The African Development Bank and the UK have announced the Secondary Town Stormwater Drainage Project in Benin as the latest beneficiary project under the Room to Run Sovereign transaction (R2RS). Under the R2RS transaction, the UK Government provided a guarantee to the Bank, unlocking additional climate finance for projects across Africa. It is estimated that $106 million of the loan amount extended to this project in Benin was made possible as a result of the UK guarantee.
Approved in July 2023, the Bank provided a loan of $129 million to the project to improve living conditions in secondary towns throughout Benin by implementing various climate adaptation activities, including building 100km of climate-resilient stormwater drainage infrastructure, paving and asphalting of roads, and reforesting OF 17 hectares of land, among others.
Originally announced at COP26 in November 2021, R2RS is an innovative and highly scalable balance sheet optimization transaction helping the Bank to lend more funding for critical climate change projects. Under R2RS, a $2 billion guarantee was provided to the Bank by the UK Government ($1.6 billion in cover) and City of London insurers ($400 million). By assuming part of the credit exposure on a portion of the Bank's sovereign portfolio, R2RS will enable the Bank to provide an additional $2 billion of climate finance to Africa by 2027, split between adaptation and mitigation.
In May last year, the UK and the Bank announced the first two projects which were enabled by R2RS - an €80 million Egyptian wastewater project and a €37 million water sanitation project in Senegal. Both focus on water supply and sanitation and will benefit millions in their respective countries. This project in Benin is the fourth project to benefit from the unlocked risk capital provided by the UK guarantee since the agreement was signed in 2022. This announcement accompanies three other beneficiary projects in Tunisia, Kenya and Mauritius, bringing the total finance unlocked by the R2R Sovereign transaction to over $400 million.
African Development Bank Vice-President for Power, Energy, Climate and Green Growth, Kevin Kariuki said, "This transaction is one of several projects constituting its lending programme through which the African Development Bank fulfils the call by stakeholders at COP27 for MDBs to innovate and scale up climate finance through the Multilateral Development Banks. The African Development Bank is proud to partner with the UK in this initiative and to be at the forefront of such developments."
Harriet Thompson, UK Ambassador to Benin, said "the world's poorest and most vulnerable people are the people most affected by the impacts of climate change. Climate change makes it even more difficult to achieve the Sustainable Development Goals. The UK has ambitious plans to build resilience to climate change globally, supporting climate vulnerable countries such as Benin. Working with African Development Bank through the UK's guarantee, this project will improve stormwater drainage, health and sanitation, improving the lives of up to 1 million people in Benin."
Commenting at the time of the approval of the project by the Bank, H.E. Jose Tonato, Minister for the Environment and Transport, responsible for sustainable development said, "Improving the quality of life of our citizens is core to the strategy of the government. We thank the African Development Bank for their support and the strategic partnership we have built over the years."
