The adoption of the Paris Agreement marked the beginning of a new chapter on international climate cooperation in December 2015. After years of intense negotiation, countries have committed to changing the world economy in a climate-friendly way. The effects of climate change have already been felt for a long time. Climate change adaptation and how it is financed play an important role in this global accord. adelphi is supporting the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) in the implementation of the Paris Agreement. adelphi has identified four main themes that stand out in the current debate on adaptation financing and on which the project team is particularly focusing on.
1) Mobilizing private adaptation finance
Adaptation cannot be financed by public money alone – the private sector must also participate in the implementation and financing of adaptation measures. However, economic and regulatory incentives for such investments are often lacking. Policy makers thus need to improve the framework conditions so that they reinforce the business case for adaptation. Funding programs, mandatory disclosure of climate risks, and climate-sensitive spatial planning are examples of the instruments that can be used for this purpose.
2) Designing financial instruments in line with the specifics of adaptation
Adaptation takes place on different levels - from international to local - and is implemented by a variety of actors. In order to make effective use of existing resources, financial instruments need to be adapted to the needs of the actors involved (for example through the development of specific local adjustment credit lines). In addition, in many cases, more innovative financing mechanisms need to be developed that bring actors together in new ways (e.g. by linking local projects to international investors) or that reduce the risks of adaptation financing.
3) Considering climate change risks in investment strategies
Before making an investment, public and private actors should ensure that the planned infrastructure, product, or service will be resilient to increasing climate change. However, weather and climate projections are usually not available (in sufficient quality), which can lead to high uncertainties when planning investments. There is also a lack of practical tools and methods to include such information in strategic planning.
4) Tracking finance flows and measuring impacts
Tracking adaptation finance is important to maximize the use of funds and to identify funding gaps. However, tracking has so far been hampered by methodological challenges that prevent project developers, investors, and financiers from systematically measuring their financial flows. As a result, adaptation finance often goes unnoticed and unmeasured.
In addition to these topics, there are numerous other challenges and opportunities for ambitious adaptation financing. adelphi will be working on these challenges in the coming months and presenting them to various target groups through policy briefs, handouts, webinars, and workshops. adelphi will also be carrying out interviews and cooperating with International Climate Initiative (IKI) projects in order to collect data and to together develop knowledge.
Cooperation with strategic partners
The above is an illustration of some of the many challenges and opportunities for ambitious adaptation financing. adelphi will be working on these and other topics over the coming year.
For this project, adelphi is cooperating with the Climate Policy Initiative (CPI), considered to be one of the world's leading climate finance think tanks. Among other things, CPI is preparing a study on the role of the private sector in the adaptation financing process in order to develop strategies for its integration. The International Institute for Sustainable Development (IISD), the International Institute for Environment and Development (IIED), and the International Center for Climate Change and Development (ICCCAD) are working on other components of the project.