Adaptation Finance Research Articles

How can we pay for it all? Understanding the global challenge of financing climate change and sustainable development solutions.

Despite the heightened attention to climate change and sustainable development initiatives by governments, civil society groups, and private companies in the USA and worldwide, the international community is confronted with a question that has existed since the 1992 Earth Summit: how can we pay for it all? To better understand this climate change and sustainable development goals (SDGs) funding dilemma, there needs to be greater clarity around four climate change investment and finance-related questions that are frequently absent or inadequately addressed in the academic and policy literature. Firstly, what are or should be the boundaries of climate change investment and finance when the problem of climate change becomes impossible to separate from biodiversity, land use management, and other dilemmas related to the broader SDGs? Secondly, how we should define and what constitutes “adequate” financial resources to address the climate change and SDGs dilemmas on the global level? Thirdly, why is it important to close the gap between climate change adaptation and mitigation funding levels? Finally, what role should the private sector and business actors play in terms of climate change investment and finance issues? In addition to achieving greater clarity around these four issue areas, I argue in this article that three questions are likely to shape the future success (or failure) of the global climate change investment and finance architecture. One, what is likely path of the United Nations as a global climate change/sustainability governance institution? Two, will the emerging Green New Deal model in the USA and in other countries actually materialize? Three, what is the future outlook for “market-fixing” sustainability-driven enterprises?

Innovative Finance, Technological Adaptation and SMEs Sustainability: The Mediating Role of Government Support during COVID-19 Pandemic

Small and medium enterprises (SMEs) survival is critical for economic sustainability due to the multifaceted role of the economy. Thus, halting SMEs operation hurts the aggregate economy. During the present pandemic, SMEs’ sustainability in Bangladesh is under-challenged because of limited market demand, supply constraints, financial incapacity, and capital restrictions. However, with the concerted effort from firms and the government, SME’s have been trying to reestablish from the unforeseen consequence by capitalizing on innovation, skills, and economic resources. The motivation of the study is to gauge the impact of innovative finance, technological adaptation, and the government’s role on SMEs’ sustainability during the COVID-19 pandemic in Bangladesh. As a study sample, 2000 SMEs were considered for data collection through a structured questionnaire from 10 December 2020, to 28 January 2021. A sample of 1895 SMEs was returned with their responses. However, after a careful data cleaning procedure, only a sample of 1395 (69.75%) responses was found suitable for study. The study applied structural equation modelling to explore causal effects and test the proposed hypothesis for the hypnotized model, i.e., more precisely, to explore the direct effects of technology adaptation and innovative finance and indirect effects through government support on SMEs. Study findings revealed that SMEs’ sustainability positively accelerates by applying innovative finance and integration of technological adaptation. In contrast, the mediating role of government was also established with indirect assessment. Study findings suggest that policy formulation and implementation must be initiated, focusing on effective online financial services, settling business transactions, and integrating IT advancements in operation.

Socially just community-based climate change adaptation? Insights from Bangladesh

ABSTRACT Community-based planned adaptation has become a popular vehicle for building the adaptive capacity of communities vulnerable to climate change. In the global south, planned adaptation interventions are often implemented by non-governmental organisations (NGOs) with the support of bilateral and multilateral donors. This paper examines the influence of external agencies involved in funding, planning and implementation of community-based adaptation (CBA) initiatives in Bangladesh. We show that the principles of CBA are negatively impacted by top-down project design, simplistic notions of “community”, lack of downward accountability and pressures to meet tight timeframes. We found that NGO-initiated CBA interventions tended to repeat the past mistakes of bottom-up approaches, primarily because of embedded institutional culture that inhibits the possibility of achieving socially just, effective and sustainable adaptation outcomes in Bangladesh. We argue that the automatic and normative attribution of NGO interventions as being “good” needs deconstructing to ensure that future initiatives are aligned with and prioritise community needs over external expectations. This requires flexible funding, planning and implementation structure for adaptation projects, which may forge new ways of engaging communities and locally led innovation to adapt to climate change.

COP26 as an opportunity to further democratise the Green Climate Fund

COP26 as an opportunity to further democratise the Green Climate Fund

Climate change adaptation as a global public good: implications for financing.

