Monday, April 22, 2019
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Why Adaptation Finance Matters: Hundreds of Millions of People Exposed to Climate Change Risks

The year 2018 concluded with the adoption of guidelines for implementation of the Paris Agreement on climate change and a warning by the Intergovernmental Panel on Climate Change (IPCC) that countries’ ambitions reflected in their Nationally Determined Contributions (NDCs) will not limit global warming to 1.5°C above preindustrial levels. In January 2019, world leaders, gathered at the World Economic Forum (WEF), were once again confronted with the urgency to deliver on ambition and implementation as per the ‘Global Risks Report 2019.’

Adaptation finance saw several developments since December 2018. In Katowice, Poland, countries agreed that the Adaptation Fund will serve the Paris Agreement. The Fund received significant new pledges, and launched small grant funding windows. The World Bank increased direct adaptation climate finance to USD 50 billion. Work on adaptation needs assessments as well as disaster risk finance and insurance solutions was advanced through several partnerships. The IPCC Working Group II, which deals with the impacts, adaptation and vulnerability to climate change, began work on its Sixth Assessment Report contribution, including on options to reduce climate-associated risks. The present Update discusses these and other developments of the past two months.

IPCC: Invest in People, Infrastructure and Ecosystem Services 

At the Katowice Climate Change Conference, the IPCC presented its Special Report on Global Warming of 1.5°C (SR15). Its findings show that climate-related risks to health, livelihoods, food security, water supply, human security and economic growth are projected to increase with global warming. The report confirms that global risks across sectors can create new and exacerbate current hazards, exposures and vulnerabilities that could affect increasing numbers of regions and hundreds of millions of people.

Cautioning that current mitigation ambitions under the Paris Agreement would not limit global warming to 1.5°C, the report presents adaptation options that reduce vulnerabilities, including: ensuring food and water security and improving health conditions; reducing poverty, inequality and disaster risks; and maintaining ecosystem services. To enhance the resilience and the adaptive capacities of societies, the report stresses, investment in physical and social infrastructure is key. [IPCC SR15 Webpage]

Adaptation Fund to Serve Paris Agreement with USD 129 Million in New Pledges 

Negotiations in Katowice resulted in several adaptation-related decisions. Parties to the Paris Agreement decided that the Adaptation Fund shall serve the Agreement, starting on 1 January 2019. During the Katowice Climate Change Conference, the Adaptation Fund received pledges of USD 129 million committed by nine contributor governments. The Fund also launched three small grant funding windows, with a total of USD 5 million available to national implementing entities under its Direct Access modality. [Adaptation Fund Press Release on Serving Paris Agreement] [Adaptation Fund Press Release on Small Grant Funding Windows]

Another decision clarified that workshops on long-term climate finance in 2019 and 2020 will focus on: the effectiveness of climate finance; results and impacts of finance provided and mobilized; and provision of financial and technical support to developing countries for their adaptation and mitigation actions.

Parties also requested the Adaptation Committee to engage with the IPCC Working Group II, with the aim to: develop, by June 2022, a draft supplementary guidance on adaptation communication under the Paris Agreement for voluntary use by Parties; and prepare, by November 2022, a paper on methodologies for assessing adaptation needs and their application, and on related gaps, good practices, lessons learned and guidelines. [SDG Knowledge Hub Story on COP 24 Outcomes] [IISD RS Summary of the Katowice Climate Change Conference]

IPCC Working Group II Begins Work on Its AR6 Contribution on Adaptation 

The IPCC Working Group II met in Durban, South Africa, from 20-25 January 2019, launching work on its contribution to the Panel’s Sixth Assessment Report (AR6). AR6, scheduled to be finalized in 2021, will present the latest scientific findings on climate change impacts on natural and human systems and their vulnerabilities. Working Group II will cover both, the capacities and limits of these systems to adapt to climate change, along with the options to reduce climate-associated risks and create a sustainable future. [IPCC Press Release]

Partnerships Advance Climate and Disaster Risk Finance, Insurance Solutions

As SR15 shows, greater proportions of people in Africa and Asia are exposed to multiple and compound climate-related risks, which makes them more susceptible to poverty. This was also confirmed in the InsuRisk Assessment Report 2018, which presents data on the levels of vulnerability, and climate and disaster risk of 84 low and lower-middle income countries. The report was launched in December by the UN University Institute for Environment and Human Security (UNU-EHS) and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH. The report updates the ‘Risk and Readiness for Insurance Solutions Assessment Tool,’ which presents information on countries’ comparable vulnerability to climate and disaster risks and “their readiness to accommodate insurance solutions.” It aims to contribute to the goal of InsuResilience, a global partnership for climate and disaster risk finance and insurance solutions, established in 2017, to enable access to climate risk insurance for an additional 400 million poor and vulnerable people by 2020. [UNU Press Release]

It is in relation to the environment that the world is most clearly sleepwalking into catastrophe.

In Asia, the Southeast Asia Disaster Risk Insurance Facility (SEADRIF) was established with a Memorandum of Understanding (MoU) between Cambodia, Indonesia, Japan, the Lao People’s Democratic Republic (PDR), Myanmar and Singapore, signed at a meeting of the Finance and Central Bank Deputies of the Association of Southeast Asian Nations plus China, Japan and the Republic of Korea (ASEAN+3), held on 14 December 2018 in Busan, Republic of Korea. Initially comprising a trust and an insurance company in Singapore, SEADRIF, in partnership with and with technical support from the World Bank, will support pre-disaster planning and post-disaster relief and reconstruction funding.

