The World Bank Group finances adaptation primarily through two of its members which collectively form what is known as the World Bank: the International Bank for Reconstruction and Development, which provides financial development and policy financing, and the International Development Association which provides zero-to-low-interest loans and grants. To a lesser extent, adaptation finance is provided through the International Finance Corporation which supports private sector development and engagement in developing countries.
As part of the Group’s New Climate Change Action Plan (2021-25) 35% of its financing (approximately USD 98 billion in fiscal year 2021) will have climate co-benefits and at least 50% of that climate finance will be devoted to adaptation. In addition, 100% of IBRD’s and IDA’s financing (USD 30.5 billion and USD 36 billion, respectively, in fiscal year 2021) will be aligned with the Paris Agreement by 1 July 2023 and support will be provided for countries’ NDCs and long-term strategies, such as NAPs. New metrics will be developed to better measure results and impacts of climate-related interventions. This New Climate Change Action Plan needs to be viewed in conjunction with the green, resilient and inclusive development that is being promoted by the Group in response to the COVID-19 crisis.
As part of the Group’s New Climate Change Action Plan (2021-25) 35% of its financing (approximately USD 98 billion in fiscal year 2021) will have climate co-benefits and at least 50% of that climate finance will be devoted to adaptation. In addition, 100% of IBRD’s and IDA’s financing (USD 30.5 billion and USD 36 billion, respectively, in fiscal year 2021) will be aligned with the Paris Agreement by 1 July 2023 and support will be provided for countries’ NDCs and long-term strategies, such as NAPs. New metrics will be developed to better measure results and impacts of climate-related interventions. This New Climate Change Action Plan needs to be viewed in conjunction with the green, resilient and inclusive development that is being promoted by the Group in response to the COVID-19 crisis.
IIBRD’s climate finance is targeted at middle-income and creditworthy low-income countries while IDA’s finance targets particularly the poorest and most vulnerable. Both Group members provide their finance in the form of grants, (highly) concessional loans and other types of funding instruments. Countries can access funds primarily through their regular engagement with the Bank, as defined through their respective Country Partnership Framework. They can also chose the World Bank as their implementing agency when accessing funding from other channels and benefit from the Bank’s experience and co-financing opportunities. In addition, the Bank regularly invests in research on new and improved approaches to climate-resilient development in which countries are welcome to participate as pilots. Such initiatives around specific themes include, for example, those on climate-smart agriculture, resilient cities and transport or on the engagement of the private sector.
The World Bank’s Blueprint for Action for Enabling Private Investment in Climate Adaptation and Resilience is a specific initiative that aims at assisting governments in setting up enabling environments for private sector engagement and designing national adaptation investment plans.
Multilateral adaptation finance that is targeted at countries within a particular region is predominantly channelled by the regional Multilateral Development Banks. Among them are the Inter-American Development Bank Group (Latin America, Caribbean), the African Development Bank (Africa), the Asian Development Bank (Asia, Pacific), the Asian Infrastructure Investment Bank (Asia, Pacific), the European Bank for Reconstruction and Development (Central and Eastern Europe), the European Investment Bank (EU (90%) and beyond (10%)), and the Islamic Development Bank (Islamic countries in Asia, Africa and Latin America). Other such banks exist (e.g. the New Development Bank) but they have not yet set climate finance targets nor specifically reported on adaptation finance.
In total, these Banks have channelled almost USD 7 billion of adaptation finance to developing countries in 2020. Of these funds, about 93% stemmed from the regional MDB’s own account while the rest represented external resources managed by the regional MDBs in their capacity as implementing entities i.e. of the GCF, the Climate Investment Funds, the GEF, the Adaptation Fund or bilateral sources. The MDBs’ own resources are a composition of the banks’ capitalization by donor members as well as additional resources that the banks raise from the capital markets. In recent years almost all regional MDBs have set themselves total or percentage targets of climate finance and increased these targets for the post-2020 period, with some including a specific target for adaptation finance.
Adaptation finance by these banks is reported to cover the incremental costs of project components, subcomponents, or elements, or proportions of projects, which are considered to be inputs to an adaptation process and are intended to reduce vulnerability and build resilience to climate change.18 In 2020, the majority of all MDBs’ (including the World Bank’s) adaptation finance has been committed in the form of investment loans (64%), followed by policy-based financing (17%), grants (13%) and other financial instruments. It has targeted primarily the energy, transport as well as other built environment and infrastructure sectors (26%), followed by cross-cutting operations (23%) and water and wastewater systems (17%).
Countries can benefit from the regional MDBs’ adaptation finance as well as from their vast technical expertise and experience in the respective region via the following two means: either through their individual country programming with those banks that they are members of or by choosing a suitable bank as their implementing entity when applying to adaptation finance from one of the global channels (see section 2.2.2.1 here>>). Some of the banks have also established particular climate change trust funds, such as the Africa Climate Change Fund (AfDB), the Urban Resilience Trust Fund (ADB), or the Small Farmers Climate Change Adaptation Fund (IDB Lab with GCF) through which they channel climate/adaptation finance as well as technical support and knowledge transfer on behalf of a specific set of governmental or institutional donors. All these different avenues can be used by countries to receive support for the implementation of their NAPs.
