Private finance for adaptation in LDCs? Spelling out the options

As part of the Copenhagen Accord, developed countries committed to mobilize 100 billion USD a year by 2020 to address the needs of developing countries. Among the Parties to the United Nations Framework Convention on Climate Change (UNFCCC), and in the context of the Green Climate Fund in particular, there is a strong expectation that a substantial share of this finance will come from private sources. Yet how realistic is this, particularly for Least Developed Countries (LDCs), which are among the most vulnerable to climate change impacts?

A large amount of private finance does flow into climate-related activities: 243 billion USD for mitigation-related activities in 2014 alone, by the latest estimate. Yet as little as 8% of that was invested outside the country where they originated – far less in LDCs.

Private finance flows for adaptation, meanwhile, are often difficult to track or, in many cases, even to identify. Unlike renewable-energy or energy-efficiency investments, whose contributions to mitigation can generally be quantified in a straightforward manner. An action that reduces vulnerability in one case can be useless, lead to maladaptation, or even exacerbate vulnerability in another context. Moreover, despite extensive outreach to businesses by the UNFCCC and governments, and multiple efforts to identify opportunities for private finance to support adaptation in developing countries, a compelling business case for large-scale adaptation investment, particularly in LDCs, has yet to be made.

This brief presents a comprehensive analytical framework for understanding private adaptation finance. It focuses on the interaction between enabling environments, mobilization, and delivery mechanisms. It examines not only how investment can occur, but also different ways in which adaptation objectives might fail to be met.

Download the discussion brief (PDF, 483kb)