Catalyzing
Adaptation
Finance
Enabling Adaptation Finance in Developing Countries
Pradeep Kurukulasuriya, PhD
Head- Climate Change Adaptation (Global)
UNDP-GEF (HQ)
Bonn, June 2014
Cambodia/LDCF
Guatemala/SPA
Vanuatu/SCCF
Laos/SCCF
Cambodia/LDCF
Catalyzing
Adaptation
Finance
Scale of Finance for Adaptation
Copenhagen Accord- $100b/year additional finance by 2020
(50% of this for adaptation)
“Additional” Funding Needs




$2.129 b (Urgent and Immediate Priorities -NAPAs)
$30-100 b/year for period 2010-2050 (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!
Present Level of Assistance
 Approx. USD $140-175b & $70-100 b/year for 2010-2050 (mainly for mitigation)
 Vertical Funds (for adaptation; LDCF/SCCF/AF): less than $1.0b to-date cumulatively
Catalyzing
Adaptation
Finance
Scale of Finance for Adaptation
Catalyzing
Adaptation
Finance
Scale of Damage in Thailand (2011)
Estimated Losses: $15-20 billion (Swiss Re/Munich Re)
$21 billion (prop. damage); $22 billion (opp. costs) (World Bank)
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, climateresilient future.
Catalyzing
Adaptation
Finance
Catalyzing Climate Finance
Catalyzing
Adaptation
Finance
Key Barriers to Adaptation Finance
Pay attention to lessons from energy…
Need to get the enabling environment right!
Integrated Model ‘Blended Finance’
International Sources
Domestic Sources
Collect
Account
For
Blend
Funding
Sources
Source: UN-MPTF, 2014
Capital
Market
Private
Sector
Catalyzing
Adaptation
Finance
Key Barriers to 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)
Catalyzing
Adaptation
Finance
Key Barriers to Adaptation Finance
Climate Finance Readiness
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.
Catalyzing
Adaptation
Finance
Financial
Planning
• Assess needs
and priorities,
and identify
barriers to
investment
• Identify policy
mix and sources
of financing
Key Barriers to Adaptation Finance
Accessing
Finance
Delivering
Finance
Monitor,
Report & Verify
• Multiple access
channels
• Implement and
execute project,
programme,
sector-wide
approaches
• Monitor, report,
and verify flows
of results and
funding
• Blend and
combine finance
• Formulate
project,
progamme,
sector-wide
approaches to
access finance
• Build local
supply of
expertise and
skills
• Coordinate
implementation
• Performancebased payments
National Planning and Budgeting Cycle: Country X
Entry points and Tools for Addressing Climate Risk
Final
Evaluation
National Plan and medium term budget
or expenditure framework
Evaluation of economic and
social benefits from
additionality of adaptation
Plan adjustments/course
correction for
Implementation
Adjustments to
sectoral plans and
valuation estimates in
adaptation priority
sectors
Climate risk assessment/
Valuation of costs and
benefits –
estimate of additional
adaptation budget needs.
Prioritization based on climate
risk analysis
Mid Term Review
of National Plan/
Sectoral Plan
Reviews
Value added of
adaptation programmes
reviewed –
Annual Monitoring
(Sectors)
Evidence based results
on impact of
adaptation
expenditures
Sectoral Plans
Medium Term
Annual sectoral
budgets
Annual
Implementation
(Priority sectors
for Climate
Adaptation)
Catalyzing
Adaptation
Finance
Key Barriers to Adaptation Finance
NAPs - A Defining Framework for Medium and
Long-Term Climate Change Challenge
Catalyzing
Adaptation
Finance
Strengthening Country Systems
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.
Catalyzing
Some Early Insights
Adaptation
Finance
• 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
Catalyzing
Adaptation
Finance
Key Barriers to Adaptation Finance
What does it take to get
the enabling environment right?
Catalyzing
Adaptation
Finance
Focus of UNDP’s Work on Climate Finance Readiness
ACTION ON THE
GROUND
CAPACITY
ENHANCEMENT
BARRIER
REMOVAL
• Policy development: How is CC policy formulated?
Are national CC strategies developed?
• Provide a framework for sector-wide approaches &
to incentivise private investments
POLICY
DIALOGUE
NAP-GSP, LECB, CPEIR
LDCF/SCCF/AF/Bilateral
financed projects
• Institutional structures: What are roles &
responsibilities of institutions involved in managing
CC response & their interaction?
NAP-GSP, LECB,
CPEIR,
LDCF/SCCF/Bilateral
financed projects
• Public financial management: How to quantify &
track CC-related expenditures in the budget?
CPEIR
• Developing bankable adaptation projects including
training on the economics of adaptation
Economics of
Adaptation
20
Catalyzing
Adaptation
Finance
Key Barriers to 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
21
Niger/LDCF
Samoa/SCCF
Bangladesh/LDCF
Laos/LDCF
www.undp-alm.org