Uganda - Regional Meeting on Sustainable Development in African Mountain Regions, November 2011 (Atari Village) - Image credit: Mountain Partnership at FAO

Getting climate finance to the frontline

22/07/2017

Technical terms are marked with an * and explained in the Glossary


Four days of rich discussion between a vibrant community of practitioners from over 50 countries recently identified seven key ideas for scaling up finance for local community resilience in some of the poorest and most climate-vulnerable regions of the world .

The 11th Community Based Adaptation (CBA11) conference, held in Kampala in June, continued this annual gathering’s unique blend of a deliberate focus on practical action on the very frontline of climate change, a diverse range of perspectives, and majority representation from the global south.

To realise the promise of Paris, those at the sharp end of delivery, such as the practitioners gathered in Kampala, will need to learn rapidly on how to reach real scale – to go from mobilising $100s of thousands to $100s of millions. Focussing, therefore, on understanding what work best to deliver local climate action – including how the management of landscapes and natural resources can enable communities to adapt to the changing climate – seven ideas emerged from the Kampala meeting that might drive significantly increased investment in the kind of bottom-up, inclusive approaches that are most effective in building community resilience.

  1. Get beyond ‘official’ climate finance

The reality that contextualises all discussions of climate finance is that the US$93 trillion bond market, the US$80 billion green bond market and the US$170 billion that smallholder farmers themselves invest in their own enterprises, will always dwarf the Green Climate Fund and other public sources of climate finance. So, getting effective climate action financed at the scale needed requires engaging the private sector in resilience – working with entrepreneurs, national banks and investors.  One possibility proposed was to develop a climate resilience bond that deliberately seeks to finance local action.

The limits of public finance also mean we must ensure every penny works as hard as possible.  So rather than focusing on what is climate adaptation and what is development, efforts should be focussed on ensuring development investments have strong resilience outcomes.  Experience shows this can be enabled through integrating climate finance into development investments within a programme or government budget, or by decentralising funding structures so that local climate funds can identify local priorities and mobilise mainstream development funding behind them, from domestic as well as international sources.

Clare (centre) at CBA11
  1. Attracting private investment requires finding value propositions

Experience from practitioners in attracting private investment focused on agricultural supply chain finance, the opportunity of innovating in insurance to transfer risk and increase the viability of investments and the opportunity for carbon offsetting through cooperatives improving their landscapes.  Market-based approaches to support ecosystem based adaptation were also discussed, such as market incentives for organic fertilisers. In each case, the importance of engaging communities from the start in designing the approaches alongside the private sector was shown to be critical. But there were also calls for further innovation in supporting investment in climate positive enterprise – including enabling investment into regions which see little private investment currently, generally the poorest countries and regions.

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  1. Use different types of finance at different stages

Adaptation approaches, like the development of a product or a business, need the right type of finance for every stage, from innovating to developing to scaling the relevant approach. Practitioners discussed the potential to better differentiate between the roles of the various global climate funds.  For example, direct access from the Adaptation Fund should support countries to build the track record to access the Green Climate Fund, by giving national institutions the responsibility to supervise projects and prove their ability to manage funding well.  Likewise, national small grant schemes, such as under the Adaptation Fund in South Africa, should be deliberately designed to build the skills in local community actors to develop and manage projects – not assume these capabilities are already there.  National climate innovation funds in Ethiopia and Kenya are already incubating climate-positive enterprises, building opportunities for investors to back young entrepreneurs.

  1. Find ways to aggregate community projects so they can be ‘packaged’ for finance

Practitioners noted that international finance largely flows through international agencies, which struggle to reach the local level directly due to concerns around fiduciary risk* in long delivery chains down to the ‘end user’, and the need to “wholesale” their investment in large transactions in to keep arrangement costs down. Practitioners discussed how to enable aggregation of investments – where communities prioritise their needs and these are packaged as recognisable ‘asset classes’* for investors.  And how to enable assurance of the financial flows and the impacts in cost effective ways – again another area for the community to innovate around. 

  1. Harmonise policies and investments

Practitioners discussed deliberately working across different geographic and adminstrative levels and scales, developing national climate policy to support local action and to enable coordination across jurisdictions. Such co-ordination would help create  ‘portfolios’ of investments that could attract multiple funding streams, and at the same support efficient delivery and avoid duplication.

  1. Invest in local institutions, building ownership

Practitioners’ experience pointed strongly to the value of working with communities to define projects, as well as building local institutions’ capabilities in delivering the required changes. One approach where real scale has been achieved has been through the decentralised climate funds mentioned above.  This approach works with local governments systems, engaging communities in strategic planning for their resilience, improving governance of land use and mobilising domestic government finance.  It requires a long term investment in local institutions, but delivers real ownership by the communities and the local governments.  In Kenya, the devolution process has enabled significant shifts in government policy in support of these approaches. The Adaptation Fund small grants scheme in South Africa also pointed to the need for investing long term in local capabilities.

Practitioners also highlighted the importance of strong accountability flowing down to communities, not just up to funders.  And that this requires delivery partners to be transparent, providing meaningful information so communities can engage in the design and oversight of investments. It also requires clear mechanisms for feedback and redress when things go wrong.

  1. Agile, flexible finance supporting innovative and inclusive partnership

At the 11th of these community-based adaptation conferences, there was a sense we had learnt a lot already from the programmes that had been run to date.  The need is for flexible approaches in developing interventions, and for wide partnerships – between local businesses, local governments, faith organisations and NGOs – not just multilateral agencies. And for much greater innovation to engage national private sector players and national investors.

Biography

Clare oversees the Climate Change research group at IIED and is exploring just transitions to low emission, climate resilient development pathways in fragile and stable contexts, and holistic risk management across development, humanitarian and climate silos.

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