Beginning as an afterthought in the UN Framework Convention on Climate Change, adaptation as an agenda has come a long way since 1992. With no ambitious mitigation, recent years have witnessed an increasing frequency of extreme climate events, including cross-border or borderless climate risks. Accordingly, the Paris Agreement frames adaptation as a global goal and global responsibility. However, financing for adaptation continues to remain extremely poor, relative to the estimated needs, even though the regime has obligatory provisions for support by developed countries. Why is this so? Why should the majority of the countries, with an insignificant contribution to causing the problem, suffer from increasing climate impacts? How can adaptation finance be enhanced at scale? As a response to these queries, the paper substantiates three claims: (1) that poor funding can be attributed to the territorial framing under the regime that conceptualizes adaptation largely as a local or national public good and, hence, the inefficacy of market mechanisms, (2) that it makes conceptual and political sense to consider adaptation as a global public good, and (3) that such a reframing should make a difference in boosting adaptation finance. In a multi-polar world with different views on adaptation finance, multilateral agencies should lead in promoting the proposed framing.

A methodology for assessing climate services’ needs: West Africa case study

As of April 2021, 192 Parties to the United Nations Framework Convention on Climate Change (UNFCCC), out of 197, have submitted their first Nationally Determined Contributions (NDCs), eight Parties have submitted their second NDCs, and 70 Parties have submitted an updated first NDC outlining priorities and commitments with respect to the implementation of the Paris Agreement, including in the area of adaptation. Climate finance has reached record levels, crossing the US$ half-trillion mark annually for the first time in 2017–18 (CPI, 2019). Action still falls far short of what is needed under a 1.5 °C scenario, however. Estimates include that US$ 180 billion will be needed annually for the period 2020–2030 (Global Commission on Adaptation, 2019), of which US$ 50 billion a year is necessary for Non-Annex countries1Non-Annex I countries refer to Parties to the United Nations Framework Convention on Climate Change (UNFCCC) not listed in Annex I of the Convention, which are mainly developing countries.1 to deliver their NDCs (UNEP, 2018). Adaptation finance is only a very small fraction (5%) of the total available climate finance, and financing for climate services and early warning systems needed to support adaptation is only a fraction of that.This paper analyses NDC adaptation priorities, the allocation of international funding, and the current status of countries’ capacities to provide the climate services needed to support adaptation, using West Africa as a test case. We conclude that there is considerable potential for using such information to assess the degree to which adaptation programmes implemented with international funding are effectively addressing national adaptation priorities and improving priority adaptation outcomes, but that additional data, analysis and coordination would be needed to fully realize this potential. Finally, we identify key areas that require further investment, which, if strengthened, would leverage sustainable benefits from the funds being invested in climate change adaptation in West Africa

Mobilizing private adaptation finance: lessons learned from the Green Climate Fund

The mobilization of effective private sector engagement is considered to be critical to address the adaptation challenge, but literature demonstrates that it has proven difficult. In the context of international climate finance, the focus has been on mobilizing private finance for adaptation and in addressing barriers that prevent investments from materializing. In contrast, this article identifies options to engage the private sector in adaptation beyond finance and focuses on market imperfections instead of barriers. This moves the focus away from simply mobilizing more private adaptation finance towards identifying market forces that innovate, engage, and direct investments towards adaptation. The Green Climate Fund (GCF) and its portfolio of 74 adaptation projects serve as a case study. Two of these projects are categorized as private sector projects and an additional nine mobilize private co-finance or non-financial private contributions. Beyond these two indicators, we demonstrate that an additional 60 projects engage the private sector in other ways, thus indicating the important broader role of the private sector in adaptation. Furthermore, our ordinal regression demonstrates that by addressing the market imperfections of positive externalities, imperfect financial markets, and incomplete and/or asymmetric information, all have a significant positive effect on private sector engagement in the GCF’s adaptation portfolio. Both findings indicate that there is a large potential for the GCF—and other climate finance providers—to increase private sector engagement in adaptation. It must be noted, however, that the mobilization of private sector engagement in adaptation is a means to an end, not an end in itself. The main aim should be to adapt society as a whole in an efficient manner, including the most vulnerable groups and people.

