Casablanca – Morocco is facing significant challenges as it strives to transition to a green economy. The Kingdom has set ambitious goals for reducing the environmental impacts of its economic activities, but the financial cost of achieving these goals is steep. The country will need an estimated $80 billion to implement its green transition projects, aimed at mitigating the harmful effects of climate change. This includes efforts to reduce carbon emissions, promote sustainable energy, and protect natural resources.

The need for green financing

Despite the urgency of the green transition, green financing in Morocco remains a relatively new concept. While many recognize its importance, there is still resistance, with some viewing it as an economic luxury rather than a necessity. However, experts agree that without adequate green financing, the country will struggle to cope with the severe environmental challenges it faces, including droughts, floods, and earthquakes—events that are intensifying due to climate change.

Morocco’s commitment to international climate action is evident in its alignment with the Paris Agreement, which it ratified in 2015. This commitment has led to a series of initiatives aimed at both mitigating the effects of climate change and adapting to its challenges. These efforts are crucial, as Morocco is one of the countries most vulnerable to climate-related risks.

Two main areas of green financing

Green financing projects can be divided into two main areas: mitigation and adaptation. The first focuses on reducing the causes of climate change by financing projects such as renewable energy production, energy efficiency improvements, and the electrification of transportation. The second area emphasizes adapting to the changes already underway, with initiatives aimed at minimizing the environmental damage caused by climate change. This includes projects that safeguard water resources, biodiversity, and other vital ecosystems.

In Morocco’s case, the green transition has been ongoing since 2009, with the country taking proactive steps to align with the Paris Agreement. These efforts include investments in renewable energy, improving food and energy security, and managing the impacts of climate-related risks. Bank of Morocco has been instrumental in helping develop a regulatory framework to guide the country’s financial sector in addressing climate-related risks.

The role of Bank of Morocco

Bank of Morocco plays a central role in the green transition, overseeing the financial sector’s involvement in climate-related projects. The bank has established principles for managing climate risks and is working to enhance the sector’s technical capabilities. It is also focusing on creating transparency in financial markets, ensuring that green projects are funded responsibly and efficiently.

The central bank expects green financing in Morocco to experience significant growth in the coming years. The rising global commitment to combat climate change, coupled with Morocco’s own green ambitions, is expected to attract significant investments in the sector. To further support this growth, the central bank is working on strengthening the legal and regulatory frameworks, including issuing new guidelines to improve the collection of climate-related data.

A key milestone in this effort is the planned release of a green financial classification by 2027. This initiative will help categorize financial products based on their environmental impact, ensuring that investments are directed towards projects that contribute to Morocco’s green transition goals.

A steep path ahead

Despite these efforts, the path to a successful green transition remains steep. Morocco faces several challenges, including securing the necessary financial resources, managing climate-related risks, and achieving the required level of technical expertise. The Kingdom must also overcome skepticism about green financing and its long-term economic benefits.

The green transition will require a collective effort from both the public and private sectors. Green financing will be essential to drive this transformation, but it must be accompanied by policies that promote innovation, create jobs, and improve the overall economic resilience of the country. While the goal of investing $80 billion in green initiatives may seem daunting, the potential benefits for Morocco’s environment, economy, and future generations are immense. With a strong regulatory framework and ongoing international support, Morocco can pave the way for a sustainable future that benefits all sectors of society.