Green business partners: Why Europe should invest in climate-led companies in Africa

Traditional climate finance mobilisation is over. Climate finance models have been following traditional aid models in their reliance on overseas development assistance (ODA) and other sources of grants and concessional public finance. But, especially in Africa, these have failed to deliver scalable solutions for climate adaptation.

Global ODA fell in 2024 for the first time in five years and Europe led the retreat: European Union contributions dropped by 8.6%, with just four member states (Denmark, Luxembourg, Norway and Sweden) meeting their aid targets. Additionally, sovereign lending on a grant equivalent basis by EU institutions fell by 28% in real terms and represented 25% of their bilateral ODA.

Yet this decline is not just a budgetary blip. It reflects a fractured geopolitical order and the failure of traditional aid models to deliver for climate-vulnerable regions like Africa, which receives barely 10% of the annual finance it needs. Rising defence spending in Europe following Russia’s all-out invasion of Ukraine in 2022, and America’s turn to economic nationalism under President Donald Trump, are affecting ODAs and concessional climate finance.

Looking to climate-smart business

But that these geopolitical events are exacerbating donor fatigue should not be a moment of regret. Indeed, despite countless pledges, Africa receives only $30bn annually in climate finance, which is far short of the $277bn it needs each year to be on target for the UN 2030 Agenda for Sustainable Development. The current global geopolitical landscape therefore provides an impetus to deliver what Africa does need: transformative green investments and climate-smart businesses that can deliver critical infrastructure, create massive employment opportunities (60 million green jobs by 2030 with adequate investments, according to the International Labor Organization) and drive climate adaptation solutions.

By channelling capital into Africa’s green industries, the EU can secure its supply chains, strengthen its geopolitical relevance to young Africans, and support the continent’s development into a low-carbon industrial powerhouse

Europe’s new approach should be to invest in climate-smart businesses, or enterprises that integrate climate resilience and economic profitability into their core operations. It should focus this investment on Africa and Europe—indeed, wherever there are viable opportunities for scalable impact. This is because prosperity and jobs will come through investment, not aid. By channelling capital into Africa’s green industries, the EU can secure its supply chains, strengthen its geopolitical relevance to young Africans, and support the continent’s development into a low-carbon industrial powerhouse.

Opportunity through investment

Africa is on the front line of climate change; what stakeholders do to mitigate global warming’s current and future impact must drive large-scale investment in resilient infrastructure, job creation and sustainable food systems. The continent holds vast reserves of critical minerals, a significant share of the world’s renewable energy potential, and a youth population that already makes up half of its total (70% of sub-Saharan Africans are under 30). In fact, demography forecasts expect the total to double to 830 million by 2050.

Climate finance structures are simply not equipped to provide the investment in green energy that Africa needs. Their inefficiency also leads to wasted potential: the structures rely mostly on aid, including grants meant to unlock private investment, which remain negligible. Over 40% of climate funding is spent on international consultants rather than on-the-ground implementation. Debt-based financing, which makes up a significant amount of these flows, is exacerbating the financial burden for many African countries. According to the African Development Bank (AfDB), several African nations now spend more on debt servicing than on climate adaptation.[1]

Meanwhile, the EU faces growing energy insecurity, exacerbated by geopolitical competition even among traditional allies such as the US. Amid shifting global dynamics, Africa and the EU have a historic opportunity to redefine their partnership from a donor-beneficiary model to a mutually beneficial green-business alliance. To achieve this, the focus of the EU’s €300bn Global Gateway initiative should pivot from primarily based on infrastructure loans to high-impact green-equity investments across key sectors such as agriculture, renewable energy and critical minerals.

Europe as a green partner

Climate-smart agriculture is a prime example. Earlier in 2025 the World Bank announced that it would double its agribusiness investment to $9bn annually by 2030. But, for most crops vital to food security in Africa such as maize and beans, changing climate conditions could cause yield losses of between 30% and 50% by 2080. If the World Bank ensures its investments are climate-smart, and that the countries most at risk implement adaptation measures early, this could significantly increase crop yields and resilience to climate change in the agriculture sector.

Moreover, startups like Twiga foods in Kenya are using AI to develop climate smart solutions: it uses AI to develop strong supply chains while reducing food waste. But its lacks scale-up capital—for example, in June Twiga announced financial distress and the halting of parts of its operations in Kenya.

In response, the EU could enable investments in agri-tech accelerators with the aim of adapting to climate change instead of continuing food aid for climate resilience. In renewable energy, the EU could scale-up its investments in green hydrogen in Namibia to other African countries to diversify its energy sources. At the same time, this would ensure that the production of green energy in the target countries increases to address industrial needs. Kenya, for example, created green hydrogen development strategies with the support of the EU, which already lays the groundwork for a clear investment plan to follow.

On critical minerals, the new Lobito Corridor—linking Zambia and the Democratic Republic of the Congo—is another project where EU investment could help in developing local sustainable value-chain businesses to supply EU battery factories with more than raw materials, such as battery-grade lithium. This requires investment in local processing, which would create sustainable jobs while securing a reliable supply chain for European industries. Several companies are developing electric vehicle (EV) batteries and battery solutions on the continent, driving the growth of electric mobility. Notably, companies like Spiro have launched assembly plants in Benin and Togo for EV production in west Africa.

From aid to investment

The EU has an opportunity to become Africa’s green investment partner, unlocking up to €1trn in returns while securing access to critical minerals, clean energy and new markets. This is exactly what today’s geopolitical climate calls for. Even the World Bank agrees: earlier this year, its executive management repositioned the institution as moving away from “charity” and towards aid reform to support private-sector development.

Europe can co-lead in green business with Africa in a win-win partnership. But first, the EU needs to let go of neocolonial aid models and instead embrace a bold, green industrial revolution that benefits both continents. And the youngest Africans, from Douala to Cairo, are not interested in more empty promises or lectures on climate change. They want capital, technology and fair deals.

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[1] Insight from the 2024 AfDB annual meeting