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Climate adaptation’s breakthrough year, or is it?

04 February 2022 Keiron Greenhalgh

Climate adaptation starts 2022 with record public sector funding pledges, a place in the spotlight at the most recent COP summit, and possibilities as the next frontier in energy transition finance.

Long sought-after private sector backing could also be part of a new era for climate adaptation, which offers protection against the impacts of drought, flooding, and rising sea levels.

For as UN Secretary General António Guterres said in June 2021: "Adaptation cannot be the forgotten piece of the climate equation."

But a number of observers used the exact same phrase as to whether abatement of emissions or climate mitigation's poor relation can really come of age this year.

Industry watchers say the "proof will be in the pudding" on whether the pledges are fully funded, more funds are promised and delivered, and talk on compensation for the most vulnerable nations to climate change elicits action as well as dialogue.

The year started positively with Lightsmith Group, a New York-based private equity firm, closing its Lightsmith Climate Resilience Partners SCSp RAIF with $186 million of commitments for investment focused on climate resilience and adaptation on 31 January.

The fund will invest in growth-stage companies whose technologies can address the growing physical impacts of climate change, which Lightsmith reckons represents a market of over $170 billion currently. Thinktank Climate Policy Initiative has calculated that private investment in adaptation thus far is less than $500 million, Lightsmith said.

Until now, an inability to access private and public financing for climate adaptation projects has been "mostly a compounding problem" involving institutional capacity and capability, leaving it trailing in mitigation's wake as the world tackles climate change, Lola Vallejo, climate program director at Paris-based sustainable development thinktank IDDRI, told Net-Zero Business Daily.

Part of fixing this will come from multilateral agencies strengthening their mechanisms for funding projects so that the countries with the lowest institutional capacity and highest vulnerability, and their populations, are not being left behind, recent research by academics at a German university concluded.

Examining existing spending from the UN's Green Climate Fund (GCF), Matthias Garschagen and Deepal Doshi of Ludwig-Maxmilians-University Munich concluded that many of the most vulnerable countries have not been able to access GCF funding, particularly Least Developed Countries (LDCs) in Africa. LDCs are 46 low-income countries confronting severe structural impediments to sustainable development.

In research published in the March 2022 issue of Global Environmental Change, the academics said that while the GCF (the biggest investor in the Lightsmith fund) is on track in prioritizing its defined priority countries, the picture looks quite different when considering standard metrics to assess and rank country-level vulnerability.

The GCF was created in 2010 under the UN Framework Convention on Climate Change to assist developing countries in adaptation and mitigation practices to counter climate change. It has a target of dividing its spending 50-50 on adaptation and mitigation (cutting emissions).

Closing the gaps

Global leaders seem determined to build on events at COP26, where the wattage of the spotlight on climate adaptation was greater than ever before, and mitigation did not grab all the headlines for once.

Progress on adaptation and loss and damage, including working with donor countries towards the commitment to double adaptation finance, and with all parties to make progress towards the Global Goal on Adaptation, is one of four goals for COP26 President Alok Sharma in the months preceding the next climate summit in Egypt in November (COP27).

Time will be invested in advancing the Glasgow Dialogue on loss and damage, and the Santiago Network, including its funding, Sharma said 24 January in his first major speech since the Glasgow climate summit ended 13 weeks ago. The network aims to connect developing countries vulnerable to the "adverse effects of climate change" with assistance in addressing loss and damage.

Loss and damage as a concept involves vulnerable and poor countries, whose contribution to causing the climate crisis is minute, receiving compensation for the damage climate change is having on the lives, livelihoods, and infrastructure of their citizens.

But the commitments from Sharma and the UK COP presidency received short shrift when it comes to the prospects for hard cash for climate adaptation.

Saleemul Huq, director of the International Center for Climate Change and Development research group, tweeted at Sharma following the latter's speech: "You need to use the Glasgow DIALOGUE on finance @LossandDamage agreed in Glasgow into the Glasgow FACILITY on the finance for loss and damage" by COP27.

