CLIMATE ADAPTATION FINANCE AND ECONOMIC GROWTH IN SUBSAHARA AFRICA

Abstract

Sub-Saharan Africa remains one of the most climate-vulnerable regions globally,
grappling with the dual challenge of environmental instability and underdeveloped
economic structures. As nations in the region increasingly turn to climate adaptation
finance to build resilience and stimulate economic performance, there is a critical need
to empirically assess the effectiveness of these financial interventions. This study
investigated the effect of climate adaptation finance on economic growth. Climate
adaptation finance is represented by Adaptation Fund (ADF), Environmental Facility
Fund (EFF), Renewable Energy Fund (REF), Renewable Agricultural and Forest Fund
(RAF), and Green Bond Issues (GBI) while economic growth is represented by Gross
Domestic Product (GDP). Using annual a 13-year data, the study applied the
Generalized Method of Moments (GMM) estimation technique. Findings from the
GMM estimation reveal that RAF was statistically significant on GDP. In contrast,
ADF, EFF (−0.0054, p = 0.873), GBI (−0.0078, p = 0.620), and REF (1.1722, p = 0.756)
showed statistically insignificant effects on GDP. The study concluded that while
climate adaptation finance holds potential for advancing economic development, its
effectiveness varies by sector. The study recommended that priority should be given to
agriculture and forest-based interventions, Additionally, improving institutional
efficiency, fund disbursement mechanisms, and monitoring frameworks will be
essential to optimize the developmental outcomes of climate adaptation finance in SubSaharan Africa.