Will Africa be part of the ‘golden decade’ of sustainable finance? Insights from GSSS bonds

In the current 'decade of action' for Sustainable Development Goals (SDGs) and climate action, the battleground for success or failure lies in lower-income countries. Equally evident now is that this battle is also won or lost at the doorsteps of development and climate finance and its insertion into the current international financial system.

This DIIS Working Paper explores Green Social Sustainability and Sustainability-linked (GSSS) bonds in Africa. These have emerged as main private sector financing tools with recent explosive growth in European markets. Evaluating their current performance, as this study does, is crucial for policy debates and development interventions. It serves as a critical yardstick to gauge the effectiveness of private sector financing in general for advancing SDGs and climate action in developing country contexts. The progress of GSSS bonds in mobilising private sector finance in Africa allows a re-evaluation of which private sector instruments and approaches can thrive in developing country contexts, as their success in Europe does not guarantee success in emerging and low-income markets.

Given that GSSS bonds are designated for specific green, social, and sustainable projects, the study's results underscore the need to shift the conversation beyond the novelty of these instruments toward a bottom-up approach that starts with pre-feasibility financing necessary for project pipelines. This approach allows the focus to be rightly put on pipelines of projects followed by deciding suitable public or private financing mechanisms.