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Fact file: Climate change adaptation finance

A fake million dollar bill Simon Davison/Flickr
A fake million dollar bill

More frequent and severe droughts, floods, and storms associated with climate change mean the livelihoods of the world’s roughly half a billion smallholder farmers are growing ever more precarious.

Despite the extreme and widespread vulnerability of farmers, who are key to the food security of many countries, resources to help them cope with climate change – in the form of adaptation finance – have long been dwarfed by the money made available to reduce greenhouse gas emissions and develop low-carbon economies.

Developing countries need tens of billions of dollars a year to meet their adaption needs, according to the UN Framework Convention on Climate Change (UNFCCC).

In the agricultural sector, examples of adaptation include encouraging better use of scarce water resources, developing drought-tolerant crops, building flood defences, constructing roads (to improve market access), setting up early warning systems, and rolling out climate-related insurance schemes.

For more details of how climate change impacts smallholder farmers and what they can do about it, read this brochure from the UN’s International Fund for Agricultural Development.

The ratio between mitigation and adaptation finance has historically been about 3:1, although the past six years have seen a rise in adaptation funding, notably with the operational launch of the $10.1 billion Green Climate Fund in late 2015.

The Paris Agreement, signed at the 21st Conference of Parties to the UNFCCC in December 2015, did much to give more emphasis to adaptation finance. For detailed analysis of this, see pages 16-25 of this text.

There are currently more than 50 funds providing adaptation finance. Here’s an overview of some of the biggest and most relevant to smallholder farmers:

Green Climate Fund (GCF)

Established in 2015 and headquartered in South Korea, the GCF is now the UNFCCC’s main finance channel. It has some $10.1 billion in its coffers, about half of which is meant for adaptation.

The GCF is currently supporting 43 projects – 20 of them in Africa – costing a total of $2.2 billion and benefiting some 128 million people with initiatives including water conservation, irrigation, flood management, and climate information.

To make it easier to access its funds, the GCF has made up to $1 million per country per year available for help with the application process for grants, loans and equity investments, and to see projects through to completion.

However, not just anyone can knock on GCF’s door with their adaptation ideas and ask for money: Applications have to be channelled through “accredited agencies” that meet the fund’s standards in areas such as financial probity and gender. The agencies can be local organisations, government bodies, multinational regional entities, and also private sector bodies.

Full details of how to access GCF funds, which takes up to 11 weeks, can be found here

UK International Climate Finance (ICF)

The main channel of the UK government’s adaptation and mitigation financing, this $5 billion fund became operational in 2011. It is managed by a board comprising officials from several UK government ministries, with most of the money coming from the foreign aid budget.

ICF disbursements are channelled through national governments in developing nations, regional organisations, and a range of multilateral bodies such as the World Bank and the UNFCCC.

The ICF portfolio is divided between capital contributions/concessional loans and grant finance. The majority of contributions to multilateral funds are in the form of concessional capital. Grants are used primarily as a mechanism for bilateral contributions.

According to its own published results, between its inception and September 2016, the fund helped 21 million people cope with the effects of climate change through 29 programmes, a figure projected to rise to 54 million during the lifetime of the fund.

Pilot Programme for Climate Resilience (PPCR)

This is a $1.2 billion adaptation funding window of the $8.3 billion Climate Investment Funds, which were designed by both developed and developing countries and are run by multilateral lenders such as the World Bank, the Asian and African development banks, the European Bank for Reconstruction and Development, and the Inter-American Development Bank.

The PPCR works hand-in-hand with poor countries’ development plans, notably their National Adaptation Programmes of Action, which are overviews of the most pressing needs and the plans for addressing them.

To date, the PPCR has approved $939 million for 58 projects in 28 countries and two regions, supporting some 2.8 million beneficiaries. These projects are expected to attract a further $2 billion in co-funding from other sources.

Least Developed Countries Fund (LDCF)

This $1 billion fund set up in 2001 by the UNFCCC and managed by 18 international organisations under the Global Environment Facility (GEF), is designed mainly to help some developing states draw up their National Adaptation Programmes of Action.

See here for details of the application process and eligibility.

By 2016, the Fund had approved around $1 billion for projects and programmes in 49 countries, leveraging almost $4 billion in financing from partners.

Special Climate Change Fund (SCCF)

The SCCF is a $362 million GEF fund that complements the LDCF but is open to all developing nations and provides financing to a wider range of actions related to climate change, with an emphasis on adaptation.

Adaptation Fund

Also part of the UNFCCC architecture, the Adaptation Fund became operational in 2001 to support specific projects in developing countries that are especially likely to be badly affected by climate change. More recently it has expanded its scope to fund regional projects, the first being one to improve food security in east Africa.

It currently has $417 million committed for 63 projects in 53 countries.

The fund is partly financed with some of the proceeds of the Clean Development Mechanism (CDM), among other sources. Two percent of the proceeds of Certified Emissions Reductions issued for CDM projects go to the fund. Other funding comes from governments and private donors.

The fund is supervised by a 16-member board that meets twice a year.

It channels its money through accredited implementing agencies: national, regional, and multilateral bodies that met the fund’s criteria and help develop specific projects.

Details of the accreditation process can be found here.

In 2014, the fund’s board approved a facility for providing small grants to help rural farmers and other vulnerable communities in South Africa cope with the effects of climate change. This more direct approach is expected to be expanded to other countries.

Adaptation for Smallholder Agriculture Programme (ASAP)

ASAP, a grant-based trust fund, was set up in 2012 by the UN’s International Fund for Agricultural Development (IFAD) to help smallholder farmers in IFAD’s 176 member states access information, tools, and technologies that help build resilience to climate change and boost their yields.

It currently operates through national governments in over 30 developing states and has channelled more than $300 million to smallholder farmers. By 2020, ASAP aims to have helped more than eight million farmers.

ASAP’s funds are accessed according to the same procedures used across IFAD. These start with the submission of a project concept by an arm of the recipient country’s government that is developed into a detailed project design, which is eventually put to the IFAD executive board.

More details here.

Details of dozens more climate finance initiatives and how to access their funds can be found here and (with better graphics, but less up-to-date info) here

(TOP PHOTO: A fake million dollar note. Simon Davison/Flickr)


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