Driving Finance Today for the Climate Resilient Society of Tomorrow for the Global Commission on Adaptation
This report was prepared by Climate Finance Advisors for the United Nations Environment Programme Finance Initiative (UNEP FI) and the Global Commission on Adaptation (GCA) as a contribution to a series of technical background papers on finance for adaptation and resilience supporting the GCA’s inaugural flagship report scheduled for September 2019.
This paper reviews barriers and opportunities for financing resilience and adaptation by all actors across the financial system but chiefly targets financial system constituents, including policymakers and financial actors, and the actions required of each.13 While the challenges and potential solutions are wide ranging, key needs fall into several categories:
- Climate risk management and climate risk disclosure;
- Harmonization of practices and terminology; and
- (re) Allocation of capital towards climate resilience, adaptation and overall sustainability.
Many efforts to bring about the changes in the financial system that are needed to integrate climate risks in decision making have been initiated, but the reality today is that the necessary rules, regulations, standards, and best practices remain nascent and weakly defined. While specific to different segments and actors within the financial system, five broad categories of barriers to scaling up financing for adaptation and resilience summarize the challenge:
- Inadequate support and/or incentives to act;
- Weak policies and conventions in the financial industry;
- Market barriers;
- Operational gaps at the institution level; and
- Low technical capacity for climate risk management.
The range of adaptation investment opportunities, while very large, faces additional barriers in the perceived lack of private benefits and the immaturity of business models.