Research group The International Institute for Environment and Development (IIED) also wants more from Sharma and Western leaders for adaptation cash, plus loss and damage compensation.

"When it comes to coping with the inevitable effects of climate change, it's simply not good enough that we still don't have a clear roadmap for richer countries to provide $100 billion a year to the poorest, and most vulnerable people, who have done the least to cause this catastrophe. The same goes for finance to pay for the losses and damage that these communities are already experiencing," IIED director Andrew Norton said in a statement following Sharma's speech

The big worry for observers following the Glasgow announcement of the loss and damage dialogue, said Vallejo, is that there hasn't been a UN request for views yet since the dialogue began, a key procedural step; only a request for technical assistance has been made, likely delaying action.

UN action

Still, supporters of the compensation mechanism are looking at meetings in June at the 56th sessions of the UNFCCC Subsidiary Body for Implementation and Subsidiary Body for Scientific and Technological Advice in Bonn, Germany, as opportunities for progress.

Some world leaders don't think that's enough though.

Remedying the absence of a climate compensation package, as part of fixing a "morally bankrupt" global financial system, is one of top of UN Secretary General Guterres' priorities for 2022, he said 21 January, which in turn would help the world's countries, particularly the poorest nations, recover from the impact of the COVID-19 pandemic.

"To build a strong recovery, governments need the resources to invest in people and resilience, through national budgets and plans anchored in the Sustainable Development Goals … Financial metrics must go beyond Gross Domestic Product, to assess vulnerability, climate, and investment risks," said Guterres, adding that "a radical boost for adaptation" is needed.

Still, countries around the world came round to the idea that time is running out in 2021, pledging record sums for adaptation. The UN's Adaptation Fund received a record $356 million in new support from national and regional governments in 2021. The fund's previous annual resource mobilization record was $129 million, reached at COP24 in Katowice, Poland.

The fund only had a 2021 resource mobilization goal of $120 million following the $116 million it raised in 2020. The record 2021 pot will go some way to backing the more than $300 million pipeline of project proposals yet to be funded, the fund added. Among the first-time contributors were the US and Canada, while the European Commission ($116.4 million) and Germany ($58.2 million) were the top backers.

Not enough

There was a positive feeling as a result of the Glasgow promises, especially the progress on the $100 billion a year goal, but it is nowhere near enough, John Verdieck, director of international climate policy at US-based NGO The Nature Conservancy (TNC), told Net-Zero Business Daily. A new pledge is needed, be it $200 billion a year, or $500 billion a year, he said, for both adaptation and mitigation in the developing world.

The talk in Glasgow—where the Adaptation Fund's record kitty was unveiled—can't be a "flash in the pan," he said, adding: "TNC hopes to see bigger pledges; we need to see a lot more detail on existing adaptation pledges."

Even Verdieck's suggested funding numbers won't be enough, Al-Hamdou Dorsouma, head of the climate and green growth division at the African Development Bank, told Net-Zero Business Daily.

Africa alone will need $3 trillion per year to fight climate change by 2030, he said. Of that $3 trillion/year figure, much would go toward climate adaptation, he added. Current African climate adaptation needs are around $331 billion/year, he said, and that is only likely to rise as the impact of climate change increases. The private sector has a key role to play in meeting such needs, he said, and the right mechanisms need to be in place to make that happen.

The funding totals being discussed are "nothing compared with the need," said Dorsouma. The historical and current underfunding of climate adaptation is "not acceptable," he said.

If $100 billion annually is a drop in the ocean when it comes to needs, US President Joe Biden's offer of $20 billion (made during a debate in the run up to the 2020 US presidential election) to Brazil to halt Amazon rainforest deforestation is similarly miniscule, given Brazil's vast surface area.

