The scale of adaptation financing is far below estimated existing and future needs. Current adaptation investment projects are mainly financed by the public sector, with development finance institutions accounting for almost 80 percent of total adaptation financing (CPI 2021). Data on private sector financing of adaptation projects is largely missing and estimated to be low. By the best existing estimates in 2017-2018, only 1.6% of the global adaptation flows were sourced from private adaptation spending.
The minimal of amount of tracked adaptation finance is a result of barriers in both mobilizing and tracking private sector investment. Context dependency, confidentiality restrictions, uncertain causality, and lack of agreed upon metrics are some of the challenges associated with tracking private sector adaptation investments (CPI 2021).
Private sector investments in adaptation have been constrained by many factors including lack of country-level climate risk and vulnerability data, limited clarity on governments’ capital investment gaps to achieve adaptation goals, and low perceived and actual returns on investment (Tall et al. 2021). There is also a large insurance gap—in 2020 the costs or “stated damage” from natural disasters was reported to be around US$210 billion (Munich Re 2021) of which 60 percent was uninsured.
Ministries of Finance can play a catalyzing role in mobilizing private finance for adaptation by creating an enabling environment characterized by thorough risk management—with better access to credit, knowledge, and services—and improved understanding of the investment landscape by private actors. Along with line ministries, it can engage the private sector in the National Adaptation Planning (NAP) processes.
The Secretariat for the Coalition of Finance Ministers for Climate Action (the Coalition), and the Coalition’s institutional partners (IPs), UNDP and UNEP, co-organized a webinar on August 17, 2023 to discuss these challenges and opportunities for scaling up adaptation private finance and the role that Finance Ministries can play and has been playing in catalyzing private finance for adaptation.
Agenda and Materials
- Opening remarks by Ralien Bekkers, Co-chair Sherpa of the Coalition of Finance Ministers for Climate Action (CFMCA) for the Netherlands
- Role of Finance Ministries in catalyzing private finance for adaptation – Nilesh Prakash, Advisor, V20 Secretariat. (View presentation slides)
- Disclosures and insurance in scaling adaptation finance – Margherita Giuzio, Team Lead-Financial Stability, European Central Bank. (View presentation slides)
- Panel discussion on experience of Ministries of Finance and sustainable finance associations on private sector financing for adaptation in the respective country. Instruments/ strategies that have been used by MoFs. Lessons learnt for sharing with peers.
- Foster Aboagye Gyamfi, Principal Economics Officer, the Economic Strategy and Research Division (NREC Unit) of the Ministry of Finance of Ghana
- Enkhlin Davaajav, Senior ESG and Carbon Manager, Mongolian Sustainable Finance Association
- Aaron Werikhe, Senior Climate Finance Officer, Climate Finance Unit, Ministry of Finance, Planning, and Economic Development, Uganda (View presentation slides)
- Closing remarks by Israel Alejandro Camacho Bahena, Director of Sustainable Finance, Ministry of Finance, Mexico (the Adaptation workstream co-lead)
Kayenat Kabir, Adaptation Workstream Coordinator, Coalition Secretariat
Paul Smith, Senior Climate Consultant, UNEP Finance Initiative
Rohini Kohli, Senior Technical Advisor, Adaptation Policy and Planning, UNDP