Climate Finance Thematic Briefing: Adaptation Finance

What are the main dedicated climate funds that focus on adaptation finance, who receives the money and what kinds of adaptation projects are funded? This brief examines these issues.

Key findings:

The largest sources of approved funding for adaptation projects are currently the Pilot Program for Climate Resilience (PPCR) of the World Bank’s Climate Investment Funds and the Least Developed Countries Fund (LDCF) administered by the Global Environmental Facility. The Special Climate Change Fund (SCCF) and the Adaptation Fund (AF) have also increased adaptation financing in the last year. A sizeable new adaptation dedicated initiative is the USD 353 million Adaptation for Smallholder Agriculture Program (ASAP) under the International Fund for Agricultural Development (IFAD).

Developed countries’ contributions to these funds remain low, and at a global level adaptation remains underfunded. So far, the United Kingdom, through the International Climate Fund, Germany, the United States Sweden and Canada represent 69% of the USD 3 billion pledged to adaptation funds thus far; of this, about USD 2.72 billion has been deposited. 79% of the deposited finance has been approved to support projects and programs. The gap between amounts pledged and deposited to the funds is small, at around 9%. This suggests that adaptation finance is flowing, even if the exact amount disbursed is difficult to assess.

Regionally, adaptation finance has primarily been directed to Sub-Saharan Africa and Asia and the Pacific, followed by global project and programs and activities in d Latin America and the Caribbean. The top twenty recipients of adaptation finance (out of 114 countries) receive 54% of the total amount approved, which represents a much lower concentration of funding than for mitigation finance(where the top twenty recipients receive 89% of total approved finance). Top recipients Bangladesh, Mozambique, Niger, Nepal, Zambia all receive between USD 94 – 190 million each (all five are also PPCR recipient countries), with the next five top countries receiving from USD 55 to 90 million each. Some of the most vulnerable developing countries receive very little adaptation finance: for instance, Somalia and Central African Republic, both among the world’s most vulnerable countries according to various vulnerability indexes, currently receive only USD 8 and 10 million respectively from dedicated adaptation funds. This is a relative increase from last year but still far from what is needed in these fragile countries to adapt to the impacts of climate change.

The scope of what constitutes an adaptation project is wide. The largest recently approved projects are the ASAP grant for ‘Adaptation for Smallholders in the Hilly Areas (ASHA)’ (USD 15 million) in Nepal, which aims to strengthen the Local Adaptation Plan for Action (LAPA) development process to implement Nepal’s National Adaptation Programme of Action (NAPA) at the local level; and the PPCR concessional loan ‘Disaster Vulnerability Reduction Project’ (USD 15 million) in St. Lucia which would benefit the country’s 174,000 inhabitants by reducing the risk of failure of key infrastructure, improving the overall national understanding of risk, and rehabilitate damaged public infrastructure following a natural hazard.

Summary