Access to Adaptation Finance:
Building Capacity for SEAN-CC Focal Points on
Access to Funds for Climate Change Adaptation
Initiatives
Bangkok, June 24-26 2013
Session – Donor Conditions
Dr. Benoit Laplante (Consultant)
Asian Development Bank
Manila, Philippines
Continuum from Development to Adaptation
Addressing Drivers of
Vulnerability
Enabling human
development: actions
that reduce poverty
and vulnerability;
increase capability and
coping capacity:
• Livelihood
diversification
• Literacy and
education
• Women’s rights
• Community health
• Food security
• Water supply,
sanitation
Building Response
Capacity
Managing Climate
Risks
Robust systems for
problem solving:
actions that build
institutional, technical
and planning capacity:
• Natural resources
management
• Weather data
collection,
forecasting
• Disaster early
warning systems
• Communications
systems
Climate risk
management: actions
that incorporate
climate information
into decision-making
to reduce risks:
• Disaster response
planning
• Drought-resistant
crops; cropping
systems
• Robust, adaptive
technologies
Traditional Development Funding
Confronting
Climate Change
Addressing climate
change impacts:
actions that target
impacts outside of
historical experience:
• Relocation due to
sea level rise (SLR)
• Climate proofing
• Coastal defenses
• Managing Glacial
Lake Outburst
Floods (GLOF)
• Extra storage to
capture glacial melt
New and Additional Adaptation Funding
From McGray et al. (2007) Weathering the Storm
Continuum from Development to Adaptation
Addressing Drivers of
Vulnerability
Enabling human
development: actions
that reduce poverty
and vulnerability;
increase capability and
coping capacity:
• Livelihood
diversification
• Literacy and
education
• Women’s rights
• Community health
• Food security
• Water supply,
sanitation
Building Response
Capacity
Managing Climate
Risks
Robust systems for
problem solving:
actions that build
institutional, technical
and planning capacity:
• Natural resources
management
• Weather data
collection,
forecasting
• Disaster early
warning systems
• Communications
systems
Climate risk
management: actions
that incorporate
climate information
into decision-making
to reduce risks:
• Disaster response
planning
• Drought-resistant
crops; cropping
systems
• Robust, adaptive
technologies
Traditional Development Funding
Confronting
Climate Change
Addressing climate
change impacts:
actions that target
impacts outside of
historical experience:
• Relocation due to
sea level rise (SLR)
• Climate proofing
• Coastal defenses
• Managing Glacial
Lake Outburst
Floods (GLOF)
• Extra storage to
capture glacial melt
INVESTMENT
PROJECT
New and Additional Adaptation Funding
From McGray et al. (2007) Weathering the Storm
Project Cycle (Business Process)
(1) CONCEPT PHASE
Draft Project Concept Paper
Reconnaissance Mission
(2) PROJECT PREPARATION
PHASE
Fact-Finding Mission(s)
Review Meeting (RM)
Throughout the Business
Process, Safeguard Review
Procedures apply.
Management RM for
complex projects
Staff RM for “low-risk”
projects
(3) APPROVAL PHASE
Loan negotiations
(4) IMPLEMENTATION
PHASE
Environmental and Social Safeguards
3 key safeguard areas
 environmental safeguards;
 involuntary resettlement safeguards; and
 Indigenous Peoples safeguards.
ADB will not finance projects which do not comply with these
safeguards.
More importantly for our discussion:
Because compliance with safeguards is ADB’s policy (more
accurately the Safeguard Policy Statement), then resources are
made available during the various phases of the Business Process
to conduct the risks, impacts, and mitigation assessments.
Environmental and Social Safeguards
Environmental safeguards
“SCOPE and TRIGGERS: Environmental safeguards are triggered if
a project is likely to have potential environmental risks and
impacts” (ADB. 2009. Safeguard Policy Statement)
Note:
Changes in environmental risks which may have potential impacts
on a project do not trigger environmental safeguards.
