Development finance institutions share their experience at COP24
Climate change impacts are high on the international agenda. From severe wildfires in California and Greece to devastating floods in Kerala, these impacts have dominated headlines this year. Both the increasing number of extreme weather events and the continuing rise in global carbon emissions add urgency to this year’s COP24 in Poland, where the global effort to tackle climate change is being developed.
One key area of focus at COP24 will be the financing gap between climate change adaptation (coping with the impacts of a changing and more variable climate), and climate change mitigation (reducing the greenhouse gas emissions that drive climate change).
Mitigation finance flows are 4-5 times greater than adaptation flows, as shown recently in the UNFCCC’s 2018 Biennial Assessment. The assessment illustrates the urgent need to scale the financing of climate adaptation, in addition to ensuring that these flows are consistently defined, tracked and reported.
In 2015, Multilateral Development Banks (MDBs) Climate Finance Tracking and the International Development Finance Club (IDFC) Climate Finance Working Group agreed upon a set of Common Principles for Climate Change Adaptation Finance Tracking. During a MDB-IDFC side-event at COP24, the Working Group will jointly launch Lessons Learned from Three Years of Implementing the MDB-IDFC Common Principles for Climate Change Adaptation Finance Tracking.
The report synthesises the experience of the major climate finance providers in defining, tracking and reporting climate adaptation finance.
Here are the lessons learned from implementing the Common Principles over the past three years:
- A process-based approach is important for preparing, tracking and reporting adaptation finance. The Common Principles have a three-step approach for tracking adaptation finance: i) setting out a project-specific context of climate vulnerability; ii) making an explicit statement of intent to address that climate vulnerability; and iii) articulating a clear and direct link between the context of climate vulnerability and the specific project activities and for tracking and reporting adaptation finance.
- A range of approaches is needed to determine shares of project costs that can be counted as adaptation finance. The Common Principles recommend that adaptation finance should be reported based on the disaggregation of adaptation activities from non-adaptation activities within projects. This is being implemented using a range of approaches that reflect the varying mandates and business models of the different MDBs and IDFC members.
- The application of the Common Principles has generated valuable experience of how to determine the project-specific context of climate vulnerability. The climate vulnerability context should explain how a project—including its assets, the services it is meant to provide, the ecosystem services it relies on and the targeted beneficiaries—is affected by climate variability and climate change, now and in the future.
- It is important to integrate technical considerations into adaptation finance tracking. These considerations include improved use of climate information, introduction of better management practices for climate resilience, and policy or regulatory reforms that incentivise more climate-resilient practices and behaviours.
- Implementing the Common Principles has helped build institutional capacity and expertise within the MDBs and among IDFC members. This includes the development of a range of technical resources and training or guidance materials, many of which are in the public domain and may therefore benefit a much wider range of organisations working on adaptation and adaptation financing.
- We need to develop further ways to define and report the impact of adaptation projects. Whilst there is more adaptation finance being reported, institutions have become more aware that reporting on adaptation efforts needs to go beyond tracking the finance and also capture the results that the projects and finance have delivered.
“Growing international awareness of the urgent need to cope with climate change impacts has led to much greater focus on financing flows for adaptation,” said Craig Davies, Head of Climate Resilience Investments at EBRD.
“This report shows how financial institutions can work together to define good practices for reporting both the quantity and quality of adaptation finance flows”.
“This report is the result of a close partnership and excellent collaboration between a wide range of organisations involved in adaptation financing,” added Zeynep Cansever Stevens, MRV Analyst in EBRD’s Energy Efficiency & Climate Change team.
“In addition to MDBs and IDFC members, a significant number of national and international organisations have also contributed towards the analysis contained in the report.”
Since the adoption of the Common Principles for Climate Change Adaptation Finance Tracking, MDBs have delivered adaptation finance exceeding US$ 18.6 billion though more 1,000 projects. IDFC members have also reported adaptation finance in excess of US$ 20.5 billion between 2015 and 2017.
The EBRD’s climate resilience investment operations is one of the pillars of its Green Economy Transition (GET) approach, through which the Bank seeks to increase the volume of green financing to 40 per cent of EBRD annual investment by 2020.
Since 2011, the EBRD has signed more than 210 climate resilience investments with a total business volume exceeding €5.6 billion, and GET adaptation finance in excess of €1.6 billion.