The Adaptation Fund’s climate finance quest

Climate financing for adaptation is becoming increasingly urgent, and countries need to ramp up contributions to help prevent future destruction, the chair of the United Nations-established Adaptation Fund told Devex. “Adaptation needs to come in much quicker, and therefore financing is even more urgent than it was just a few years ago because of the speed of climate change,” said Mattias Broman, the chair of the fund’s board. “We know that [with] every dollar we are investing now, we’re saving a lot of money in the future because prevention is always better than trying to build something back that has already been destroyed.” But the fund’s reliance on voluntary donations means predictable funding has been hard to come by. It signed its first multiyear agreement — with Sweden, Broman’s home country — in 2019. With the momentum around the 26th U.N. Climate Change Conference, which kicks off Sunday in Glasgow, Broman is hoping more countries might follow suit. “We are encouraging other countries to … do the same because it gives more predictability to the fund,” he said. “And we are, of course, constantly looking for more countries who would like to contribute to the fund.” On Tuesday, a report from the U.N. Environment Programme showed that current country pledges fall short of what’s needed to halt temperatures from rising more than 1.5 degrees Celsius over preindustrial levels, which experts hope could avert the most dangerous effects of climate change. The analysis suggests the world is on course to see a 2.7 C temperature rise by the end of the century. The Adaptation Fund was set up during the 2001 U.N. Climate Change Conference in Marrakech, Morocco, but it only officially launched in 2007. Its mission is to help lower-income countries build resilience and adapt to climate change. In its 14 years of operation, the fund has allocated over $850 million to 123 projects across the developing world. While the amount may not be huge given its scope, the fund stands out for pioneering the “direct access” method, which gives countries full ownership of projects, from planning through implementation, with a monitoring system woven in between. Examples of projects include strengthening defenses against water scarcity in some regions of Pakistan, scaling up climate-resilient rice production in West Africa, and increasing the climate change adaptation efforts of coastal communities in Belize, Ghana, and Côte d'Ivoire. Originally, the fund’s core financing came from a 2% share of proceeds issued via the Clean Development Mechanism, a carbon offsetting scheme of the U.N. But just a few years after the fund became operational, the market for carbon credits plunged — so it began relying more on donations. So far, total contributions to the fund amount to nearly $1.2 billion, with proceeds from the climate emissions reduction scheme making up the second-largest contribution at $209 million, according to the World Bank, the fund’s trustee. Germany is listed as the largest contributor among all countries, with $514 million, followed by Sweden at $172 million and Italy and Spain at around $61 million each. Belgium, Switzerland, France, Norway, and the United Kingdom are also in the top 10, albeit with smaller sums. But unlike the Green Climate Fund, which was borne out of the 2015 Paris Agreement, the Adaptation Fund does not have a replenishment process, making donations voluntary and potentially less attractive. Broman ― who took over as chair in April ― said Sweden became the first country to sign a multiyear agreement with the Adaptation Fund in 2019, amounting to 520 million Swedish kroner ($60 million) for the period 2019-2022. Julia Grimm, a climate finance expert with Germanwatch, has written about how important these kinds of agreements are, as it gives the fund’s secretariat the predictability “to initiate the necessary decisions ... [to] expand its activities” and ensure it “does not have to invest its already scarce capacity in resource mobilization every single year.” Broman expressed optimism about the future of finance for adaptation. “I think we will see a lot of countries trying their best now to increase their funding for climate financing, and a quite large portion of that will hopefully go to adaptation,” he said. At the beginning of this year, U.N. Secretary-General António Guterres called for more than half of all climate finance to be spent on adaptation. The United Nations’ “Adaptation Gap Report” from January placed annual adaptation costs in lower-income countries at around $70 billion. Barbara Creecy, South Africa’s environment minister, has also called on nations to work toward a 50% increase in the climate resilience of the global population by 2030, as well as an increase of at least 90% by 2050. In a recent interview with Devex, she described adaptation as “a bit of a stepsister in the way that it's been treated.” “Adaptation needs to come in much quicker, and therefore financing is even more urgent than it was just a few years ago because of the speed of climate change.” --— Mattias Broman, chair, Adaptation Fund In terms of how the Adaptation Fund dispenses money, Broman said the board “cherishes” the direct access method for giving local authorities more space and flexibility in which to maneuver. Other funds, including the Green Climate Fund, now use this option as well. “It really builds local capacity in a different way than if you compare it to having multilateral organizations,” Broman said. “They can build up their capacity, and once they have that, they are able to apply for other funding as well.” The fund only grants cash to so-called implementing entities — accredited bodies that are required to meet fiduciary standards and comply with the fund’s environmental, social, and gender policy. As of September, the fund had accredited 56 bodies: 34 at the national level and eight at the regional level, along with 14 multilateral entities, which include some of the biggest aid lenders. The latter have a 50% cap on total financing to ensure local and regional entities, which have less experience in putting proposals together and may need more time, can also access a large share of the pie. Of the 34 national bodies, “10 were from Least Developed Countries ... and seven from Small Islands Developing States,” according to the Adaptation Fund. In April, the board decided to enhance “access to climate finance for vulnerable countries through raising the Fund’s cap on single country project funding ... to US$ 20 million.” Many countries had already exhausted their options to ask for more money, Broman said, and “without such a decision, we would have become less relevant for those countries.” Climate change will affect the most vulnerable societies the most, and that’s why it’s important to act now, he said. “We all know we’re not heading towards the 1.5 degrees unless we make very great changes to the trajectories and how we are consuming and producing right now,” Broman said. “But even if we would stop tomorrow [living] the way we are, we know that we would still have to adapt to climate change for many years, and [the need to adapt] will only increase in the coming years, no matter how well we do with mitigation.”