In a world facing the looming threat of climate change, Africa is emerging as a powerhouse of climate tech innovation. While Africans contributed less than 4% to global carbon emissions, the continent possesses a unique set of natural assets, rich biodiversity, abundant arable land, vast renewable energy potential, a growing skilled workforce, and a vibrant pool of tech talent. These factors combine to position climate innovators in Africa as leaders in building solutions for a low-carbon future on a global scale and for increasing the resilience of 1.5 billion people on the continent.
Since Catalyst Fund started investing in climate resilience solutions across the continent, we are often asked two questions: 1) Why are you investing in this sector, what is the business case? and 2) What climate resilience and adaptation solutions are you investing in?
Climate change is already impacting virtually every economic sector and industry, all over the world. Even as we struggle to develop mitigation and decarbonization solutions that can stabilize the climate below 1.5C of warming, we will still need to live with many of the effects of climate change such as the prevalence of environmental disasters (wildfires, storms, floods, earthquakes), increased heat, sea level rise, and more. These impacts are most acute in emerging economies. According to the latest Climate Vulnerability Index, nine out of the top 10 world’s most vulnerable countries are in Sub-Saharan Africa.
The need for climate adaptation solutions will keep growing. This is an opportunity for entrepreneurs and investors. The climate innovation opportunity in Africa is estimated to be valued at a staggering $2.8 trillion by 2030.
The potential benefits of investing in climate resilience and adaptation are clear and far-reaching, encompassing increased agricultural production, higher household incomes, improved environmental services, the creation of long-term assets, and reduced vulnerability to extreme weather events. The World Resources Institute reports that every dollar invested in adaptation yields net economic benefits ranging from $2 to $10. Conversely, the GCA’s State and Trends in Adaptation report shows that a lack of adaptation financing in Africa will mean as much as 6 trillion dollars of economic benefits will not be realized by 2035.
Private investors have the potential to enter this market early and realize significant financial returns and impact for generations to come.
Among investors, there tends to be confusion as to what a climate adaptation and resilience solution is. The lack of data and definitions in this space has been holding the sector back, as investors feel they lack a North Star equivalent to the “Net Zero” goal. However, efforts such as the ASAP Taxonomy attempt to shed some light on the universe of inevitable solutions.
The Catalyst Fund is an early-stage VC fund and accelerator backing game-changing entrepreneurs building tech and tech-enabled solutions to address climate resilience challenges. After reviewing over 3,000 decks and studying this space for several years, we see opportunities across three main verticals:
Africa is particularly susceptible to climate-related natural hazards, which can displace millions of people and disrupt economies. Just last year 1.8m people on the continent were displaced because of Cyclone Freddy, the strongest cyclone ever recorded on the continent. The following opportunities stand out:
1a) Insurtech solutions are vital products for managing the impacts of disasters and shocks, with the potential to protect and aid recovery for both farmers and urban dwellers. Startups like Assuraf in Senegal are offering health, life and disaster insurance via a digital platform combining online and offline models to reach customers.
1b) Digital payment and remittance products can serve as channels for post-disaster relief and financial support, making them more accessible and affordable for underserved populations.
1b) Climate data solutions and advanced analytics can enable personalized financial products that account for climate risks, such as climate-smart loans and insurance, as well as optimizing climate-exposed value chains. Startups like Amini is solving for Africa’s environmental data scarcity, leveraging satellite data and AI-driven analytics to provide actionable insights for agricultural supply chains.
1d) Carbon markets provide a novel source of finance for local projects that restore nature while curbing emissions. Startups like CAVEX, a cloud-based digital marketplace, will facilitate the collection, verification and monitoring of data on climate-positive actions from small projects and facilitate trading through a transparent pricing model.
