Climate Adaptation Notes is a structured funding mechanism aimed at increasing private, commercial bank debt, and institutional investment in water and wastewater sector infrastructure projects. The instrument combines short-term project financing for construction from commercial banks with long-term asset-based infrastructure funding provided by institutional investors. The target markets for Climate Adaptation Notes as designed are divided into three categories: pilot countries in the Southern African Common Monetary Union or tied to the South African ZAR, countries in the remainder of the Southern African Development Community (SADC), and then countries in the broader sub-Saharan Africa region.

Stage of Implementation

The instrument is currently in pre-piloting/fundraising stages and has not been implemented. To date, project implementers – Renewable by Nature and GFA Climate & Infrastructure – have identified and consulted with strategic partners, established a licensed independent fund manager, and been endorsed by the membership of the Global Innovation Lab for Climate Finance. Next steps for the instrument are to continue grant fund raising efforts to establish the debt capital markets platform and implement financial and impact management processes and then to mobilize investment to support equity project developers from DFI first loss capital providers, institutional capital, and commercial banks. Key challenges to instrument success include 1) project pipeline risk where lengthy project development cycles could reduce the pool of financeable projects and 2) monitoring and measurement challenges as the complexity of climate adaptation criteria can be an added burden for borrowers and lenders.

Actors Involved

  • Project developers: Project developers may be public, private, or joint (PPP) entities and can be the source of the climate adaptation projects in the water and waste sectors. Project developers have a relatively high-risk appetite, do not generally have climate mandates, and have limited independent capacity to raise capital.
  • Commercial banks: Are often the lead entity for origination of water projects and carry out financial and technical due diligence. Banks have construction project expertise, relatively higher risk appetites (as compared to institutional investors), and do not have fully committed mandates.
  • Institutional investors: Have largely avoided financing water and wastewater projects in Africa due to cost recovery challenges and the complexity of the technical due diligence. Institutional investors could provide the funding for the refinancing of water sector climate adaptation projects once they have successfully reached commercial operations if the financial structure is able to accommodate their re-finance of bank finance.
  • DFIs: Can provide the funding for a “first loss” subordinate debt tranche to credit enhance the funding structure and catalyze the long-term investors and mitigate their risk. DFIs also often provide guidance on climate adaptation screening and monitoring criteria of water adaptation projects.


  • Currency stability: CAN will function best in countries with an existing debt capital market (DCM). In many countries, local capital markets may not be sufficiently deep to offer project finance in local currency – this could limit the instrument effectiveness because it is designed to unlock liquidity in local debt capital markets. Southern Africa is well suited as a pilot region for this instrument because targeted Southern African Common Monetary Union countries benefit from relatively well-developed DCM.
  • Significant pools of project pipeline: Countries with significant pools of investable project pipeline in the water and wastewater sectors are strong candidates for CAN. This pipeline can be informed by a regulatory environment where adaptation projects are identified and prioritized and there is sufficient climate risk analytics capacity to ensure the projects meet target climate adaptation criteria.
  • Strong debt capital markets: Aligned with a need for currency stability, this instrument will also function best in countries or regions with strong untapped debt capital markets with limited investment in infrastructure and stakeholder environments including strong institutional investors. Pensions funds are a target for long-term commercial investment and 90% of pension fund assets in Africa are concentrated in four countries: South Africa, Botswana, Namibia, and Nigeria, three of which are CAN-targeted countries.

Applicable Countries

Given the use of local currencies, identifiable project pipeline, and deep institutional investor pool, countries/regions that could be well suited to a Climate Adaptation Notes model include the Southern African Customs Union (Botswana, Eswatini, Lesotho, Namibia, and South Africa).


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


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