Investment in projects that help countries adapt to climate change attracted around USD 20-24 billion in 2012, according to CPI’s recently published Global Landscape of Climate Finance 2013. However, due to data gaps and limited understanding of private sector adaptation efforts, the Landscape 2013 only tracks public adaptation finance.
While difficult to track, private sector investments in adaptation are critical to scale up climate finance efforts to the levels required by projected needs. Private actors, however, are not fully aware about climate-related risks and opportunities, even if climate change can directly affect their assets and revenues. Knowledge, technical, financial, and risk barriers can hinder their engagement.
The public sector can play a role in helping to overcome these obstacles. To better understand how public resources can be deployed to engage private actors in building countries’ climate resilience, a forthcoming San Giorgio Group case study explores approaches taken on-the-ground by the Pilot Program for Climate Resilience (PPCR) in the Nepalese agricultural sector.
The Nepalese project, executed by the International Finance Corporation, is the first of 11 private sector projects in the PPCR portfolio to attract the engagement and interest of private sector participants, such as agribusiness companies, in contributing toward the country’s adaptation efforts. Processors of rice, maize, and sugarcane – among the most vulnerable crops – have committed to train farmers on how to avert climate-related losses and to increase productivity, through knowledge and training tools provided with the support of PPCR’s funds. The overarching goal of the Nepalese project is to build models that make climate-resilience a long-term business for the private companies involved, thereby creating the conditions for their engagement beyond the project’s life. This is essential for scaling-up resources and achieving transformational results.
This project is just one example of the broader efforts of the Multilateral Development Banks (MDBs) involved under the PPCR. Both the private and public sector arms of MDBs are exploring ways to develop innovative private sector-oriented projects to engage private actors in activities leading to countries’ enhanced resilience, or supporting the creation of enabling frameworks conducive toward greater private sector’s involvement in strengthening climate resilience.
However, getting private actors on board in activities that reduce countries’ vulnerabilities to climate risks in Least Developed Countries – the main target of PPCR activities – is a challenging undertaking. Unfavorable investment climates and underdeveloped private sectors are limiting the opportunities for engagement. These and other obstacles to progress for PPCR private sector interventions in countries such as Mozambique, Niger, and Zambia were among the topics discussed at the PPCR meeting held in Washington last week.
Nevertheless, exploring ways to engage the private sector and learning from these experiences is part of the game in pilot initiatives. To experiment further the PPCR established a USD 70 million private sector competitive reserve in November 2012. Through the private and public sector arms of the MDBs – AfDB, EBRD, IADB and IBRD – PPCR pilot countries submitted 11 project proposals for activities in nine countries. The six projects selected at the PPCR meeting last week, for an investment of about USD 41 million in concessional loan resources, range from the energy and infrastructure to the agriculture and forestry sectors in Haiti, Jamaica, Mozambique, Saint Lucia, and Tajikistan.
Beyond the PPCR, MDBs are also exploring ways to pilot and test private sector adaptation approaches in Middle Income Countries such as Turkey. These initiatives are critical to generate the learning ground and experience that could then be subsequently replicated in Least Developed ones.
These efforts show that the PPCR and MDBs are facing the challenges and developing new approaches for engaging the private sector. This is important, as resilience in an ever warming world will depend on decisions and actions taken by millions of private individuals and companies. Those decisions and actions will depend on how quickly we can learn to engage them effectively.
This post was updated on November 19, 2013 to reflect greater accuracy around the MDBs involved in the 11 PPCR projects.