Infrastructure investor PIDG aims to direct billions to climate projects

The Private Infrastructure Development Group (PIDG), one of the largest providers of concessionary financing for infrastructure projects in Africa, unveiled its 2030 strategy on the sidelines of a climate conference in London last week. The strategy aims to attract $1.6bn in funding and deliver $9bn in new commitments for infrastructure projects that mobilise over $25bn in funding from additional sources.

PIDG is funded by six donor governments, along with the International Finance Corporation. The group’s businesses include the Emerging Africa Infrastructure Fund, which provides debt financing; InfraCo Africa, an investor in early-stage infrastructure projects; and GuarantCo, which offers loan guarantees in local currencies.

Focus on climate projects

The company’s strategy document promises to “only invest in projects that contribute to climate adaptation, resilience and/or mitigation”.

A focus on mitigating and adapting to climate change is not new for PIDG, the group’s chief executive, Philippe Valahu, tells African Business. But, given the increasingly obvious impacts of climate change, there is a “sense of urgency” to ensuring that infrastructure is built with climate resilience in mind, he says.

“We’ve decided that we would make a statement that everything we do, everything we think about, will be through that climate lens,” says Valahu.

He cites a recent solar project in Madagascar that GuarantCo supported with a loan guarantee, in which solar panels are mounted on poles that are buried 3 metres into the ground. This makes them resilient to cyclones, which are hitting the island more and more frequently.

Valahu says that PIDG is aiming for renewables to eventually make up 100% of its portfolio in the power sector. For the time being, however, gas investments are not completely off the table. Valahu says that the group would still consider funding gas-fired power stations in limited circumstances, such as if a project could provide immediate baseload power capacity in a country that had a long-term plan to roll out renewables.

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Africa fights for funding

PIDG states that, historically, around 70% of its investments have been made in Africa, with the remainder in south and south-east Asia. According to the strategy document, “over half” of PIDG’s portfolio will remain in Africa, but Asia is likely to capture a growing share of its investments.

Valahu tells us that the focus on Asia comes from the need to fund alternatives to highly polluting power sources in countries such as Vietnam and Indonesia.

Nevertheless, Valahu insists that Africa should “most definitely not” fear a loss of funding in absolute terms. He concedes the plan to increase investments in Asia is “a bit ambitious”, noting that Asia is unlikely to absorb more than around 30% of PIDG’s investments for the foreseeable future. “Africa will remain the bulk of what we do,” he says.

Meanwhile, Valahu argues that global conversation around mobilising trillions of dollars for climate mitigation and adaption might not be suited to Africa’s needs.

“The fixation on the trillions is not particularly helpful,” he says, pointing out that the type of renewable energy projects that are needed in many African countries are relatively small by global standards. The largest institutional investors, which can collectively deploy trillions of dollars, are unlikely to be interested in backing such projects, he says.

PIDG’s strategy therefore emphasises the need to support early-stage project development, particularly in markets perceived as riskier. The group is already one of the main backers of off-grid solar projects in Africa, which typically find it harder to attract finance than grid-scale independent power producer projects.

Valahu promises that, as part of its new strategy, PIDG’s support for early-stage project development will “grow exponentially”.