Failure in climate finance for adaptation.

Written by Ismail Weiliang and Putra Dwitama, National Climate Adaptation Specialist, ADB, Indonesia.

20 NOV 2022

3 MINS READ

ISMAIL WEILIANG

The Climatebender

PUTRA DWITAMA

ADB Indonesia

Views are entirely ours

and not connected to any company

More Loss and Damage

The IPCC's (Intergovernmental Panel on Climate Change) latest report highlights that greenhouse gas emissions have already set irreversible changes in motion. The world has warmed by 1.1℃ above pre-industrial levels, and current policies are heading towards much higher temperatures at 2.8℃. Every fraction of a degree rise in global temperatures brings more extreme weather, sea level rise, and ecosystem effects, resulting in loss and damage that will be difficult to avoid. Therefore, more money must be spent on adaptation, particularly for the most vulnerable.

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Quick Take:

  • Greenhouse gas emissions have resulted in rising global temperatures that will bring a more extreme climate.
  • The world must urgently increase efforts to adapt to these impacts of climate change.

A Widening Gap

Investing in adaptation can provide significant returns up to 10 times or higher. Estimates suggest that US$1.8tn must be invested in global resilience from 2020 to 2030, which could generate US$7.1tn in benefits. However, financing adaptation remains a challenge, with a wide range of variables and uncertainties resulting in diverse and often tailored adaptive measures. Climate financing for adaptation is still lacking, with international adaptation finance flows to developing countries reaching only USD 2B in 2020, which is five to ten times below estimated needs, and the gap is widening.

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Quick Take:

  • Returns from investment in adaptation can be 10:1 or higher.
  • Climate financing for adaptation is challenging and laging behind needs. The gap is widening.

Urgent action is needed

The shortfall in financing adaptation is cascading down to the implementation level, and we urgently need to improve and increase climate financing in adaptation. This requires stronger business cases and enabling environments, including policies, regulation, governance, and institutional capacity. Governments must manage fiscal risk to climate, using a combination of adaptation investments and developing financing instruments, while optimizing revenue and spending, increasing the efficiency of public investment, and considering market growth in climate finance.

The need to build resilience provides us with an opportunity to have the skills and expertise to solve these challenges and build resilience at policy levels in every project. Regional partnerships can support innovation and prototyping of solutions for community resilience to flooding driven by storm surges and sea level rise. By investing in countries that are affected first, the countries that are affected in the future benefit from the solutions.

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Quick Take:

  • Urgent action is needed to improve the ecosystem for governance in climate financing for adaptation.

A Different Mindset

Reframing climate resilience assessments as an investment opportunity is also crucial. PCRAM, a market-first risk assessment methodology, has been developed to quantify climate risks for assets and show the business case for investment. This private sector-led COP26 flagship initiative advances solutions to integrate physical climate risks in investment decision-making, enhancing the financial valuation of investments, ensuring climate risk assessment is integral to adapting infrastructure assets, and leading to significant reductions in the cost of future climate adaptation measures and improvement in the quality of revenue streams.

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Quick Take:

  • There is opportunity to build resilience in every project, regional partnerships on pilot projects and climate resilient investments.

In conclusion, the gap between the risk we face and the level of adaptation is widening, and significant investment is required to reduce the impacts of climate change and ensure the most vulnerable communities can manage climate-related risks. We must prioritize climate financing for adaptation and build resilience at policy levels in every project, considering fiscal risk management and market growth in climate finance.

  1. UN Adaptation Gap Report 2022 https://wedocs.unep.org/bitstream/handle/20.500.11822/41078/AGR2022.pdf?sequence=1&isAllowed=y
  2. ​​OECD. 2020. Highlight: Climate Change and Long-term Fiscal Sustainability.

Authors:

Putra Dwitama is currently a National Climate Adaptation Specialist at ADB, Indonesia.

Ismail Weiliang is a consultant that provides technical advice on climate resilience with half a decade of experience in flood risk advisory for Asia. He also founded "The Climatebender” a non-profit organisation that provides humanitarian relief to communities vulnerable to the climate crisis.

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