Earth Today | Adaptation financing requires public sector leadership – report
Published:Thursday | February 3, 2022 | 12:06 AM
A 2019 report of the Global Commission on Adaptation has suggested that the burden of responsibility for mobilising needed financial resources for climate readiness rests with the public sector.
“While investments in adaptation have clear economic benefits, they may require large upfront payments before reaping medium- and longer-term benefits,” said the report titled ‘Adapt Now: A Global Call for Leadership on Climate Resilience’.
“Furthermore, many adaptation investments do not generate sufficient short-term cash flows to attract private investors. For this reason, the public sector needs to shift its focus to include both generating finance and creating incentives to scale up private sector engagement in adaptation investments,” it added.
Adaptation refers to the range of changes that can be made in response to anticipated climate change impacts, including sea level rise and extreme weather events, in order to reduce the associated loss and damage. Specific interventions range in scale and include measures such as setting up early warning systems, constructing flood defences and changes to business operations.
According to the Global Commission on Adaptation 2019 report, it is necessary that there be a transformation in financing for adaptation – from a shift in how investments decisions are made to the scale up and improved deployment of public finance; developing and implementing effective disaster risk finance strategies; as well as tapping into private capital for support.
“The world’s more climate-aware companies are already using their own resources to safeguard business operations and supply chains against climate impacts … After Superstorm Sandy struck in 2012, Bloomberg LP, the global provider of financial data, moved a key data centre out of Manhattan to upstate New York to protect its equipment against flooding. Decisions like this will become more common,” the report noted.
However, it explained that climate-proofed corporate facilities will be of little use if, for example, “workers cannot reach the workplace, if suppliers cannot deliver, or if customers cannot make purchases because of breakdowns in communications or transportation”.
“Greater incentives need to be created for the private sector to join with the public sector in investing more broadly in resilient infrastructure or nature-based solutions,” the report said.
The shift in private finance, the commission said, will not happen without effort.
“Because private capital responds to commercially attractive, risk-adjusted returns, rules and incentives must be in place to ensure the shift happens. The public sector will need to build the policy, regulatory and legal scaffolding for blended finance that is efficient, generates suitable revenue streams, and shares both costs and benefits,” the report said.
“Public funds that help catalyse investment play a critical role, such as the Special Climate Change Fund’s new Challenge Programme on Adaptation Innovation, managed by the GEF (Global Environment Facility). The programme supports continuous innovation and learning on private sector investment approaches, business models, partnerships, and technologies suitable for climate adaptation,” it added.
“A second example is the Climate Resilience and Adaptation Finance and Technology-transfer facility project, co-financed by the GEF and the Nordic Development Fund, which is an equity investment fund designed to expand the availability of private sector technologies used in climate adaptation solutions,” the report said further.