Africa Green, Resilient and Inclusive Housing De-Risking (GRIHD) Facility

active

Prospective

Inadequate housing is a pervasive challenge throughout Eastern and Southern Africa (AFE) with many countries demonstrating enormous deficits. The soaring demand for housing that is adequate in quality and location, is met by scant new supply, especially for the middle to low-income segments of the population. On top of this, the effects of climate change exacerbate an already vulnerable situation. Climate-fueled disasters were the primary driver of internal displacement during the past decade, forcing approx. 20 million people a year from their homes. The manner in which the right to housing is to be realized also has implications for climate change. It has been estimated that the building and construction sector accounts for 38% of global energy-related CO2 emissions. While the region has contributed marginally to global GHG emissions in this sector, ambitious national mass housing programs, e.g. Kenya’s 500,000 homes, Zambia’s declaration to provide decent and affordable houses for 30,000 civil servants and 15,000 nurses, etc. once realized will not only drive-up demand for building materials, amplifying their embedded carbon emissions and environmental footprints, but will also increase energy demand for cooling and water heightening the risk of carbon lock-in and pressure on scarce water resources. It is thus imperative that new mass housing programs are developed with long-term, environmental and social considerations. This confluence of housing and climate change crises underlines the importance of a holistic strategy. A strategy that thinks of housing delivery as a process that deliberately embeds climate change considerations rather than the end product of a physical structure. A value chain solution that causes less harm and delivers more benefits across the housing construction process, from material sourcing and manufacturing to end-user offtake. Within the region, however, important obstacles remain to the mainstreaming of housing that is low-carbon, energy efficient and climate-resilient. While the sector and its climate ambitions offer compelling social and economic returns, these arguments provide an insufficient driver for conventional investors. The industry is still nascent and as such, market forces alone will not herald an equitable and sustainable housing transformation. A broad range of enabling regulatory frameworks and policies, as well as catalytic public investments and innovative financial instruments, incentives and risk sharing tools are needed in the sector and its value chain variables to ease market barriers for suppliers and manufacturers, developers, investors and financiers, owners and tenants. At its core, the proposed Africa Green, Resilient and Inclusive Housing De-risking (GRIHD) Facility (the "Facility") seeks to introduce an innovative framework which systematically identifies the barriers and associated risks which hold back private investment in energy efficient, resilient and inclusive housing in the region. It is designed to make available financial instruments to address market risks in three ways: either reducing, transferring and/or compensating for risk, i.e. “de-risk”. The overall objective is to cost-effectively achieve a risk-return profile that stimulates private sector-led delivery of climate smart results along the housing value chain. This strategic leveraging of scarce resources to mobilize private capital will allow the Facility to expand reach, support scale-up efforts and have higher impact. Designed as a regional Financial Intermediary Financing (FIF) operation, the Facility will be housed in the Eastern and Southern Africa Trade and Development Bank (TDB) - with whom both the WB and MIGA have existing operations with. Operating at a wholesale level, the apex Facility will partner with a range of banks, microfinance and housing finance institutions, i.e. participating financial institutions (PFIs), to deploy catalytic risk capital and instruments in support of climate-informed housing solutions on both the supply and demand sides of the sector. Over the life of the Series, it will offer a range of complementary de-risking products targeting specific value chain interventions (“windows”) in particular: (i) Window 1: supply, production, and manufacturing of green housing materials; (ii) Window 2: provision of missing last-mile housing infrastructure that incorporates nature-based solutions; (iii) Window 3: green and resilient housing construction and renovation; and (iv) Window 4: support offtake of climate-smart homes. Nonetheless, in recognition of the need for the Facility to take a measured approach in rolling out its interventions, a phased implementation of the value chain windows under SOP 1 is adopted for a streamlined focus on Windows 1 and 3 only. By aligning incentives and helping to share some of the market concerns facing key value chain actors, the Facility seeks to cultivate a more vibrant and sustainable financial and housing sector in the AFE region. The diversity of the proposed interventions is deliberate to trigger the green, resilient and inclusive housing movement from the top of the value chain while providing greater flexibility to cater to the various needs of the investing parties.

Industry, Trade and Services

World Bank

Project

Water Supply and Storage, Manufacturing (Industrial), Commercial, Government