Environmental and Social Safeguards
Changes in environmental risks
TRIGGER SAFEGUARDS
Project
Environmental Risks
DO NOT TRIGGER SAFEGUARDS
Changes in project viability
President’s Planning Directions 2012
“As we formulate country and regional partnership strategies, we
should ensure that our strategies incorporate adaptation and
disaster vulnerability concerns, and that our support to national
and sector planning in DMCs incorporates climate change
resilience. We should continue screening projects for climate risks
and climate-proofing where needed.”
ADB, Office of the President, 3 April 2012
ADB Board’s Request on the Content of RRP
“To ensure the climate change risk of a project is adequately
analyzed and reported in the RRP:
 Operations Department (….) will (a) identify the climate change
risks early at the project preparation stage, (b) analyze the
risks, and (c) will ensure that the RRP and/or linked documents
address the effect of climate change on the proposed project
to the extent feasible; and
 RSDD will (a) provide project teams with technical support in
using screening tools for climate change risks (…) and (b) advise
on the treatment of climate change impacts on the propose
project at each review stage under the business process.”
ADB, Office of the Director General, 23 April 2013
Impacts on Project Development
Note:
This identification and treatment of climate change risks is a
costly:
• Cost of climate projections, risk mapping, etc.
• Costs of risk screening, impact and vulnerability
assessment
• Costs of “climate-proofing” investments (modifying
materials, designs, processes; altering locations, etc.)
• Costs of managing residual risks (reserves, contingency
credit, insurance, etc.)
ADB Board’s Request on the Content of RRP
Note also:
This identification of “climate change risks” and the “treatment of
climate change impacts” has not become component of the
safeguards and is not subject to compliance.
Financing “climate-proofing” of investment projects
Issue 1: (Risk identification and screening)
Since assessment and mitigation of climate change risks is not a
safeguard compliance issue, no additional resources are made
available in the context of the Project Preparation Phase to
undertake this assessment.
So far, resources have been made available to regional
departments more or less on an ad hoc basis from Technical
Assistance projects.
Financing “climate-proofing” of investment projects
Issue 1: (Risk identification and screening)
Examples:
O Mon Combined Cycle Power Plant (Viet Nam)
Mekong Delta Connectivity Project
Khulna Water Supply
and Sanitation Project
Financing “climate-proofing” of investment projects
Issue 1: (Risk identification and screening)
Key Issue to be addressed: Systematic funding is needed as
part of the Project Preparation Process – as for safeguards
compliance.
Financing “climate-proofing” of investment projects
Issue 2: (Climate risk mitigation)
If climate risk mitigation is deemed desirable, then a key issue
pertains to the funding of the incremental cost associated with
climate risk mitigation.
We need to expand on “if” and on “desirable”.
Most projects are subjected to an assessment of their economic
costs and benefits, as well as financial costs and benefits.
Economic Analysis: If the Net Present Value (NPV) of the project is
estimated to be positive, then the project is deemed to be
desirable from an economic point of view.
Financing “climate-proofing” of investment projects
Costs of Climate Change
Costs and Benefits of
the Project Without
Climate Change
Costs and Benefits
of the Project With
Climate Change
Costs and Benefits of
the Project Without
Adaptation
Costs and Benefits
of the Project With
Adaptation
Benefits of Adaptation
NOTE: Costs of climate change and benefits of adaptation are
not the same.
Financing “climate-proofing” of investment projects
Condition 1: One must demonstrate that the NPV of the project is
adversely impacted (increased costs and/or reduced benefits) as a
result of climate change.
Economic Analysis of Adaptation Projects
Changes in the Net Present Value of the
Project as a Result of Climate Change
NPV(P) = net present
value of project
NPV(CP) = net present
value of climate proofing
ΔNPV(P) > 0
ΔNPV(P) < 0
Keep project
in portfolio
Economic analysis of project-level
climate-proofing options
NPV(CP) > 0
NPV(CP) < 0
NPV(P) > 0
NPV(P) < 0
NPV(P) > 0
NPV(P) < 0
Keep project
in portfolio
with
adaptation
Remove
project from
project
portfolio
Keep project
in portfolio
without
adaptation
Remove
project from
project
portfolio
• Projects adversely impacted by climate change do not necessarily need
to be climate-proofed; and not all projects that can be climate-proofed
should be conducted.
