Scale of Finance for Adaptation “Additional” Funding Needs $2.129 b (Urgent and Immediate Priorities -NAPAs) $ b/year for period (WDR 2010) $290 b/year (Parry et all 2009) $326 - $355 b/year for financing adaptation options on natural ecosystems) (Source: Berry 2007) Mainly infrastructure Estimates are likely an underestimate! Catalyzing Adaptation Finance Present Level of Assistance Approx. USD $ b & $ b/year for (mainly for mitigation) Vertical Funds (for adaptation; LDCF/SCCF/AF): less than $1.0b to-date cumulatively Copenhagen Accord- $100b/year additional finance by 2020 (50% of this for adaptation)
Scale of Finance for Adaptation Catalyzing Adaptation Finance
Catalyzing Adaptation Finance: Key Drivers Public finance alone is not currently sufficient; Public finance alone is not going to be sufficient Most of the investment in adaptation expected by businesses and households (end-users) Ensuring that money is well spent, and hence maximizing its impact and The main drivers of private sector investment will be: – Preserving existing infrastructure, businesses and livelihoods – Developing new businesses – ( No-regret investments (adaptation is an ancillary benefit) Ensuring that money is well spent, and hence maximizing its impact and effectiveness will be critical to maintaining support and realizing the transition to a low-carbon, climate- resilient future. Catalyzing Adaptation Finance
Key Barriers to Adaptation Finance Catalyzing Adaptation Finance Need to get the enabling environment right! Pay attention to lessons from energy…
Capital Market Capital Market Private Sector Integrated Model ‘Blended Finance’ Source: UN-MPTF, 2014 Blend Funding Sources Account For Collect Domestic Sources International Sources
Key Barriers to Adaptation Finance Catalyzing Adaptation Finance Adaptation Finance is unlikely to be at the scale required without an effort to remove a few key barriers Need to create conditions that attract finance without compromising development goals and sharing cost burden on end-users. Multiple stakeholders (investors, end-users, policy makers, supply chains, etc) Broad spectrum of policies, incentives and support mechanisms to (a) reduce risks (i.e. lower cost of capital) (b) increase rewards (i.e. premium prices, credits, etc)
Key Barriers to Adaptation Finance Catalyzing Adaptation Finance The capacities of countries to plan for, attract, access, deliver, and monitor and report on climate finance, both international and domestic, in ways that are catalytic and fully integrated with national development priorities. Climate Finance Readiness
Key Barriers to Adaptation Finance Catalyzing Adaptation Finance Assess needs and priorities, and identify barriers to investment Identify policy mix and sources of financing Multiple access channels Blend and combine finance Formulate project, progamme, sector-wide approaches to access finance Implement and execute project, programme, sector-wide approaches Build local supply of expertise and skills Coordinate implementation Monitor, report, and verify flows of results and funding Performance- based payments Financial Planning Accessing Finance Delivering Finance Monitor, Report & Verify
National Planning and Budgeting Cycle: Country X Entry points and Tools for Addressing Climate Risk National Plan and medium term budget or expenditure framework Sectoral Plans Medium Term Annual Implementation (Priority sectors for Climate Adaptation) Annual Monitoring (Sectors) Annual sectoral budgets Mid Term Review of National Plan/ Sectoral Plan Reviews Plan adjustments/course correction for Implementation Final Evaluation Climate risk assessment/ Valuation of costs and benefits – estimate of additional adaptation budget needs. Prioritization based on climate risk analysis Evidence based results on impact of adaptation expenditures Value added of adaptation programmes reviewed – Adjustments to sectoral plans and valuation estimates in adaptation priority sectors Evaluation of economic and social benefits from additionality of adaptation
NAPs - A Defining Framework for Medium and Long-Term Climate Change Challenge Key Barriers to Adaptation Finance Catalyzing Adaptation Finance NATIONAL DEVELOPMENT PLANNING PROCESS
Strengthening Country Systems Catalyzing Adaptation Finance Lessons from Cambodia – Focus on the process – Inclusive national dialogue and strong ownership from multiple stakeholders – Establish institutional structures and mechanisms that are demand led and enable innovation, accountability and transparency – Strengthen capacities of national institutions to plan, budget, track and monitor climate finance – Build public capacity to design and implement national programmes and projects that are results (benefit) based and sustainable – Establish robust M&E systems to track and measure climate finance effectiveness – Share lessons and knowledge both nationally and internationally to build capacity and strengthen commitment to agreed climate responses.
Country-driven processes subject to political changes/ sensitivities Priority setting is lengthy & complex due to competing agendas among sectoral ministries Technical capacities for iterative climate considerations in planning and budget required (to assess finance needs, first need to understand costs/benefits of adaptation over different time scales) Elements are not one-size-fits-all - Different configurations of these four components can exist within institutions, between institutions, or across national or sectoral systems. Not starting from scratch – Many countries have parts of these systems in place. The challenge is identifying them and organizing them to produce an effective system at the national level. Readiness is an ongoing process – tools and guidebooks are available to support countries as the climate finance landscape evolves Some Early Insights Catalyzing Adaptation Finance
Key Barriers to Adaptation Finance Catalyzing Adaptation Finance What does it take to get the enabling environment right?
20 Focus of UNDP’s Work on Climate Finance Readiness Catalyzing Adaptation Finance ACTION ON THE GROUND CAPACITY ENHANCEMENT BARRIER REMOVAL POLICY DIALOGUE Policy development: How is CC policy formulated? Are national CC strategies developed? Provide a framework for sector-wide approaches & to incentivise private investments Institutional structures: What are roles & responsibilities of institutions involved in managing CC response & their interaction? Public financial management: How to quantify & track CC-related expenditures in the budget? Developing bankable adaptation projects including training on the economics of adaptation NAP-GSP, LECB, CPEIR LDCF/SCCF/AF/Bilateral financed projects NAP-GSP, LECB, CPEIR, LDCF/SCCF/Bilateral financed projects CPEIR Economics of Adaptation
21 Key Barriers to Adaptation Finance Catalyzing Adaptation Finance ACTION ON THE GROUND CAPACITY ENHANCEMENT BARRIER REMOVAL POLICY DIALOGUE LDCF/SCCF/AF/Bilateral financed projects NAP, Climate Readiness, Economics of Adaptation, Evidence Based Result Tracking