As its first financial product, SEADRIF will pool flood risk from Lao PDR, Myanmar and possibly Cambodia. Participating countries will pay a contribution and obtain three years of coverage. In the case of a qualifying flood event, they will receive a payout from the risk pool. Each country’s contribution is based on their risk profile and their desired level of coverage. Donors contribute seed capital and funds to cover start-up and operating costs for the development and implementation of the regional catastrophe risk pool. [World Bank Press Release]

FAO Presents Climate-smart Agriculture and Land-use Tracking Tool 

In the land-use sector, the Food and Agriculture Organization of the UN (FAO) presented in December its compilation of Climate-smart Agriculture Case Studies 2018, revealing how the management of farms, crops, livestock and aquaculture can meet food security needs, while building adaptation to climate change and contributing to mitigation of greenhouse gas (GHG) emissions. In Katowice, FAO Deputy Director-General Maria Helena Semedo emphasized the importance of conservation of ecosystems to protect the environment and address the impacts of climate change, and urged greater investment in the integrated and sustainable management of natural resources.

To strengthen measuring, monitoring and reporting capacities on forests and land use, FAO, with the US National Aeronautics and Space Administration (NASA), launched an open access tool, ‘Collect Earth Online’ (CEO), allowing users to track land-use and landscape changes anywhere in the world. [FAO Press Release]

IFAD, OPEC Support Rural Entrepreneurship in Senegal

Senegal and the International Fund for Agricultural Development (IFAD) entered a financing agreement for the Agricultural Development and Rural Entrepreneurship Programme – Phase II (PADAER-II). The USD 72.4 million programme aims to improve food and nutrition security and incomes of smallholder crop and livestock farmers in four regions of Senegal. Financing includes:

  • USD 46.3 million loan and USD 0.5 million grant from IFAD;
  • USD 10 million grant from the Organization of the Petroleum Exporting Countries (OPEC);
  • USD 9.5 million from the Government of Senegal; and
  • USD 6.1 million from local communities and beneficiaries themselves.

The programme seeks to improve hydro-agricultural systems, pastoral infrastructure and markets and to provide training in sustainable services and financial services. PADAER-II will also strengthen the weather index-based insurance programme developed during PADAER-I. [IFAD Press Release]

WEF Global Risks Report: USD 97 Trillion in Infrastructure Investments Required by 2040

In January, the World Economic Forum (WEF) presented the Global Risks Report 2019 at its annual meeting in Davos, Switzerland. The report finds that climate change risks are at their highest-ever level, accounting for more than half of the top ten risks.

As adaptation becomes costlier, the report notes, questions of burden sharing arise, for example, between the public and private sectors, and between municipal and national authorities. Burden sharing may also be necessary between countries. According to the report, innovative and collaborative approaches are needed “to ensure that action is taken globally before it is too late.” The report highlights that, according to projections from the Global Infrastructure Hub, a body created by the G20, infrastructure investment totaling USD 97 trillion is required by 2040 across 57 countries and seven sectors.

With environment-related risks dominating the results of the Global Risks Perception Survey for the third year in a row, accounting for three of the top five risks by likelihood and four by impact, the report stresses that “of all risks, it is in relation to the environment that the world is most clearly sleepwalking into catastrophe.” [Global Risks Report 2019] [WEF Press Release]

World Bank Increases Direct Adaptation Climate Finance to USD 50 Billion over Five Years

Following up on the 2025 Targets to Step Up Climate Action it launched during the Katowice Climate Change Conference, the World Bank presented in January an action plan on climate change adaptation and resilience. Under the plan, the Bank will increase direct adaptation climate finance to USD 50 billion over 2021-2025. Outlined in a publication titled, ‘Action Plan on Climate Change Adaptation and Resilience: Managing Risks for a More Resilient Future,’ the plan provides for an average of USD 10 billion a year during the five-year period, which is more than double what was achieved in 2015-2018. [World Bank Press Release]

World Bank, EU Mobilize EUR 30.7 Million for DRM in Caribbean

Also in January, the World Bank’s Global Facility for Disaster Reduction and Recovery (GFDRR) signed two agreements with the EU to provide funding totaling EUR 30.7 million that will strengthen disaster risk management (DRM) in the Caribbean.

EUR 27.7 million goes to the Caribbean Regional Resilience Building Facility to support 15 Caribbean countries by providing technical assistance to mainstream resilience, leveraging investments to reduce vulnerability and expanding financial protection against disasters.

EUR 3 million goes to the Technical Assistance Program for Disaster Risk Financing and Insurance in Caribbean Overseas Countries and Territories (OCTs), to help OCTs assess: their financial exposure or contingent liability to disasters; financial protection tools available; and the feasibility of participating in insurance mechanisms. [World Bank Press Release on DRM Funding for the Caribbean]

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The SDG Knowledge Hub publishes monthly climate finance updates, which largely focus on multilateral financing and cover, inter alia, mitigation and adaptation project financing news and lessons, institutional events and news, and latest developments in carbon markets and pricing. Past climate finance updates can be found under the tags: Finance Update: Climate Change; and Finance Update: Sustainable Energy.

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