Outline

1. ADAPT Asia-Pacific: Sources of Climate Change Adaptation Financing for AsiaPeter KingTeam Leader, Adaptation Project Preparation and FinanceADAPT Asia-Pacific CLIMATE FINANCE TRAINING WORKSHOP Day 1, Session 1Bangkok, Thailand 24-26 June 2013

2. Outline Brief overview of the ADAPT Asia-Pacific Project ADAPT Asia-Pacific’s Assessments on Adaptation Funds and Projects Conclusions and Implications for Financing Adaptation Projects

3. Overview of ADAPT Asia-Pacific Project

4. USAID/RDMA Response to Climate Finance Issue • ADAPT Asia-Pacific - The Climate Change Adaptation Project Preparation Facility for Asia and the Pacific • A $17 million, 5-year regional adaptation project preparation facility supported by USAID Regional Development Mission for Asia (RDMA) • Key objective is to help governments in Asia and the Pacific accelerate their access to the increased pool of international climate change adaptation funds • Started activities in October 2011.

5. What does ADAPT Asia-Pacific hope to achieve? • Sustainable knowledge transfer, capacity building and TA-driven facility through four principal tasks: • Project preparation - provide specialized TA to country partners in preparing adaptation project proposals. • Capacity building - strengthen practitioner capacity to prepare adaptation projects through targeted capacity building/training. • Annual forum - promote networking and training through regional events, including an annual forum. • Knowledge platform - strengthen the Asia-Pacific Adaptation Network (APAN) regional platform for knowledge sharing on climate fund eligibility, best practices etc.

6. ADAPT Asia-Pacific Geographic Coverage • 13 countries - Bangladesh, Cambodia, India, Indonesia, Laos, Maldives, Mongolia, Nepal, Philippines, Sri Lanka, Thailand, Timor-Leste, and Vietnam • 1.8 billion people • Recent decision to add 14 Pacific Island countries

7. ADAPT Asia-Pacific’s Technical Assessments on Adaptation Funds and Projects

8. What Does Climate Finance Mean?

9. Only 5% of climate finance has gone to adaptation (2009-10 annual flows) Source: CPI(October 2011)

10. Adaptation costs are high, especially in urban sectors • USD 70-100 billion per year between 2010 and 2050 as adaptation costs for developing countries (World Bank) • USD 40 billion per year until 2020 in Asia-Pacific (ADB) • 80% of adaptation costs to be borne by urban areas (World Bank) • 1 billion urban slums dwellers are particularly at risk (World Bank) Source: Cover of the World Bank Report: Climate Change, Disaster Risk and the Urban Poor (2011)

11. Possible Sources of Adaptation Financing • Official Development Assistance (ODA) • Specialized global climate funds (new and additional money to ODA) • National budgets and fiscal measures • Private sector • Philanthropy

12. Eleven Funds Support Climate Change Adaptation in Asia

13. Uncommitted available resources range between $260 – 500 million (from the AF, LDCF, SCCF combined) • PPCR resources are not included in the above estimate because they have been allocated to 9 countries and 2 regional programs How much money is left ? – Multilateral Funds

14. Unclear how much is available, as no significant pledges beyond 2010-2012. • Programming funds for each donor – not necessarily realized. • Also provide contributions to the multilateral funds thus double counting. How much money left ? – Bilateral Funds

15. Fund Access Mechanisms

16. GEF funds (SCCF and LDCF) only finance adaptation costs, thus requiring co-financing for BAU costs

17. General findings across funds • Broad definition of adaptation • Reduce vulnerability • Increase adaptive capacity • Key sectors: • Agriculture • Water resources • (Rural) Coastal management • Disaster risk reduction (DRR) • Priority beneficiaries • Low-income countries • LDCs • SIDs • Financing instruments: • Grants (used by all 11 funds) • Others: • Concessional loans (PPCR, Japan) • Budget support (GCCA-EU) • Private financing (Japan)

18. National Financing – Climate Public Expenditure and Institutional Reviews (CPEIR) Cambodia – $769 million (2009-2011) • Includes both on- and off-budget expenditure

19. Climate Relevant Expenditure - Cambodia Most funding is on roads – (but with no indication of climate proofing) – and disaster response.

20. Private Sector Financing – Estimated annual investment cost in adapting to a 2oC world Coastal protection $33.6 billion Climate proofing settlements $154 billion Water infrastructure $720 billion Agricultural water supplies $122-203 billion Space heating and cooling $148 billion Total $1,118-1,259 billion Source: Agrawala et al (2010)

21. Possible Financing Mechanisms to Mobilize Private Sector Funding (OECD 2010) • Blending commercial grants and loans • Extending range of potential borrowers through micro-finance • Alleviating affordability constraints • Mitigating risks with guarantees and insurance • Creating grouped financing vehicles • Increased direct lending to sub-sovereigns • Strengthening balance sheets via equity injection • Increasing transparency via credit ratings • Developing bankable projects • Developing local equity markets

22. Needs ? napa Analysis - About 900 project concepts

23. Conclusions and Implications for Financing Adaptation Projects

24. Adaptation projects are still underrepresented in the portfolios of global funds, private sector, and domestic funding • Global adaptation funds are very small compared to needs, thus playing limited role in adaptation financing • Developing country governments will need to shoulder most of the future costs of adaptation • Need to consider all options to fill the resources gap • Private sector? • Public-private partnership? • Instruments that blend financial resources and/or reduce risks associated with climate uncertainty are likely to play an important role e.g. national climate trust funds, guarantees, and insurance schemes

25. www.adaptasiapacific.org