Climate Exposed, Debt Decomposed, Reforms Proposed Climate Disasters and Financing Solutions for Infrastructure in Sub-Saharan Africa

Sub-Saharan Africa faces a large and persistent infrastructure financing gap, while climate change is increasing both the need for adaptation investment and the cost of capital. This thesis asks how infrastructure and adaptation finance can be scaled in Sub-Saharan Africa while keeping the cost of debt low enough to avoid debt distress. To answer this question, the thesis decomposes the cost of debt itself. It brings three climate-related risk pricing channels and a behavioral climate sentiment channel from the sovereign level to the project level, where the association of these factors with Sub-Saharan African infrastructure debt pricing has not previously been analyzed at scale. The empirical analysis uses a cross-sectional dataset of 230 infrastructure projects across 1996-2025, assembled from the African Development Bank and World Bank Project Appraisal Documents, as well as data from the private infrastructure finance information platform IJGlobal. Relevant variables are extracted from more than 1,100 unstructured PDF documents using an LLM-assisted extraction pipeline. The all-in nominal interest rate clustered at financial close is regressed on hazard-decomposed climate exposure measures for flood, storm, and extreme heat events, an NLPderived behavioral sentiment proxy, lender composition, and standard macroeconomic and project-level controls. The climate hazard risk indicators are constructed using climate data informed by satellite observations, combined with local weather station records. The results show a structured pattern of selective pricing. Storm exposure is associated with a significant cost of debt premium of approximately 104 bps per unit increase in the storm risk index, and this result is robust across lender segments and alternative exposure constructions. Heat exposure is not robustly priced. Flood exposure is not priced as a simple residual risk premium. Rather, it appears to operate through lender-side selection, with our hypothesis being that commercial syndicates finance floodexposed projects only where adaptation has already been credibly arranged. The behavioral sentiment proxy is priced by private commercial lenders at 114bps per unit increase in the sentiment score and is attenuated when mandate-driven institutions participate in the syndicate. These findings imply that the climate premium in Sub-Saharan African infrastructure debt is not a single number, but a structured pattern of hazard-specific and lender-specific pricing. We analyze the effect of reducing the storm climate premium through investment in infrastructure resilience on a sample of 19 projects, using a cost-benefit DCF analysis of debt repayment that integrates a Hill-type exposure function. The case study does not provide evidence of any significant benefit in the total cost of debt financing over a project's lifetime from simply reducing debt by investing in adaptation. While not minimizing the importance of resilient infrastructure, this conclusion hints at the need of a deeper, structured, financial solution to scale capital. The thesis argues that the most effective policy response is a blended-finance architecture combining concessional and commercial capital, complemented by adaptation-linked instruments and targeted institutional reforms. A central recommendation is the reform of Basel III capital treatment for eligible blended finance instruments, particularly through lower effective CET1 capital requirements for credit-enhanced climate infrastructure exposures in Sub-Saharan Africa, in order to crowd in commercial capital at scale. Infrastructure Debt; Cost of Debt; Blended Finance; Climate Risk Pricing; Climate Hazard Risk Index; Satellite Climate Data; Weather Station Data; Behavioral Climate Sentiment; Development Finance Institutions (DFIs); Basel III; CET1 Capital Requirements; Adaptation Pricing.