As noted in the summary of tracked adaptation finance flows, 67% of all tracked adaptation finance to Africa in the Landscape came from DFIs in 2017 and 2018 (information on climate funds is separated given the uniquely adaptation-targeted nature of that finance). DFIs play a critical role in financing adaptation in Africa as their mandates align closely with adaptation outcomes. DFIs are increasingly mainstreaming climate adaptation across projects through climate risk and vulnerability assessments. They have a low capacity to raise funds from international capital markets as sometimes they have a high ratio of shareholders’ equity to debt and can not borrow from markets.

DFIs can assist country governments in building adaptive capacity for mainstreaming adaptation and can support private investments by testing innovative financial instruments. DFIs are also uniquely placed to support adaptation investments in the private sector which can create positive externalities for social and economic development. For example, they can support private sector adaptation projects by bridging the knowledge gaps through tools such as feasibility studies, business risk assessments, technical assistance, and market studies. They can provide concessional finance to MSMEs engaged in adaptation activities in cases where returns are low. Intermediated financing to local banks which on lend to MSMEs to undertake resilient practices can be another way to finance adaptation with low transaction costs.

Although not a development finance institution, as an international financial institution the International Monetary Fund is working towards integrating climate change into its economic surveillance programs through its “Article IV” mandate and consultations. As noted in the Introduction, a proposed SDR allocation of $650 billion globally will also potentially increase resources for a green and resilient recovery in Africa.

 Modest risk appetite Risk Appetite

Risk averse policy approach and/or mandated commercial returns required.

 Regulatory/legal mandate to embed climate change in investment decisions Climate Mandate

Presence of legal/regulatory frameworks to embed climate change in investment decisions.

 Minimal restrictions on direct fundraising Ability to Raise Funds

Stronger mandate to embed climate change strategy in investment decisions; climate harming investments prohibited.

 Ability to determine funding mandate, approval may be lengthy Flexibility to Deploy Funds

Ability to determine funding mandate and vehicle, though process or change; approval or exemption may be lengthy and difficult.

This project has been developed in partnership with the Global Center on Adaptation


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