How Pension Funds Can Help Electrify Africa

This policy brief explores how African pension funds can be leveraged to address the electricity access gap in Africa by investing in renewable energy-backed (RE) bonds. It argues that while there is a significant opportunity to align long-term pension obligations with long-lived energy infrastructure, systemic barriers regarding investment vehicles, regulatory frameworks, and government environmental policies must be addressed to unlock this capital.

• Africa faces a significant investment gap in renewable energy, requiring approximately $70 billion annually until 2030 to improve reliability and expand access. However, actual investment in sub-Saharan Africa was only $10 billion in 2018 and $30 billion in 2019.
• Current energy infrastructure financing in sub-Saharan Africa relies heavily on foreign investors and development financial institutions (DFIs), which introduces foreign exchange risks because electricity tariffs are collected in local currency. Additionally, information asymmetry regarding local energy consumers increases the perceived risk and cost of capital.
• African pension funds represent a substantial untapped resource, with a Brookings Institution estimate suggesting they could invest roughly $11.7 billion annually in infrastructure projects (based on a sample of 33 funds excluding South Africa).
• Renewable energy-backed (RE) bonds are proposed as a suitable investment vehicle for pension funds because they align with the funds' preference for low-risk fixed income assets and avoid the high risks associated with the development and construction phases of projects. These bonds allow pension funds to invest in commissioned projects with visible performance and revenue history.
• To unlock pension fund investment in RE bonds, three primary barriers must be overcome: the need for specialized investment vehicles like green banks to coordinate multi-financier models; regulatory frameworks that limit infrastructure investment and liquidity; and the need for governments to replace fossil fuel subsidies with clear clean energy policies and procurement systems like auctions.

APA

RMI (2021). How Pension Funds Can Help Electrify Africa. https://rmi.org/resources/how-pension-funds-can-help-electrify-africa/

Chicago

RMI. How Pension Funds Can Help Electrify Africa. 2021. https://rmi.org/resources/how-pension-funds-can-help-electrify-africa/.

Wikipedia

{{cite report |author=RMI |title=How Pension Funds Can Help Electrify Africa |date=16 August 2021 |url=https://rmi.org/resources/how-pension-funds-can-help-electrify-africa/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2021how, author = {{RMI}}, title = {{How Pension Funds Can Help Electrify Africa}}, institution = {RMI}, year = {2021}, month = aug, url = {https://rmi.org/resources/how-pension-funds-can-help-electrify-africa/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }