CBA13: Adaptation finance – show us the money
Nisha Krishnan and Stephen Porter will lead the ‘climate finance’ theme at this year’s community-based adaptation event. In this Q&A they discuss what’s in store.
Climate finance will be a key theme of the 13th international conference on Community-Based Adaptation to Climate Change (CBA13), that will take place on 1-4 April 2019 in Ethiopia. The event will explore the mechanisms and enabling environments needed for climate finance to flow at scale to support effective adaptation.
CBA13 participants will discuss, debate and problem solve to arrive at practical ideas for getting adaptation finance to communities on the ground. In this interview, Nisha Krishnan (NK), a climate finance associate within the Climate Resilience Practice at the World Resources Institute, and Stephen Porter (SK), a senior researcher in IIED's Climate Change research group, provide an idea of what to expect.
This theme will explore what needs to happen to get finance to flow to support effective adaptation. First, by way of context, can you set out the ‘big picture’ on climate finance?
SP: The community-based adaptation events seek out solutions to strengthen the resilience of vulnerable communities, enabling them to cope with the direct shocks and longer-term stresses of climate change. There are myriad barriers that prevent vulnerable communities from building their resilience, leaving them exposed to climate change risk and trapped in cycles of poverty.
Among these barriers is sufficient levels of finance: this is one of the three themes we’ll be tackling at CBA13.
Finance is a critical enabler of action to help communities manage the worst effects of climate change. But the numbers aren’t adding up for the most vulnerable. In 2015 and 2016, roughly half a trillion US dollars of financing flowed to renewable energy and energy efficiency. While important to prevent a 2°C world, these large-scale mitigation projects are not doing enough to support the most vulnerable communities adapt and become more resilient.
Total finance pledged to the primary multilateral climate funds – where adaptation should have equal footing with mitigation – sits at around US$30 billion. Two funds, the Green Climate Fund (GCF) and Clean Technology Funds, account for half. This is far shy of the $100 billion per annum pledged by industrialised countries in Copenhagen in 2009.
Even the GCF has struggled to live up to its commitment of 50% of financing going towards adaptation – such projects account for just a quarter to a third of those approved. The world’s poorest countries are often in regions hit hardest by climate change. The support they need to cope with the impacts is woefully off target. Of total global climate finance, only 7% goes to the Least Developed Countries (LDCs), and less than 5% is earmarked for adaptation (PDF).
And how does this global climate finance gap play out at the local level?
SP: This huge shortfall is only part of the problem. From the climate finance pot, only 25-35% is going to adaptation. A bigger problem still is that very little of this money is reaching people on the ground.
IIED estimates that only 1 in 10 dollars in international public and private climate and development finance is getting to vulnerable communities struggling to cope with the impacts of climate change.
What sort of things will you be looking for from CBA13 participants as you examine the climate finance theme together?
NK: CBA participants are working at the very heart of the adaptation challenge. In past events, they’ve wrestled with some of the most pressing questions around finance, planning and community empowerment, such that local communities’ priorities are at the centre of adaptation action. Each year, firmly rooted in the local context, participants have experimented with innovative ways of addressing these burning questions.
We’re interested in hearing not just about how we can increase adaptation finance flows, but how to leverage these to catalyse maximum impact for adaptation and development. We want to explore how, where possible, we can build on existing devolved structures that funnel money down to local communities. And we want to examine how we can use these systems for monitoring and accountability.
We want to hear participants’ experiences of approaches that are working: from designing instruments, like community-managed revolving funds to working with governments and communities alike to establishing processes, monitoring, and accountability. This could include co-creating the funds’ management rules and vision, and formulating a shared understanding of risk.
Together, we want to identify the ‘missing pieces’ and develop concrete ideas of how we can connect to ongoing national and international discussions around climate finance.
How has the dialogue on adaptation finance progressed since CBA12? Where were we then and where are we now?
NK: The adaptation community, and in particular the CBA community of practice, has been very active over the past year. There has been further experimentation with existing architectures of decentralisation that help get climate finance down from the national level into the hands of local governments. Using these mechanisms empower local communities: they decide what they need to adapt and determine how finance is allocated.
And there have been some promising advances in how to engage the private sector more concretely to support adaptation action and in figuring out how to improve accountability and transparency of where support for adaptation is going, to whom and for what.
But our collective work shows we’re still up against barriers. There are ongoing calls for more evidence on whether relatively new approaches and locally driven solutions such as decentralised or devolved systems are effective in delivering impact – in terms of resources or action on the ground.
And there is ongoing reluctance from climate funds and private actors to take risks on different methods of reaching communities (such as through community-managed funds), and a need for common standards on reporting, monitoring, or even risk assessments. We’re starting to engage with these issues – but more needs to be done, and CBA13 participants will likely have a lot of ideas on how best to move things forward.
Engaging the private sector has long been a recurring issue. How can we crack it?
SP: Yes, it’s abundantly clear that public bodies alone cannot provide the levels of funding needed to adapt to climate change impacts. The private sector is stumping up finance for mitigation efforts but investments in adaptation remain way off target.
We need the private sector to be a partner not only in mitigation, but also in adaptation. At CBA13 we will be exploring with small and medium enterprise (SME) participants and partners, on-the-ground examples of how private finance can better work for local communities.
To engage the private sector, we need to really unpack the challenge of scale. This is closely linked to transaction costs: funding many small projects is typically much more expensive than a single large project. To attract investors, projects need to be bundled together – or ‘aggregated’. The larger a project is, the lower the proportion of total costs attributed to getting a project under way. So, we’ll be looking for innovative and creative ways to aggregate projects, so they are more attractive to private investors.
But herein lies the challenge: the needs of one community may not be the same as another, even when they are geographically linked. Such differences (such as lack of water access in one location and poor soil fertility in another) can add potential (or perceived) risks and costs, to aggregating dissimilar projects. CBA13 will provide a forum to propose and discuss potential mechanisms that can aid scaling up.
Participants will develop investment pitches that will be tested in a ‘dragon’s den’ with potential investors. Pitches will need to be ‘investment ready’ and pre-empt tough questions from private investors – on opportunities, challenges, risks and returns – who are thinking about investing in local adaptation.
What would you want to see come out of the climate finance theme at CBA13?
SP: On the issue of private investment we are looking for a clearer understanding of what the private sector needs. We know they need to know about risk, we know they need evidence around the return on investment – but we need to really drill down into the detail, to really understand what the private sector needs to know to get the money flowing.
The issue of communication is interwoven here: developing a mutual understanding of the different ‘languages’ spoken by finance recipients and potential investors (for example, the terms used to express key concepts) is vital. If projects are proposed in the language that meets the needs of investors for decision-making, the potential investors can communicate their respective capabilities to deliver results that benefit communities.
NK: We’re at a critical juncture in the adaptation world: the World Bank recently announced $50 billion for adaptation over 2021-25 and a commitment to community-driven development. The Global Commission on Adaptation will release its flagship report on the state of and imperative for action on adaptation in September 2019, and launch a year of action addressing some of the most pressing resilience-related challenges – from food security to finance to local action – through December 2020.
The UN Secretary General’s Summit features climate resilience as a key theme, and the GCF is heading into a round of replenishment, amid calls for it to streamline national and subnational direct access processes, so that countries and communities can benefit more directly. These are just a few of the events and spaces we will target for influencing.
With its collective learning from well over a decade, the CBA community is uniquely positioned to help influence decisions on finance flows. This community has the means to bring voices of those on the frontlines, least able to access funds, to the table.
Together we have the opportunity to address sticking points, including how different actors like community councils or trusted partners can manage a larger common fund for small, community based resilience activities, and absorb some of the management burden (around reporting, grant management) that often overwhelms both (financial) supporters and communities.
Together, we can explore how these work, investigate standard setting for reporting, performance management, or even how best to calculate (social or other) returns on investments.
What’s your message to prospective CBA13 participants?
SP: To bring the same enthusiasm and critical awareness as they have in previous years! As hosts, IIED and partners will provide an environment for open and free discussion. We’ll be encouraging participants to be active, be vocal. Teach lots but learn more!
NK: We want to leave CBA13 with practical ideas for getting adaptation finance to communities on the ground – so come ready to discuss, debate and problem solve. Join us in Addis Ababa!