Legal Aspects of Adaptation Finance under the UNFCCC Regime with Special Reference to the Adaptation Fund

Abstract This article addresses the legal aspects of the financing of adaptation to climate change, with special consideration given to one of the climate funds – the Adaptation Fund (AF). In the complex structure of climate finance, the AF attracts attention as it differs from other funds in several aspects. As an exception from other United Nations (UNs) climate funds, AF has not been recognised as an operating entity of the Financial Mechanism of the Convention. AF is also an unprecedented example under the Convention of a fund serving in parallel two decision-making bodies (CMP and CMA) under two agreements (Kyoto Protocol and Paris Agreement) ratified by non-overlapping sets of parties; with a Fund Board elected by both bodies collectively. AFs funding source is specific, it was designed to be financed from shares of the proceeds of sales of certified emission reduction units (CERs) generated by Clean Development Mechanism (CDM) projects but since 2012 there is a limited possibility of offsetting the emissions with CERs under the EU emissions trading system (ETS). For several years Parties were unable to agree the operating principles and procedures of a new mechanism established in article 6(4) of the Paris Agreement, which will resemble CDM, and would constitute a source of funding for the AF. Once this source of funding is available, the AF would cease to serve the Kyoto Protocol. Despite the above problems, AF was seen as a good example of how future climate funding can be designed. We examine the evolution of the above legal problems, including the most recent decisions and conclusions adopted during Conference of Parties (COP)25 in Madrid.

Interrogating Climate Adaptation Financing in Zimbabwe: Proposed Direction

Reducing vulnerability to climate change and enhancing the long-term coping capacities of rural or urban settlements to negative climate change impacts have become urgent issues in developing countries. Developing countries do not have the means to cope with climate hazards and their economies are highly dependent on climate-sensitive sectors such as agriculture, water, and coastal zones. Like most countries in Southern Africa, Zimbabwe suffers from climate-induced disasters. Therefore, this study maps critical aspects required for setting up a strong financial foundation for sustainable climate adaptation in Zimbabwe. It discusses the frameworks required for sustainable climate adaptation finance and suggests the direction for success in leveraging global climate financing towards building a low-carbon and climate-resilient Zimbabwe. The study involved a document review and analysis and stakeholder consultation methodological approach. The findings revealed that Zimbabwe has been significantly dependent on global finance mechanisms to mitigate the effects of climate change as its domestic finance mechanisms have not been fully explored. Results revealed the importance of partnership models between the state, individuals, civil society organisations, and agencies. Local financing institutions such as the Infrastructure Development Bank of Zimbabwe (IDBZ) have been set up. This operates a Climate Finance Facility (GFF), providing a domestic financial resource base. A climate change bill is also under formulation through government efforts. However, numerous barriers limit the adoption of adaptation practices, services, and technologies at the scale required. The absence of finance increases the vulnerability of local settlements (rural or urban) to extreme weather events leading to loss of life and property and compromised adaptive capacity. Therefore, the study recommends an adaptation financing framework aligned to different sectoral policies that can leverage diverse opportunities such as blended climate financing. The framework must foster synergies for improved impact and implementation of climate change adaptation initiatives for the country.

Financing Climate Change Adaptation: International Initiatives

Climate change adaptation is one of the main strategies to address global climate change. The least developed countries and the small island states that lack financial resources to adapt to climate change are the most vulnerable nations to climate change. Although it would be more economical to adapt to climate change compared to the anticipated damage of not doing so, the demand for capital is estimated to range to hundreds of billions. The crucial question is how to manage investments to adapt to climate change globally. This study provides an overview of existing international provisions on climate finance for adaptation. It includes provisions through international financial institutions, United Nations agencies, bilateral and multilateral channels, and the private sector. It also explores how private sector finance can be further attracted to invest in climate change adaptation.

Super-bureaucracy in climate adaptation governance in Bangladesh

ABSTRACT State bureaucratic settings and associated governance patterns have an enormous impact on the planning and implementation of a country's climate development policy. Contextually, a typical superior bureaucratic framework with its decision-making power centred on climate adaptation projects funding prevails in Bangladesh. This paper deploys the concepts of Weberian bureaucracy and super-bureaucracy and its governance pattern to explore the power attributes of climate bureaus and associated bureaucratic practices and decision-making behaviour regarding adaptation funding in climate adaptation governance. The study employs all climate adaptation development projects (n = 573) financing in Bangladesh. The analysis finds that the general administration cadre employees rather than technical professionals are involved in multiple decision-making processes, including appraisal and approval and monitoring and evaluating projects holding powerful pivotal positions both centrally and locally. These super bureaus also expand their power resources in climate adaptation policy by governing big adaptation projects, keeping the project director position, and approving the said position. The power capabilities and interests of the super-bureaus accrue by creating new climate institutions too. The decision-making behaviour and governance pattern underpin a state of super-bureaucracy, which are not supportive enough of innovative policy-making through inclusive participation and collective decision-making for governing dynamic climate adaptation policy.

