition. Connecting national markets and savings for investment could reduce borrowing costs, expand investor bases, incorporate underutilised liquidity, expand investment options, facilitate more efficient allocations of capital, reduce reliance on external aid, and improve the larger market’s resilience to external shocks. All these benefits are crucial for closing clean energy and climate financing gaps.
Efforts to expand and integrate capital markets are already underway in Africa. The African Exchange Linkage Project (AELP) is a joint project of the African Securities Exchanges Association (ASEA) and the African Development Bank (AfDB) to facilitate international securities trading across the continent (AELP, n.d.[19]). The AELP went live in 2022 and has ten participating exchanges, including the largest exchanges in Africa: the Johannesburg Stock Exchange, the Nigerian Exchange Limited, the Casablanca Stock Exchange, the Egyptian Stock Exchange, the Bourse Régionale des Valuers Mobillières, and the Nairobi Securities Exchange. This connects 90 percent of Africa’s market capitalisation and over 2 000 companies in one place (Societe Generale, 2023[20]).
Regions outside of Africa have found success with integrating capital markets. The Nuam Exchange in South America links the exchanges of Santiago, Lima and Colombia in a single marketplace. Established in 2022, the exchange has grown to a market capitalisation of USD 450 billion and hosts over 445 equity issuers and 345 fixed-income issuers. In conjunction with Morgan Stanley Capital International (MSCI), Nuam has launched an index fund comprising 56 companies from Chile, Peru, and Colombia, allowing investors at home and abroad to invest in a diversified portfolio for the region, with a combined market capitalisation of approximately USD 319 billion (Nuam Exchange, n.d.[21]). The unified marketplace has provided greater business opportunities for brokers, more options and diversification for investors, improved access to financing for regional issuers, and operational efficiencies for market participants (BNP Paribas, 2024[22]).
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The chapter integrates analyses from the International Energy Agency (IEA), the IMF, UN and various OECD policy areas, including macro-economic projections, climate finance and development co-operation. The chapter includes an examination of the funding structures of companies in the energy sector and financing scenarios that depart from a “baseline” approach. While the scenarios are not predictions about what will effectively happen in the future, they can help policy makers and investors to assess reasonable alternatives depending on the policies that are prioritised.
The methodology largely follows that of the fourth chapter of the OECD Global Debt Report 2025. The appendix below explains where this analysis deviates from that methodology, either due to the availability of higher-quality Africa-specific data or because of data limitations.
Public sector debt limits and debt issuance
The analysis distinguishes between government debt issuance unrelated to climate goals (implicit IMF debt-to-GDP scenario baselines) and additional public sector investment needed for climate change mitigation as per IEA APS investment requirements.
The CMS caps debt-to-GDP for each region, restricting debt issuance for climate change mitigation. Countries are allowed to issue debt tied to GDP growth (i.e. growth-driven debt issuance) to keep the ratio stable. In the absence of such issuance, the debt-to-GDP ratio would decrease over time. However, countries cannot issue debt that increases the ratio beyond the established cap (i.e. ratio-increasing debt).
The PSS caps debt-to-GDP at 75% for North Africa and at 60% for Sub-Saharan Africa. The analysis assumes that countries issue growth-driven debt and ratio-increasing debt for purposes unrelated to the climate transition in line with the IMF estimates, where debt-to-GDP of 72.8% North Africa in 2024 increases to 74.5% in 2030. From 2030, the analysis assumes that any growth-driven debt issuance that keeps the ratio stable at 74.5% is climate-unrelated and that countries do not run ratio-increasing deficits unrelated to climate change mitigation investments, as explained in the preceding section. The IMF estimates that baseline debt-to-GDP of Sub-Saharan Africa will evolve from 61.1% in 2024 to 54.9% in 2030. According to the IMF’s Regional Economic Outlook, public debt in the region has stabilised and is declining due to narrowing primary deficits. These fiscal adjustment efforts are expected to continue and further reduce the region’s debt-to-GDP ratio (IMF, 2025[17]).
Conversely, investments in climate change mitigation are driven by ratio-increasing debt issuance (from 72.8% to 75% over time) and partly by growth-driven debt issuance that keeps the ratio stable at 75% (For instance, North Africa reaches its debt-to-GDP limit temporarily for four years from 2027, before GDP growth provides the public sector again with leeway) minus the growth-driven debt issuance that would keep the ratio stable at 72.8% absent any climate mitigation-related investments.
We refer to resources from the International Monetary Fund (IMF) and European Parliament for guidance on public debt limits and governance.
The IMF provides debt burden thresholds and benchmarks through its Debt Sustainability Framework (DSF) for low-income countries (LICs) (IMF, 2025[23]).
The IMF’s corresponding list for low-income countries includes 38 of the 49 countries in Sub-Saharan Africa. Thus, we apply the DSF to the regional analysis for Sub-Saharan Africa. These countries are classified by their debt-carrying capacity as Weak, Medium, or Strong, with associated debt thresholds of 35, 55, and 70 percent of GDP, respectively.
Although, the IMF does not provide a comprehensive list of the classifications of all 38 LICs, it produces detailed debt reports for individual countries. The five most recent reports are for Kenya, Madagascar, and Guinea-Bissau in 2021 and Central African Republic and Rwanda in 2020. Of these, Guinea-Bissau and Central African Republic are classified as Weak, Kenya and Madagascar are classified as Medium, and Rwanda is classified as Strong. As this handful of classifications appears reasonably symmetric, we decide to classify the wider Sub-Saharan Africa region as “Medium” in debt-carrying capacity and apply the IMF’s corresponding 55 percent limit on the region’s debt-to-GDP ratio.