Financing “climate-proofing” of investment projects
Condition 1: One must demonstrate that the NPV of the project is
adversely impacted (increased costs and/or reduced benefits) as a
result of climate change.
Condition 2: One must demonstrate that the NPV of the project
increases with investments in adaptation.
Condition 3: One must demonstrate that the NPV of the project
with adaptation is positive.
These 3 conditions aim to tackle: “If climate risk mitigation is
deemed desirable….”
If all 3 conditions are met, then the issue of financing
adaptation is raised.
Financing “climate-proofing” of investment projects
Multiple funds are available.
Climate Investment Funds
GEF
Clean Technology Fund
Pilot Program for Climate
Resilience
GEF Trust Fund
Least Developed Countries
Fund
Forest Investment Program
Special Climate Change Fund
Kyoto Protocol
Adaptation Fund
Scaling-up Renewable Energy
ADB is an accredited multilateral implementing entity (MIE) for
these funds. For these funds, ADB simply implements
the rules and conditions established by the funds themselves.
Financing “climate-proofing” of investment projects
ADB has its own fund: Climate Change Fund.
Eligibility:
All DMCs are eligible for CCF resources.
Process:
Project proposals are submitted by ADB’s User departments
to the CCF Manager and ultimately to Climate Change
Steering Committee (CCSC) for CCF support.
Applications are reviewed in six batches and are due on 31
January, 31 March, 31 May, 31 July, 30 September, and 30
November.
Financing “climate-proofing” of investment projects
ADB has its own fund: Climate Change Fund.
General criteria:
Proposals for CCF support should:
• be consistent with the country partnership strategy and results framework;
• be consistent with the objectives of ADB’s Climate Change Program (CCP);
• introduce innovative solutions;
• adopt a participatory approach;
• be catalytic;
• have high demonstration value in the sector; and
• have good potential for replication and scalability in the country and/or region.
http://www.adb.org/site/funds/funds/climate-change-fund
Financing “climate-proofing” of investment projects
ADB has its own fund: Climate Change Fund.
Specific criteria for adaptation:
The CCF prioritizes interventions that will (i) enhance the climate resilience of
infrastructure and other investments, community livelihoods and key sectors,
especially in the following geographic areas: (i) arid and rain-fed agricultural
areas; (ii) densely populated coastal lowlands and deltas; and (iii) low-lying
islands.
http://www.adb.org/site/funds/funds/climate-change-fund
Financing “climate-proofing” of investment projects
ADB has its own fund: Climate Change Fund.
Fund Status:
As of 31 December 2012, the $50 million ADB financing for
the CCF has been fully allocated to 60 projects. Of the $50
million, $14 million was allocated to 27 adaptation / climate
resilience projects in 11 countries.
Financing “climate-proofing” of investment projects
ADB has its own fund: Climate Change Fund.
Selected adaptation projects:
 Managing the Water Resources of Boyang Lake (PRC)
 Avatiu Port Development Project (COO)
 Karnataka Integrated and Sustainable Water Resources
Management (IND)
 Strengthening the Resilience of the Water Sector in
Khulna to Climate Change (BAN)
 High Mountain Agribusiness and Livelihood Improvement
Project (NEP)
Summary Observations / On-going Challenges
• Blurring of distinction between “adaptation” and “development”
has implications for access to finance.
• In particular concepts as “new and additional financial
resources” and “agreed full incremental costs” are difficult to
apply.
• The seamless (and appropriately funded) implementation of
climate risks and mitigation options assessment within the
Project cycle is an on-going challenge.
• DMCs demonstrate reluctance to access lending facilities for
purpose of climate-proofing investment projects.
Access to Adaptation Finance:
Building Capacity for SEAN-CC Focal Points on
Access to Funds for Climate Change Adaptation
Initiatives
Bangkok, June 24-26 2013
Session – Donor Conditions
Dr. Benoit Laplante (Consultant)
Asian Development Bank
Manila, Philippines