Integrated assessment of human vulnerability to extreme climate hazards: emerging outcomes for adaptation finance allocation in Southwest Nigeria

ABSTRACT Efficient allocation of adaptation finance resources hinges on precise indices of human climate vulnerability measurement for targeting the most vulnerable and prioritized institutional development pathways. Climate vulnerability numerical index has the potential to identify vulnerable groups, regions and livelihood sectors in setting adaptation finance flow towards vulnerable households and key economic sectors. We analysed human vulnerability to climate hazards in Southern rainforest of Nigeria, a region that holds rural livelihoods with fragile ecology. Using cross-sectional household data, Human Climate Vulnerability Index was constructed for the five local government areas in this region. Results suggest that the most vulnerable area faces poor wealth and inadequate support institutions while the least vulnerable has an access to the best basic amenities. Socio-economic factors especially the large share of female-headed households, rising disadvantaged aging population and poor infrastructure are major contributors to vulnerability. The highest exposure index is associated with high temperatures and solar radiation. Highest sensitivity index is mostly determined by demographic inequalities and socio-economic, infrastructure, health and environmental indicators while Adaptive Capacity (AC) index is dependent on wealth and assets and social amenities. Adaptation finance should target socio-economic, demographic inequalities, communication services, support institutions and infrastructure to reduce sensitivity but target basic social amenities to strengthen AC.

Donor interactions in the allocation of adaptation aid: A network analysis

This article examines how adaptation aid is allocated across countries, and specifically focus on the role of donor—donor interactions in allocation decisions. We test two contrasting hypotheses: the presence of other adaptation donors in a recipient country may increase or reduce the likelihood of donor i to provide adaptation aid to that recipient. In the former case, donors support adaptation in the same recipient countries; in the latter, they provide their adaptation aid to different recipient countries. We model adaptation aid allocations as a network, and apply an innovative method, bipartite temporal exponential random graph models, to bilateral adaptation aid flows between 2010 and 2016. Our empirical analysis finds strong evidence for donor interactions. The results suggest a positive effect of other donors: donors tend to support adaptation in similar sets of recipient countries. These results provide further evidence that adaptation aid largely follow the structures and processes of traditional development aid, which poses questions for the additionality of finance for adaptation to climate change.

Ecosystem services valuation to build a matching funds scheme to finance adaptation to climate change in Puerto Vallarta, Mexico

To foster the implementation of Mexico’s adaptation component of its Nationally Determined Contributions (NDC) under the Paris Agreement, both its nationwide payment for ecosystem services (PES) program and its National Strategy for Reducing Emissions from Deforestation and Forest Degradation (ENAREDD+) are regarded by the Ministry of Environment as solutions to improve the economic feasibility of adaptation measures. Mexico is reallocating its public expenditure to attend country-wide social needs causing budgetary constraints, which hinders PES and ENAREDD+ as funding sources. This led the National Institute of Ecology and Climate Change (INECC) to consider a PES with a matching funds approach to provide sufficient financial resources for adaptation measures. To estimate the available funds, INECC developed an exercise of economic valuation of ecosystem services. The watershed of Puerto Vallarta in Jalisco, Mexico, was the chosen location given its ecological and touristic importance and because of its urgent need to implement adaptation measures due to its heighted vulnerability to climate change. This article intends to showcase the value that upstream ecosystem services provide to tourism, the potential to implement adaptation measures in the region and to estimate local available funds to develop ecosystem-based adaptation measures (EbA). A literature review was conducted to understand the regional environmental, social, and economic dynamics and to identify the main ecosystem services; then, the value of ecosystem services was estimated via the willingness to pay and accept (WTP and WTA) using contingent valuation. Also economic data regarding forestry and agriculture was collected to calculate the forest conservation opportunity cost. The results showed that tourist and residents would be willing to pay circa $150 million USD per year and farmers would be willing to accept circa $75 million USD. This evidences the potential to implement forest conservation activities that will contribute to adaptation and mitigation objectives of Mexico’s NDC.