As the IMF does not include any North African countries in its Debt Sustainability Framework, we follow the European parliament’s guidance for public debt governance, which provides 60 percent of GDP as a threshold for reduction measures (European Parliament, 2024[24]).
For reference, the general government gross debt-to-GDP ratio for countries in Africa that report such data to the IMF was 67 percent for 2024. For North Africa, it was 73 percent and in Sub-Saharan Africa it was 64 percent. The two largest economies in Sub-Saharan Africa, South Africa and Nigeria, held debt-to-GDP ratios of 76 and 53 percent, respectively, in 2024. Egypt and Algeria, the two largest economies in North Africa with data, held debt-to-GDP ratios of 91 and 46 percent, respectively, in 2024 (IMF, 2025[25]).
Foreign direct investments methodology
While data on annual foreign direct investments in the energy sector are not readily available, this analysis approximates such capital expenditures based on the announced values of greenfield FDI) projects by destination country, as reported by UNCTAD (2025[15]). These announced project values cover a wide range of sectors and represent total investment commitments typically spread over multiple years. They do not necessarily translate into realized expenditures, due to project delays, scale adjustments, or cancellations. Furthermore, foreign investments often include a modest, though slower, contribution of local financing.
To address these nuances, the analysis in this chapter applies a series of adjustments: the share of energy-related projects based on IEA estimates relative to total gross fixed capital formation data from the World Bank—ranging between 16 to 36% in North Africa and 12 to 25% in Sub-Saharan Africa depending on the year; a realization rate of 84% derived from empirical research on FDI project completion in developing economies across Africa, Asia, and Latin America from 2003 to 2020 (Hornstein, 2024[26]); and an assumed local financing share of 15%, reflecting approximate co-financing patterns observed in projects such as Morocco’s Noor Ouarzazate solar complex, where foreign funding was complemented by domestic investment (Worldbank, 2017[27]).
Lastly, the analysis assumes a disbursement schedule spanning seven years, with investment shares of 35% in the first year, followed by 25%, 15%, 10%, 7%, 5%, and 3% in subsequent years. This reflects that most renewable power generation projects commonly require the bulk of their capital expenditures within the first two to three years upon approval, corresponding to site development, equipment procurement, and construction phases. However, certain energy infrastructure investments, such as grid expansion and upgrades, typically exhibit longer disbursement profiles due to extended planning, staging, and integration periods.
Development finance methodology
Development finance for climate is assumed to grow linearly in all three scenarios, reaching the New Collective Quantified Goal on Climate Finance (NCQG) agreed at COP29 by 2035. Only in the PSS is additional development finance for climate provided to North and Sub-Saharan Africa, when these countries reach their assumed 75% and 60% debt-to-GDP limits. The appendix describes the employed methodology in detail. The analysis focuses on climate finance provided by the public sector (bilaterally or through multilateral institutions) for climate change mitigation. It therefore excludes from the total NCQG the private sector investments mobilised by public climate finance (these investments would be captured as FDI) and any investments in climate adaptation, which are outside the scope of the scenarios.
Development finance for climate reduces the burden on the public sector in North and Sub-Saharan Africa in the scenarios. The debt issuance related to development finance is allocated to the issuing countries (advanced economies and EMDEs other than North and Sub-Saharan Africa) in the scenarios for four main reasons: (i) some of the development finance is in the form of grants or concessional agreements, which would not create any debt burden or would give rise to debt that is easier to service; (ii) part of the development finance loans are provided directly to projects, and do not create public debt in North and Sub-Saharan Africa; (iii) allocating the debt issuance related to development finance to the issuing and destination regions would be to count twice the same investment; (iv) the main focus of this chapter is the development of public bond markets, which would not include loans received by African governments.
Annex Figure 4.A.1 illustrates the baseline development finance (aligned with COP29 goals) across all scenarios, as well as the additional development finance required in the PSS.
The PSS projects an average of USD 12 billion annually in additional required public-sector-funded development finance for North Africa in 2026-29 and USD 6 billion in 2025 for Sub-Saharan Africa
Source: OECD, IEA proprietary database.
Capital market development of North and Sub-Saharan Africa in the CMS
The CMS models a gradual alignment of the capital structure in North and Sub-Saharan Africa with that of EMDEs other than China (OECD, 2025[2]) by the end of 2050. The convergence is modelled using a logarithmic trajectory. By 2035, 70% of the adjustment is achieved, reflecting an accelerated initial shift that slows as it approaches parity.
Estimation of future bond and equity markets
The projection of energy bond and equity markets takes advantage of the basic accounting identity of equating total assets with total liabilities plus equity and uses the capital structure data presented in “Financing sources of recent investments in the energy sector” section.
Furthermore, the analysis uses the total asset and non-current asset base, and depreciation in the energy sector as of December 2024. These figures result from aggregating firm-level data of all listed companies in the energy sector as defined above.
The analysis then incorporates total future private sector energy investments based on the IEA NZE pathway in the different scenario projections, increasing the asset base while assuming a constant depreciation rate relative to non-current assets. The resulting increase in the total asset base is then translated into financing instruments based on the shares presented in “Financing sources of recent investments in the energy sector” section (following the methodology in panel B of Figure 4.3).
The starting points for bonds and listed equity are the total outstanding bonds in the energy sector and the total market capitalisation as of December 2024. As future investments exceed depreciation, total energy assets increase and require a corresponding increase in their financing instruments. The analysis of capital market data is sourced from LSEG.