In addition, IHS Markit Director, Latin American Country Risk, Carlos Cardenas told Net-Zero Business Daily that President Jair Bolsanaro sees cash offers to curb deforestation as an insult to Brazil's sovereignty and his authority.

However, Brazil was one of the 141 nations that signed up to a declaration to protecting forests at COP26, with a promise to halt and reverse forest loss and land degradation. The countries involved cover 90.94% of forests worldwide.

Bolsanaro has also been addressing another core climate adaptation target in recent months as flooding due to heavier-than-normal rainfall caused devastation in major metropolises, near previous infrastructure tragedies, and across vast tracts of the northeast of the country.

Flooding is becoming a bigger risk, said IHS Markit Country Risk Analyst Ailsa Rosales, because there has been a loss of a "happy medium" when comes to the global climate, which is causing the greatest suffering in the poorest nations, where the margins for stability are much smaller. Intense drought is followed by intense flooding all too frequently, with little to no respite in the cycle, she said, which is leading to crop destruction, that in turn is creating price volatility, and, as a result, civil unrest.

Climate disaster increases the level of risk in countries around the world, especially flooding, because local authorities don't have the money to either build defenses or deal with the consequences adequately, Rosales said.

Flooding often affects vast areas. The strategy going forward for climate adaptation funding must encompass a whole country, not just one project, TNC's Verdieck said. It must be linked to the broader economy, he said, adding "that's where $1 billion goes fast." There is a need to align adaptation funding more closely with what's already going on in the countries that will receive the backing, he said.

Yet no one adaptation project in the developing world can absorb $1 billion "if it is dumped in their lap," Verdieck said, adding that the country where the money is heading need to know the funds are coming, and to be able to plan for its arrival and what to do with it.

Bigger projects

Still, existing climate adaptation supporters are trying to increase the size of the projects that are being tackled. The GCF is trying to promote larger adaptation projects, Division of Mitigation and Adaptation Director Jerry Velasquez told Net-Zero Business Daily in an interview, adding it was "trying to scale them up."

While GCF's mission involves ramping up the adaptation and mitigation split to a 50-50 ratio, Velasquez said adaptation's share of the GCF investments is currently running at 48%, of which 62% is going to LDCs and Africa. Some 47% of the backing is in the form of grants, he added, with the majority of those funds allocated to adaptation.

That said, "some of our work on mitigation we consider adaptation," said Velasquez, citing developing solar, wind, storage, transmission, and energy access.

In addition, investors are now able to calculate the adaptation benefits of clean fuels for cooking and decreases in indoor pollution, especially in terms of reducing health problems, particularly for women, Velasquez said. COP26 was unique in that no previous summits of such stature had treated the climate crisis as a health crisis, he added.

COP26 also provided a "clear mandate" to figure out "operationalizing global adaptation" ahead of the completion of the Global Stocktake of the Paris Agreement in November 2023, said IDDRI's Vallejo.

Whether progress is being made on adaptation is always a tricky question, as it is much more difficult to assess than with mitigation projects, said Vallejo, adding that more funds for setting up detailed assessment frameworks would help.

COP27 host Egypt has been a driving force behind negotiations on defining what climate finance in essence is, said Vallejo, which means that this is very likely be a big part of what talks at that summit will entail.

Before then, the coming year's key task is properly setting up the Santiago Network, which will provide technical assistance and foster cooperation on loss and damage needs from disaster risk management to humanitarian emergency response to development aid, she said.

However, the slow pace of change on adaptation has seen two countries explore the possibility of legal remedies for goosing the process—Pacific island nation Tuvalu, whose highest point is only 15 feet above sea level, exacerbating its vulnerability to climate change; and Antigua and Barbuda. The countries in November established a Commission of Small Island States on Climate Change and International Law at the UN and will initially explore their options for redress under the International Tribunal for the Law of the Sea.

Posted 04 February 2022 by Keiron Greenhalgh, Senior Editor


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