A majority of Africa's population relies on agriculture for their livelihoods, which contributes to 23% of the continent's GDP. However, climate change threatens to reduce agricultural yields over the next decade, with a projected 30% decline in the fish catch of African countries by 2030, putting millions of livelihoods and food security at risk. The following opportunities can reduce vulnerability while bettering livelihoods:
2a) Tech-enabled solutions for climate-smart agriculture: Agtech platforms connecting farmers to input suppliers and offtakers, precision agriculture solutions that reduce water use and improve agricultural practices, and verification/auditing solutions to ensure organic farming practices can improve productivity and promote adaptation to climate change while also promoting sustainable growth. Startups like Tolbi, Farmz2U, VAIS are all examples of tech-driven approaches to optimizing agriculture.
2b) Food systems: In Africa, food supply chains are often broken resulting in waste and inefficiencies. In sub-Saharan Africa, nearly 50% of vegetables and fruits never reach the market resulting in food waste, loss of income and unnecessary greenhouse gas emissions. Foodtech companies like Farm to Feed create digitally-enabled marketplaces to reduce food loss and improve farmers’ incomes.
2c) Land restoration and nature-based solutions: Nature-based solutions can help regenerate soils while also driving higher yields for farmers. Startups like Sand to Green leverage agroforestry, solar-powered desalination, and climate-smart farming practices to create profitable and scalable “climate resilient regenerative farms”. Their plantations can generate 1.5 times more yield and thus more revenue than a monoculture plantation in the same area.
Africa is particularly vulnerable to climate change stressors such as water scarcity and heat waves, which can disrupt livelihoods. Under future climate change scenarios, the provision of essential services like water, health, waste management and energy access will have to adapt to a new reality. Opportnities abound in:
3a) Water management and access: Innovative solutions such as water kiosks, water ATMs, water IoT systems, desalination, and smart irrigation solutions are essential for conserving and accessing water resources.
3b) Cold Storage and cooling: In Africa, 470 million in rural areas lack refrigeration and 630 million in urban areas lack cooling. The growing demand for cooling and cold storage, influenced by climate change, has significant impacts on energy use and carbon emissions. Solutions like solar-powered cold storage facilities have shown positive impacts on increasing incomes for farmers and reducing food waste. Startups like Raino, or Koolbox, Freezelink or Figorr reduce post-harvest losses, curb medical supply wastage and facilitate last-mile food supply chains.
3c) Heath tech: In Africa, 56% of public health events recorded between 2001 and 2021 were climate-related and will continue to rise due to climate change. This makes healthtech solutions crucial for addressing climate-related health issues. For example. research finds that climatic hazards have exacerbated more than half of known human infectious diseases. Digital technology can help respond to the rise of climate-sensitive infectious diseases, respiratory diseases and others stemming from climate stressors. Startups like Medikea, or EightMedical are increasing access to medicines, testing, and disease prevention linked to climate stressors as well as emergency medical response.
3d) Waste management: In urban environments, waste management remains a challenge, with a significant portion of waste being dumped or burned, leading to environmental and health risks. According to the World Bank, only 43% of urban waste in Sub-Saharan Africa is collected, and only 4% is recycled. Tech-enabled innovations can waste management more efficient and beneficial for vulnerable communities; often also creating new sources of income thanks to circular economy models. Startups like Bekia and Scrapays are changing the way waste is collected while enabling small business growth.
These are just some examples of the innovations we are seeing. The climate adaptation market in Africa is vast and rapidly growing, with established business models and diverse opportunities. Yet, adaptation flows to Africa must increase 5–10-fold (from USD 11 billion to USD 53–106 billion per year) to meet current needs.
The Catalyst Fund is at the forefront of supporting innovative entrepreneurs who are driving change that can transform Africa's future by making it more resilient and sustainable in the face of climate challenges. And, it is particularly important we focus on building solutions that are affordable, accessible, and appropriate for climate-vulnerable communities.
The need to invest in climate resilience and adaptation has never been more pressing.
The benefits have never been more clear.
This is the time to invest in a more resilient future for all.