Negotiating the future of the Adaptation Fund: on the politics of defining and defending justice in the post-Paris Agreement period

ABSTRACT The Paris Agreement's rapid entry into force, less than one year after it was adopted, reaffirmed that the international community would continue its efforts to mitigate greenhouse gas emissions and adapt to climate change impacts. Yet structures created under the Kyoto Protocol, like the Adaptation Fund, were left in a state of unprecedented ambiguity because parties had to actively approve their continuation under the Paris Agreement, or risk seeing them fade into history. Drawing on narrative political analysis of negotiating texts and observations at meetings of the Conference of the Parties (COP), we argue that the Adaptation Fund negotiations became a particularly intense site for the contestation of justice-based norms in international climate policy. Developing countries’ ardent and almost unanimous support for the continuation of the Adaptation Fund, despite the Fund's relatively small share of international climate finance, provides important insights into processes of norm contestation in international climate negotiations since the Paris Agreement, which marked a significant transition toward liberal norm structures. We explore how this unwavering support for the Adaptation Fund—and the claims to distributive and procedural justice it represents—could impact not only Fund governance and structure in the post-Paris Agreement period, but also the success of future adaptation efforts and the Paris Agreement itself. Key policy insights As global environmental governance moves towards a more liberal conception of justice, developing countries are holding on to specific issues, such as adaptation finance, to preserve distributive justice-based norms, deeply rooted in the history of the United Nations Framework Convention on Climate Change (UNFCCC). A critical tension in international adaptation finance is contrasting conceptualizations of justice and responsibility. While developed countries increasingly see their climate financing decisions as optional and in the same vein as development aid, developing countries argue that financing is an obligation for countries with historic responsibility for climate change. In order to resolve some of the stickiest issues on climate finance, pressing concerns about procedural and distributive justice must be addressed. Developing countries will focus on defending their position and power in the negotiations, rather than discussing technical decisions, until justice is acknowledged and preserved.

Climate Finance and Emission Reductions: What Do the Last Twenty Years Tell Us?

In the framework of the Paris Agreement implementation, financial transfers remain a major point of negotiation for addressing equity concerns raised by the ambitious climate objectives. In complement to the theoretical, experimental and numerical studies that have examined the role of transfers in facilitating coalitions, we conduct the first empirical analysis of their impact on national carbon emission reductions. We build on the existing literature to develop a conceptual framework which models continuous national emission choices in the presence of financial transfers. We infer an equation of the impact of mitigation and adaptation finance on national emissions of recipient countries. We test the derived hypothesis using carbon emissions data of non-OECD countries in the last 20 years. We find that public adaptation and mitigation finance tend to increase emissions. Private mitigation finance seems to reduce them only after five years following the transfers.

TOOLS FOR FINANCING ECOSYSTEM-BASED ADAPTATION TO CLIMATE CHANGE

The article aims to determine the "portfolio" of financing ecosystem-based adaptation to climate change based on the analysis of traditional market instruments used to preserve, maintain and restore ecosystem services and biodiversity. The definition of ecosystem-based adaptation, its qualification criteria and elements of their application in contrast to traditional economic measures for biodiversity and nature conservation are revealed. The relevance of using ecosystem and nature-based approaches to adapt to climate change and reduce the risk of natural disasters given the increasing frequency of extreme weather events associated with climate change – severe droughts, floods, heatwaves, storms and other hazards are explored. Accordingly, the urgency of adaptation to climate-related risks and hazards in different economic sectors, e.g. agriculture, land use, fisheries, and natural components with a focus on the climate impacts prognosis for the European region, using effective and affordable measures with additional long term social and environmental benefits are explained. Trends and specific gaps in the international experience in financing climate adaptation measures are considered. The most common instruments for financing nature-based solutions and ecosystem-based adaptation to climate change, which are already used in world practice or have the potential of their practical implementation in various sectors, including environmental and carbon taxes, subsidies, tradable environmental permits, risk insurance, obligations, debt and equity instruments, as well as innovative forms of green loans, green bonds, and climate-related insurance types are systematized and represented. The specifics of financing such measures through international funds, development banks and European Union funds are considered. Possibilities of integrating financing of ecosystem-based adaptation to climate change to the current processes of climate change adaptation policy development of Ukraine, particularly in the context of performance of obligations under the Paris climate agreement, are considered.

