Demystifying Private Adaptation Finance
Most experts agree that the USD 100 billion required annual investment for adaptation cannot only come from public sources, but also from private investors. There are increasingly examples of adaptation measures at the local level and being financed, at least in part, by the private sector. Their effectiveness is less dependent on the actions of others and may even provide local benefits or business opportunities.
As part of GIZs larger Private Sector Adaptation to Climate Change (PSACC) programme, GIZ and the UNEP Finance Initiative (UNEP FI) has engaged the Centre, DIE and Acclimatise, to analyse where and how private sector finance is required to support objectives of adaptation and climate resilience in developing countries and emerging markets. Climate impacts and adaptation measures will be analysed through illustrative case studies and interviews which offer concrete insights into private finance for adaptation.
Since adaptation-related activities are almost as heterogeneous as economic activities the study uses 'adaptation themes' to cluster them. Each theme comprises a climate impact, a typical adaptation measure and typical commercial actor responses to these adaptation measures. This analysis enables the Centre team to determine which private finance instruments are relevant and well suited for financing which types of adaptation activity across a spectrum of finance instruments, used by a diverse set of actors from SMEs to large infrastructure projects.
The study then analyses different barriers to (private) adaptation finance and the consequence for risk and/or return of the corresponding investment (financing perspective). This analysis may be used as a guide to translate specific barriers into different policy options to overcome or compensate these barriers.