The Green Climate Fund (GCF) has announced a $40 million equity investment in the Novastar Ventures Africa People and Planet Fund III, a $200 million venture capital fund aimed at supporting early- and growth-stage companies developing climate solutions across the African continent.
This investment is designed to address one of the most pressing challenges in climate finance: the significant gap between Africa’s climate action needs and the level of private capital currently available. According to estimates, Africa requires $2.8 trillion between 2020 and 2030 to meet its Nationally Determined Contributions (NDCs). Yet, in 2019 and 2020, the continent attracted only 12% to 15% of the required investment.
The GCF’s contribution is intended to serve as a catalytic anchor, helping to de-risk the fund and attract additional private capital. Many investors have historically been hesitant to invest in African climate ventures due to concerns over currency volatility, political risk, and limited exit opportunities.
Novastar’s third fund will focus on three core investment themes:
- Adaptation and resilience services for climate-vulnerable communities.
- Clean technologies that support the decarbonization of economic growth.
- Innovative solutions for sustainable natural resource management.
The fund will prioritize investments in Kenya, Nigeria, Rwanda, South Africa, and Egypt, with the goal of scaling affordable climate solutions and fostering a robust climate-tech innovation ecosystem across the continent.
Novastar Ventures, founded in 2014, is one of Africa’s leading venture capital firms, managing over $200 million in assets with offices in Nairobi and Lagos.
The GCF is not alone in backing Novastar’s latest fund. A diverse group of limited partners (LPs) has joined the initiative, reflecting a growing global interest in Africa’s climate and tech sectors. These include:
- British International Investment (BII) – the UK’s development finance institution.
- Sumitomo Mitsui Banking Corporation (SMBC) – Japan’s second-largest bank.
- Mitsui O.S.K. Lines (MOL) – a major Japanese shipping and logistics company.
The participation of Japanese corporate giants like SMBC and MOL signals a strategic pivot toward Africa’s high-growth, sustainability-focused sectors, and highlights the increasing role of Asian capital in shaping the continent’s green future.
This investment aligns with the GCF’s broader strategy to localize climate finance. At its 41st Board meeting earlier this year, the Fund approved $686.8 million in new investments, with Africa receiving the largest share (38%).
A key part of this strategy includes the establishment of regional offices beyond its current headquarters in South Korea. This decentralization aims to improve responsiveness and ensure that climate finance is more accessible and tailored to local needs.
Mafalda Duarte, Executive Director of the GCF, commented:
If climate action is local, then the Green Climate Fund must be local too. The establishment of regional offices will improve the Fund’s ability to deliver on its commitments and support vulnerable communities more effectively.
The GCF is also expanding its network of accredited implementing partners, including institutions like the Development Bank of Rwanda and the ECOWAS Bank for Investment and Development, to facilitate direct access to funding.
By investing through Novastar, a seasoned, Africa-based VC firm, the GCF is demonstrating a new approach to climate finance: using venture capital to unlock innovation and scale solutions that can address the continent’s unique climate challenges.
Since its inception, the GCF has committed $16.6 billion, mobilizing a total of $62.7 billion in co-financing across 297 projects. This latest move into Africa’s venture capital landscape underscores its commitment to bridging the climate finance gap through innovative, locally grounded partnerships.