What role for multi-stakeholder partnerships in adaptation to climate change? Experiences from private sector adaptation in Kenya

Amidst increasing interest in multi-stakeholder partnerships (MSPs) in climate discourse, this paper identifies four rationales for why MSPs may be particularly suited to supporting adaptation from existing literatures. With a focus on MSPs that seek to support adaptation among micro, small and medium enterprises (SMEs) in Kenya, we then investigate the extent to which this potential is being realised in practice, through interviews with partners engaged in the design and implementation of MSPs. This allows us to examine some of the opportunities, challenges and distributional risks that may result from employing MSPs to support adaptation. We find that through action and investment from donors and the public sector in areas such as research, data access, relationship building, training and capacity building, access to finance and business incubation, MSPs can enable a wide range of private sector actors to deliver adaptation resources to SMEs. Beneficiaries include small-scale SMEs in agricultural value chains in remote regions, that could otherwise fall outside of market inclusion. As such, respondents in this research typically considered MSPs to present an exciting opportunity to plug gaps in adaptation and development finance. Further analysis, however, suggests that dependence on market mechanisms for delivering adaptation resources means that MSPs risk excluding the poorest groups, exposing businesses to new risks and reproducing existing inequalities. Additionally, MSPs often remain heavily dependent on donor-led organisations for both resources and momentum. In Kenya, opportunities to develop more integrated responses to supporting the adaptive capacity of SMEs are being missed through a disconnect between the practice of MSPs and national public sector development frameworks and institutions.

Food Systems at Risk: Transformative Adaptation for Long-Term Food Security

This report examines how climate change is impacting agriculture and threatening national and global food systems, particularly in climate hotspots, and how these trends are projected to intensify over the coming decades. The report defines and details transformative adaptation for agriculture and why such longer-term, systemic approaches are needed to protect the lives and livelihoods of millions of small-scale farmers and herders. Transformative adaptation in agriculture promotes long-term resilience by continually shifting the geographical locations where specific types of crops and livestock are produced, aligning agricultural production with changing landscapes and ecosystems, and/or introducing resilience-building production methods and technologies across value chains. The report presents evidence to support a call for urgent action by: Agricultural research organizations, to build and share knowledge regarding transformative approaches; Governments, to integrate this knowledge into plans and policies by establishing and implementing transformative pathways; and Funding entities, to increase financial support for agricultural adaptation and design sustainable financing mechanisms with the right incentives and disincentives to support transformative adaptation. Strategic investments in resilient food systems are crucial to manage intensifying climate change impacts and feed a global population expected to reach 9.7 billion by 2050. Planning for transformative adaptation should center on inclusive, participatory processes that engage a diverse range of stakeholders who may otherwise be marginalized in decision-making, such as women, youth and Indigenous peoples.

Financing climate change in the conditions of the Slovak agricultural sector

Research background: Globalization is a powerful engine of structural changes in national, regional and global economies. Except for positive economic effects, globalization also has negative effects. One of them is the deterioration of the global environmental situation and the ongoing global climate change. Purpose of the article: The paper focuses on the current global financing trends to mitigate the effects of climate change. Generally financial funds come from international, national and regional actors. Governments have a range of funding mechanisms and resources at their disposal. Within the EU, these are the Structural Funds, investment funds and the financing from European Investment Bank. At the national level, it is financial assistance from state budgets and local government budgets. Methods: The paper provides literature review of the possibilities of financing climate change at the national and international level and, using analysis and synthesis, points to future trends and sources of financing climate change. We also analyse the proposal of Common agricultural policy 2021-2027 and effects on Slovak agriculture. European Commission wants member states to use up to 40% of the budget for environmental goods and climate change. Slovakia might have problems to spend the allocation due to the fact, that most of the money will be voluntary schemes. Farmers will have the option to participate. Findings & Value added: Agriculture is seriously exposed to the adverse effects of climate change as agricultural activities are directly depending on climate conditions. The article analyses in detail the possibilities and sources of financing adaptation measures in the Slovak agricultural sector.