Financing strategies for adaptation. Presentation for CANCC

Presentation by Maribel Hernandez, NAP Global Network (IISD), at the Coalition Of Low-Lying Atoll Nations on Climate Change (CANCC) peer learning cohort workshop on “National Adaptation Planning With a Focus on Coastal Adaptation” in North Malé Atoll, Maldives, between May 1 - May 3, 2024.

1. Financing strategies for
adaptation
Maribel Hernandez, NAP Global Network
May 3, 2024
CANCC Peer Learning Cohort

2. Financing the NAP Process
Financing is needed:
•Throughout the NAP process
•To cover two types of costs:
•Operating costs
•Investment costs
The amount of financing needed:
•Will vary from country to country
•Expected to be significant

3. The NAP Process:
A financing perspective

4. Amount of financing required
•Greater financing needed in the
implementation phase
•Flexible, forward- looking approach is key
Actors requiring financing
•Development phase: primarily government
•Implementation phase: greater diversity of
actors
Different phases, different
needs

5. x
•Promote a planned, coordinated and
coherent approach for accessing and
channeling adaptation finance
•Help to align financing needs with potential
sources of financing
•Help governments integrate international
and domestic, public and private finance to
most cost- effectively implement NAP
•Clearly communicate a country’s key
priorities for investing in adaptation
Dedicated NAP Financing
Strategies

6. x
The strategy should be:
•Developed early in the NAP process
•Tailored to country circumstances
•Aligned with other initiatives, such as
NDCs
Dedicated NAP Financing
Strategy (cont.)

8. Domestic :
•Help leverage other sources of finance (i.e.,
bilateral, multilateral, private sector).
•i.e., National, sub-national and sectoral
budgets;National Funds, National
Development Banks.
International :
•Familiarity with the eligibility criteria /
investmentrequirements / “taxonomies” of
the potential donors needed.
•i.e., Climate funds, MDBs, multilateral and
bilateral agencies
Potential sources of finance to be
considered

9. Public and Private :
•Public sources of finance are not enough to
bridge the Adaptation Gap.
•Proper understanding of the barriers and
enablers for private sector investment in
adaptation is key.
Focusing on low-hanging fruits helps to
increase the efficiencyin the process for
accessing adaptation finance.
Potential sources of finance to be
considered (continued)

10. x
Financial instruments for climate
change adaptation
A diversity of financial instruments could be envisaged:
•Grants: including performance-based and re-payable grants
•Loans: i.e. senior, junior or subordinated capital; credit
tranching, resilience-based credits
•Equity
•(Climate) Bonds
•Dedicated funds or facilities – using mix of all above
•Debt for climate swaps
•De-risking mechanisms: i.e., credit risk guarantees (a guarantor
assumes the debt in case of default) and green securitization
(revenues generated by the investment help payback the debt)
•Risk transfer mechanisms, including parametric insurance

11. Based on a project that examined what the scope of these strategies
should be, and what constitutes good practices for their development.
Preparing Financing Strategies for Adaptation

12. x
Developed by 9 countries: Albania, Belize, Benin,
Cambodia, Ethiopia, Moldova, Peru, Saint Lucia and Saint
Vincent and the Grenadines
Main objective: to identify sources of financing for
priority adaptation actions and improve mobilization of
resources for adaptation
Similar approach:
i)Costing the priority adaptation options;
ii)Identify overall financing needs;
iii)Map all financing options; and
iv)Develop a plan/setting out the steps to access
financing.
A review of publicly available
financing strategies for
adaptation

13. Emerging lessons
•Financing strategies for adaptation vary in focus,
detail, and information
•Prioritization and costing of adaptation options are
critical aspects of the financing strategy
•Strong focus on securing international public
finance for adaptation
•Detailed description of potential sources of funding
but the “matchmaking” exercise often needs to be
improved
•Very few types of financial instruments are
considered (mostly grants and concessional loans)
•The pivotal role of the private sector is
recognized,but greater emphasis could be placed to
enable their engagement

14. Concrete examples of
innovative financing
instruments for adaptation
Cambodia
•Performance- based grants – under the
UNCDF LOCAL programme
•Cambodian Climate Finance Facility:
finances high- impact climate projects in
NDC priority sectors, through long-term
concessional lending. Recently approved
(March 2024) GCF programme. Provides
loans and grants (for technical assistance,
mainly).

15. Concrete examples of innovative
financing instruments for
adaptation (cont.)
Antigua and Barbuda
The Sustainable Island Resource Framework Fund
(SIRF Fund)
Income provided through domestic (Green Card park
visitation fees, pollution charges, carbon credits,
taxes, levies, and other fees) and international
sources
The Fund’s Blended Finance Window for SMEs
includes:
•A technical assistance grant package.
•An in- kind micro-equity investment for the
adoption and transfer of climate smart/renewable
technology.
•A concessional financial loan at 2% interest rate.

16. Indonesia
Climate Fiscal Framework : Tax and incentives, climate
change-related expenses, climate budget tagging, fiscal
transfer to encourage green development in sub -national
level.
Climate bonds: 100% of the proceeds exclusive go to
finance or refinance adaptation, mitigation and biodiversity
preservation projects
Indonesia Environment Fund (IEF): Funding
mechanism for channeling and distributing environmental
and climate funds. Uses a variety of instruments across a
number of different sectors.
Indonesia Impact Fund: Invests in start- ups that are
implementing large-scale impact solutions that align with
the SDGs (including SDG 13 – climate change) targeted by
the Fund to address resource or capacity gaps.
Concrete examples of innovative
financing instruments for
adaptation (cont.)

17. Thematic Focus:
Financing
Guidance on financing the NAP process
Download at:
napglobalnetwork.org/resources

18. Thank you!
Email:
[email protected]
Website:
www.napglobalnetwork.org
@NAP_Network NAP Global Network