Finance and Investment Action Track
The economic case for investing in climate adaptation is strong. Benefit-cost ratios range from 2:1 to 10:1. Yet, money is not flowing at the pace or scale needed. The Global Commission on Adaptation’s landmark report, Adapt Now, calls for a transformation in finance by: shifting how investment decisions are made to account for climate risks, scaling up and deploying public finance more effectively, scaling disaster risk finance and insurance, and harnessing private capital for resilience.
Action Track Goal
The long-term goal of the Commission’s Finance and Investment Action Track is to make climate risks more visible and actionable, mobilize public and private investment in adaptation, and promote systemic change in fiscal and financial systems to integrate climate risk into decision-making.
The Commission is mobilizing a wide range of partners and will seek to build bridges between public and private stakeholders to achieve these goals. We will pursue four key areas of action in 2020, which combined, will support increased ambition on adaptation finance to be showcased at the Climate Adaptation Summit and COP26.
1. Align public sector financial decision-making with adaptation goals
We will address the urgent need to promote understanding and uptake of climate risk considerations amongst countries’ finance and planning ministries, so that key decisions are aligned with a more resilient future. This includes:
- Working with Coalition of Finance Ministers (CFM) and Finance Ministries of the Climate Vulnerable Forum (V20) members to provide the foundational tools for governments to improve management of macroeconomic and fiscal risks; integrate adaptation planning into their budgets; and increase finance, including at the local level. We will provide technical and intellectual support and leadership to the CFM working group on macro-fiscal planning by developing and disseminating best practices, including through a new online database.
- Co-designing a capacity building program to help mainstream climate risk into government decision-making. This program will complement the CFM by supporting developing countries (such as V20 countries) that may not be CFM members; supporting non-finance ministries (such as Ministries of Planning); and supporting subnational governments. The program will provide countries with increased access to best practices, tools, and peer exchange.
- Supporting the International Monetary Fund (IMF) as it scales up its climate change policy assessments (CCPA) diagnostic and incorporates macro-critical climate risks into its annual Article IV consultations.
Key 2020 deliverables
- 30 Finance Ministers commit to mainstream climate resilience across their portfolios, from macroeconomic policies, to fiscal planning and budgeting, to private sector engagement, as well as to use new and enhanced financial instruments.
- Mobilize $50 million to support 6-10 Finance and Planning Ministries to mainstream climate resilience into their planning, fiscal, and budgeting processes.
- Steps toward mandatory incorporation of climate risks into IMF Article 4 consultations.
CFM working group members include Fiji, France, Mexico, the Philippines, and Uganda. Institutional partners include the World Bank CFM Secretariat, the IMF, and other selected multilateral development banks (MDBs). For the mainstreaming program, partners include the Global Resilience Partnership, the V20, the UK Government, and other donors.
2. Open the door to scaled up public, concessional, and contingent finance for adaptation
Public finance for adaptation, including domestic and international flows, currently amounts to roughly $30 billion per year, far short of the estimated need for $140-$300 billion per year for developing countries by 2030. The Commission will seek to mobilize partners to help meet the adaptation finance gap, including:
- Working with donors, MDBs, the IDFC, and other partners to explore enhancements to current adaptation finance mobilization for official development assistance.
- Exploring innovative new instruments, such as resilience bonds or insurance-related programs, with partners, particularly through the Coalition of Finance Ministers, V20, and the Coalition for Climate Resilient Investment.
Key 2020 deliverable
Lay the foundation for enhanced ambition on adaptation finance, which will be showcased at the Climate Adaptation Summit and COP26.
The V20 Vulnerable Country finance ministries, MDBs, the Coalition for Climate Resilient Investments, the Coalition of Finance Ministers, and the African Adaptation Initiative.
3. Scale up private finance for climate adaptation and resilient investments
Scaling up private investments in adaptation and resilience has proven difficult to date, partially due to unclear analytics, metrics, and incentives. The Commission is co-leading the new Coalition for Climate Resilient Investments (CCRI), a first-of-its-kind, private sector-led group that seeks to transform how investment decisions are made, starting with infrastructure. The Coalition is interested in strengthening markets for private and public-sector investment in climate-resilient infrastructure and supporting climate vulnerable geographies to attract investment.
In addition, the Commission supports the Climate Resilience Risks & Opportunities Coalition (Climate-RROC), co-led by the UNEP-FI and the Global Center on Adaptation, which seeks to enhance disclosure of physical climate risks among financial institutions by sharing experiences and best practices, advancing the knowledge and evidence base in the public sphere, and building support for public policies.
Key 2020 deliverables
- Enlist 30 leading companies across the investment value chain, totaling over $1 trillion in assets, to commit to full climate screening and financing of only climate resilient investments.
- 50 financial institutions commit to disclosure of physical climate risk by 2021.
Our CCRI co-leads include Willis Towers Watson, the World Economic Forum, and the UK Government. CCRI has over 45 members with over $5 trillion in assets. Climate-RROC’s leadership team includes 5 leading banks and investors committed to increasing disclosure practices by 2021.
4. Deepen economic understanding of adaptation
While there is a growing body of economic research on adaptation, this topic has not generally been translated into practical tools to inform decision-makers. To support the three activities above, we will continue building the economic evidence for investing in adaptation, promoting the translation of these findings into decision-maker friendly tools and methods.
Key 2020 deliverable
Completion of 5 technical notes on topics such as climate fiscal risk, pricing risk, and the cost of capital for vulnerable countries.
World Bank, Grantham Research Institute, Imperial College London, London School of Economics, SOAS University of London, and more
Mobilizing Partners: How Organizations Can Engage
Partnerships are essential to the success of this Action Track. We welcome new partners to join the Action Track. Partners can engage by providing technical, political, or financial support and by amplifying the initiatives. Specifically, partners can:
- Join us in building the technical knowledge of central finance and planning ministries, and the private sector, on resilience by contributing to our workshops, analytical products, or materials.
- Advocate for policies in your country and through networks that promote climate mainstreaming and better pricing of risk across all new investments and financial portfolios.
- Provide financial or in-kind support, such as dedicated technical staff, to help the Commission expand public and private sector actors’ resilience expertise.
- Promote your work on adaptation finance, resilience and the Action Track with your networks including via speeches at events, social media, blogs, op-eds, newsletters, and more.
Key Events and Milestones
Below are select key milestones and events for 2020, where Commissioners and partners can engage and support the Action Track.
Technical seminars on the fiscal implications of climate risks – Feb. 2020. The IMF in Washington, D.C. and the Coalition of Finance Minister Meeting in Abidjan, Cote d’Ivoire.
GLOBE Canada – Vancouver – Feb. 2020. A roundtable with Canadian public and private leaders on climate resilient investments and CCRI principles.
- World Bank/IMF Spring Meetings – Washington, DC – April 2020. A technical workshop with the Coalition of Finance Ministers on climate risks.
- London Climate Week – London – June 27-July 5, 2020. A high-level roundtable on adaptation-related financial policies and flows.
- Adaptation Action Summit – Amsterdam – Oct. 22, 2020. Select deliverables to be launched.
- COP26 – Glasgow, UK – Nov. 9-19, 2020. Select deliverables to be launched.