How to unlock finance in support of developing countries’ low-carbon and climate-resilient growth is a central issue of concern for policymakers around the globe. As evidence grows regarding the negative impacts of climate change on human health, economic activity, natural resources and physical infrastructure, finance in support of climate change adaptation has been attracting more attention, especially for countries that are the most immediately vulnerable to these adverse impacts.
In an effort to address this issue, during the 2009 United Nations Framework Convention on Climate Change (UNFCCC) negotiations in Copenhagen, developed countries committed to a goal of mobilizing jointly USD 100 billion a year by 2020 to address the climate mitigation and adaptation needs of developing countries. This funding is to come from a wide variety of sources, public and private, bilateral and multilateral, including alternative sources.
There are few known examples where public finance has mobilized private adaptation finance. This is to some extent due to the difficulties in tracking adaptation-related finance. More work is needed to better-understand how to identify, measure, and track public interventions that mobilize private finance for adaptation, and how similar interventions can be most effective in the future. Analysis has, however, so far primarily focused on mitigation, only partly dealing with adaptation due to significant data constraints and methodological challenges.
The OECD-hosted Research Collaborative on Tracking Private Climate Finance, under which this Climate Policy Initiative-led research was conducted, aims to develop more comprehensive methodologies for estimating private finance flows mobilized by developed countries’ public interventions for climate action in developing countries. This study advances our understanding of private finance for climate change adaptation mobilized by public finance interventions by:
- Taking stock of data availability and on-going efforts to measure private finance mobilized for climate action in developing countries, including for adaptation activities
- Developing and evaluating a range of methodological options to estimate private finance mobilized by public adaptation finance
- Conducting case study-based pilot measurements of mobilized private adaptation finance by testing these methodological options on two bilateral public finance adaptation projects
Key findings include:
- There is currently limited publicly-available data on private adaptation finance mobilized by public interventions in and to developing countries but promisingly, development finance institutions are developing methodologies to track private finance associated with their public climate finance interventions, covering both mitigation and adaptation finance.
- There is an inverse relationship between the accuracy of the approaches used to measure mobilized private finance and the incentives they provide on the one side, and their practicality and standardization potential on the other.
- Direct private finance mobilization is easier to identify and more practical to quantify than indirect mobilization. However, not considering the latter can lead to underestimations of total private finance mobilized, and to overestimating the direct mobilization impact of public financial support.
- Assuming that the provision of public support is in part motivated by the expected private finance mobilized, excluding indirect mobilization may disincentivize the provision of upstream project, technology, and market development support.
- A coherent use of approaches among public actors supporting an individual activity, project or program is needed to minimize risks of double counting. This is particularly the case where both upstream and downstream public finance interventions can claim to have participated in mobilizing the same private finance.
Download the full report for definitions of direct and indirect private finance mobilization and in-depth examination of these issues.