Climate and Environmental Fund: A Sustainable Response to Cape Verde’s Challenges

Climate change represents an opportunity to realign the development model, making it climate-resilient and based on low greenhouse gas emissions, while fully leveraging a regenerative economy. With this perspective, Cape Verde has designed and is implementing a new climate governance framework. This framework provides practical guidelines for institutionalizing mechanisms to ensure the effective implementation of climate action, including political decision-making, coordination, knowledge management, diplomacy, resource mobilization, communication, and transparency.

To implement this governance framework, three key institutions were created: the Interministerial Council for Climate Action, led by the Prime Minister and responsible for decision-making; the National Secretariat for Climate Action, a coordination body providing support for the implementation of climate policies; and the Climate and Environmental Fund (FCA), tasked with mobilizing and accelerating funding for investments with climate and environmental impact. The FCA has the legal status of an autonomous property in the form of a single-member limited liability company.

The creation of the FCA was catalyzed by the public debt swap between Portugal and Cape Verde, within the context of the need to diversify financing sources for environmental and climate projects. The economic crisis caused by the COVID-19 pandemic resulted in a significant decline in tax revenues and tourism in Cape Verde, leading to a 14.8% recession in 2020. As a result, the debt-to-GDP ratio exceeded 156%, highlighting the country’s economic vulnerability.

The war between Russia and Ukraine further exacerbated this scenario, forcing the government to intensify support measures for the most vulnerable populations and stimulate economic recovery. However, due to budgetary constraints, the government struggled to simultaneously address the impacts of these crises and the negative effects of climate change, including four consecutive years of drought.

In this context, Cape Verde proposed a Memorandum of Understanding to Portugal to convert the bilateral debt into investments in environmental and climate projects, under the management of the FCA. In addition to resources from this debt swap, the FCA can be financed through state transfers, donations, tax revenues, issuance of bonds in the financial market, among other sources.

FCA funding is directed toward priority areas such as sustainable water resource management, promotion of renewable energy, energy efficiency, biodiversity and ecosystem conservation, strengthening coastal resilience, and livelihoods. Projects can be proposed by public institutions, civil society, the private sector, or academic or research institutions.

From this perspective, the potential impact of the FCA is transformative, representing a crucial step in building sustainable development for Cape Verde. It is recognized that its success will depend on efficient collaboration between the government, the private sector, civil society, and international partners. We are hopeful that this initiative can also serve as an inspiration for other countries seeking sustainability as a path to a fairer and more resilient world.

Alexandre Nevsky Rodrigues

National Secretary for Climate Action of Cape Verde