Opportunities and Options for Adaptation Finance, including the Private Sector

UNFCCC Adaptation
Posted on: 2/01/2024 - Updated on: 3/08/2024

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UNFCCC Adaptat…

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Abstract

Finance is one of the key ingredients in the effort to adapt to climate change impacts and build a climate-resilient world. The 2019 TEP-A interrogated some of the central questions related to adaptation finance, including: What does the adaptation finance landscape currently look like? How can adaptation planning help maximize available finance? What is the role of the private sector and how can policymakers help private sector actors fulfill that role? And how can governments, donors, and practitioners better understand and assess the results of their adaptation finance? This paper presents a range of insights on these questions based on the discussions held as part of the 2019 TEP-A.

Key Messages:

  1. Despite the enduring challenges related to accessing funding from multilateral climate funds, these funds play a crucial role in providing finance to developing countries, building capacity and enhancing readiness for finance, and promoting synergies and coherence in the fragmented adaptation finance landscape. However, the impact of international finance will be limited unless it is accompanied by additional public and private resources.
     
  2. Developing and implementing robust and iterative national adaptation planning processes that engage the private sector and integrate gender considerations will enable countries to catalyse large-scale finance for adaptation that addresses the needs of the most vulnerable. The process of formulating and implementing NAPs in particular offers the opportunity to identify and make use of suitable sources of finance (including the GCF, which has been mandated by the COP to provide financing for NAPs), develop project proposals and create overarching financing strategies to support adaptation, among other things.
     
  3. Aligning domestic expenditure with climate change action needs is an effective way to catalyse domestic and international finance at the national and subnational level. Supporting multilateral finance with domestic expenditure can help advance government priorities, enhance country ownership and ensure that there is consistent and predictable finance available to support the iterative adaptation process.
     
  4. Civil society organizations and other local-level actors can help increase the transparency of adaptation finance and build trust among the communities to which the finance is directed. While building networks with these actors is a time-consuming and resource-intensive process, these networks can help deliver greater results with the limited finance available. Given the importance of local-level actors and community-led initiatives in driving forward adaptation action, there is an enduring need to increase the amount of adaptation finance. Advancing policies that commit to directing a minimum percentage of adaptation finance to the local level and promoting access mechanisms that are directly available to community-led organizations or groups can help to achieve this objective.
     
  5. Ensuring that technology needs assessments and technology action plans are complete and up to date is an important first step towards commercializing adaptation technologies. The private sector is already investing in adaptation technologies, but a combination of awareness-raising and new financing mechanisms can help to expand this market.
     
  6. In the light of the scarcity of adaptation finance flows relative to need, understanding how adaptation investments enhance adaptation action is crucial. At the level of projects, programmes or portfolios, opportunities to enhance this understanding include investing in monitoring, evaluation and learning throughout the full project or programme life cycle and requiring projects to go beyond output indicators and move towards programmatic approaches to adaptation. At the national or international level, this includes developing useful national adaptation monitoring and evaluation systems and linking national monitoring of progress on adaptation with monitoring related to international frameworks.
     
  7. Policymakers can incentivize private sector financing of adaptation action in various ways. The public sector can play an important role in unlocking and scaling up private sector investment in adaptation by de-risking these investments, increasing demand for adaptation products and services and supporting the suppliers of these products and services. Policymakers can also impose requirements on the private sector to invest in adaptation efforts relevant to their businesses. This could include, for example, using laws and regulations to ensure that sectors within a country are obligated to invest in adaptation efforts for the ecosystems and communities on which their businesses depend.

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Citation

Opportunities and Options for Adaptation Finance, including the Private Sector. (2022). United Nations Framework Convention on Climate Change (UNFCCC).

Affiliated Organizations

UNFCCC stands for United Nations Framework Convention on Climate Change. The Convention has near universal membership (198 Parties) and is the parent treaty of the 2015 Paris Agreement. The main aim of the Paris Agreement is to keep the global average temperature rise this century as close as possible to 1.5 degrees Celsius above pre-industrial levels. The UNFCCC is also the parent treaty of the 1997 Kyoto Protocol.

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