Why global investors keep missing Africa’s biggest climate opportunity

This article is based on a conversation from Voices & Visions, a podcast produced through a partnership between Tutto Passa Agency and TechCabal, which explores the people and ideas shaping Africa’s innovation economy.

The world’s biggest climate challenge at the moment may not be raising more money, but deploying the existing capital differently.

In Africa, investors have committed $44 billion annually, up nearly 50% from a few years ago, yet founders building technologies to help farmers survive droughts, businesses reduce emissions, and communities adapt to changing weather patterns still struggle to access capital.

According to Victor Ndiege, the CEO of Kenya Climate Ventures (KCV), an impact investment manager focused on early-stage climate enterprises, their problem is not a shortage of investors but funds unwilling to finance risk on local terms.

The disconnect is exposing one of the weaknesses in Africa’s green transition. As climate adaptation becomes the top policy agenda, local fund managers argue that the financial instruments meant to support it are designed for mature markets and not small local enterprises.

“There are many investors who have not been able to deploy capital, not because there are no businesses requiring capital, but because of the terms and structures around deploying that capital,” Ndiege said. “The financial architecture is the most important aspect of investing, not the name of the instrument.”

While billions of dollars have been committed globally to climate action, only a tiny share reaches businesses helping communities adapt to changing weather patterns. Climate adaptation—the technologies and services that help economies cope with changing rainfall patterns, water shortages, and rising temperatures—remains one of the least financed segments of climate investing.

Many climate businesses require long-term investments before generating stable cash flows. For example, farmers adopting new irrigation technologies or households switching to solar power might not produce venture-scale returns overnight.

Their growth relies on patient deployment and steady operational growth. Ndiege argues that this mismatch comes from the assumptions investors bring to Africa.

His criticism extends beyond venture capital to the development finance ecosystem.

KCV is currently raising a $25 million climate fund after building a revolving investment facility over the past decade. However, several development finance institutions have indicated that the proposed fund is too small for their participation.

“$25 million is what we need to grow sustainably,” Ndiege said. “But many investors would rather wait until we are managing $100 million before coming in. By then, we may no longer need them.”

This observation exposes a paradox that is alive in most startup ecosystems around the world. Institutions that are meant to finance early-stage startups only back mature fund managers and do not help smaller ones scale. Most ecosystems are built in such a way that capital follows validated successes.

Meanwhile, local entrepreneurs continue struggling to secure financing.

The firm invests for as long as seven years, allowing companies to mature before repayment obligations intensify. Funding is disbursed in stages, matching the pace at which businesses grow.

One area where KCV claims it has broken with most of its peers is currency. It deploys local currency financing and not dollars or pounds.

“If we chose to invest in dollars or pounds, businesses would spend more money hedging against currency fluctuations,” Ndiege said. “We want entrepreneurs to spend their time growing their businesses rather than responding to risks that we can help them overcome.”

For African businesses generating revenues in local currencies, exchange-rate volatility can turn otherwise viable investments into distressed assets.

The issue has become important as many African currencies have depreciated against the dollar over the past three years, increasing repayment burdens for companies financed in foreign currency.

KCV also rejects the argument that early-stage companies should avoid debt entirely. According to Ndiege, most investors assume that only equity financing is appropriate for young businesses. In 2025, African startups raised a record $1.64 billion to $1.8 billion in debt financing.

“The question is not whether debt works,” he said. “The question is how you structure that debt facility to respond to the growth of that startup.”

Repayment schedules, interest costs, and deployment timing, he argues, should reflect business life cycles and not banking rules.

“If our portfolio companies do not succeed, then we have not succeeded,” Ndiege said. “It should not be an investor-investee relationship. It should be a partnership for growth.”

This support should be extended to other operational needs of a young company. Many African startups fail not because the demand is absent but because they lack audited financial statements, governance structures, or investment documentation required by institutional investors.

“The challenge is translating what entrepreneurs know into a language investors understand,” Ndiege says. “It is not about their ability to do business. It is about compliance.”

KCV’s investment combines capital with technical assistance, governance support and managerial development. The approach is resource-intensive but reflects the realities of African enterprise growth, where many businesses emerge from informal markets before formalising.

If climate finance continues to reward only businesses that have already succeeded, Africa may discover that the biggest barrier to climate adaptation was never the availability of money, but the way capital itself was designed.

Listen to the full podcast on Spotify.