The Pilot Programme for Climate Resilience
The PPCR was established under the Strategic Climate Fund – one of the two funds of the Climate Investment Funds which were created at the request of the G8 and G20 in 2008 to pilot and scale climate solutions in developing countries. The CIFs are financed by 14 donor countries, coordinated by the World Bank and implemented with the assistance of the MDBs and other partners.
The PPCR finances technical assistance and investments to support countries’ efforts to integrate climate risks and resilience strategically into core national development planning and implementation. It thereby focuses on activities that have the potential to scale up action or to spark transformational change as opposed to singular projects that have a limited impact both in terms of temporal and geographical scale. It supports two phases: First, a preparatory phase to develop a country’s Strategic Programme for Climate Resilience and readiness to absorb large-scale finance, providing approximately USD 1.5 million per country in grants. This phase is intended to build on an existing national programme, such as a NAPA, a NAP or another climate change strategy. And second, the implementation phase for which funds are available in the form of grants or concessional loans and should also be sought from other funding sources, such as the GCF. Both phases must be implemented with the support of one of the participating MDBs and in accordance with the policies and procedures of that MDB.
Until 31 December 2021 the PPCR had received a total of USD 1.2 billion in cumulative contributions. Over time it has expanded the number of participating countries. During the first phase (2008 – 2014) it supported 18 pilot countries of which nine were supported individually and an additional nine received support as part of two regional pilots (Caribbean and Pacific). For this phase, countries were not able to apply but were selected and invited by the PPCR Sub-Committee of the CIF Administrative Unit based on the recommendations of an expert group. In providing such recommendations the expert group took into account a combination of selection criteria19 as well as expert judgement and consultations with a range of stakeholders. In general, priority is given to highly vulnerable Least Developed Countries eligible for MDB concessional funds, including the Small Island Developing States.
Since May 2015, 10 additional countries have been selected to receive funding based on an expression of interest and a subsequent review and recommendations by an expert group.
In February 2020, the Business Development for Resilience Program was established as an additional window under the PPCR under which funds can be used to (a) develop innovative private sector resilience initiatives, (b) support Ministries of Finance and/or Planning to mainstream climate risk management into economic planning and development, and (c) provide project preparation grants and/or technical assistance to PPCR pilot countries. Under this window, funds are available to finance a pipeline of an additional 20 projects either under existing SPCRs or in other non-PPCR participating CIF countries (for activities a) and b)). As such, nine additional CIF countries have been receiving support under this window. The BDRP resources may also be used to support countries’ response to the COVID-19 crisis.
Funds are also available through the CIF’s Private Sector Set Asides that allocate concessional financing on a competitive basis to projects that engage the private sector across all CIF programmes.
As the PPCR is designed to integrate climate resilience into development plans, PPCR funded actions should, as an overarching principle, not be free-standing and should be fused with MDB resources and/or other parallel co-financing measures. Until December 2021 the co-financing ratio had been 1:2.3, whereby the MDBs remained the biggest source of co-financing, followed by recipient governments, bilateral/other donors, and the private sector.
In 2021, the G7 confirmed its commitment to provide up to $2 billion in additional resources for CIFs and the CIF has agreed to pilot five new investment areas of which two relate to adaptation: climate-smart cities and nature-based solutions.
A CIF PowerPoint Presentation on PPCR Fundamentals (2015) is available here>>.
The Adaptation for Smallholder Agriculture Programme
The ASAP is the flagship programme of the International Fund for Agriculture and Development for channelling climate and environmental finance to smallholder farmers. It has been launched in 2012 and has entered into its third phase in 2021. In the future the programme will ensure that approaches for addressing climate-related risks are integrated into all of IFAD’s portfolio of loans and grants.
The first phase of ASAP (2012-2017) has received USD 300 million in grant support. The overall target for the second phase (2018 – 2020) was USD 100 million. In 2021 the third phase (ASAP+) was launched with the aim of mobilizing a total of USD 500 million.
ASAP+ focuses on addressing the climate change drivers of growing food insecurity by:
- Increasing resilience of vulnerable communities to the uncertainty caused by climate change on food security and nutrition;
- Reducing greenhouse gases through win-win interventions that also yield significant food security benefits, particularly for vulnerable groups.
Investments support the following activities with a focus on multiple-benefit, community-driven approaches:
- Climate services – enhancing the use of climate information for decision-making and planning investments to increase resilience;
- Natural resource management and governance – strengthening the participation and ownership of smallholder farmers in decision-making processes and improving technologies for the governance and management of climate-sensitive natural resources;
- Women’s empowerment – increasing the participation of women in, and their benefits from, climate change adaptation activities;
- Nature-based solutions with high potential to decrease the vulnerability and enhance the resilience of smallholder farmers to climate change, while promoting ecosystem restoration;
- Carbon-sequestration, including through streamlining renewables.
In order to be eligible for ASAP funding, countries do not necessarily need to be ODA eligible countries, but need to be IFAD developing member states. ASAP+ will focus on countries where IFAD has an active portfolio and resources with the exception of countries where vulnerability to climate change and food insecurity is high and support from IFAD would greatly contribute to preventing further crises, e.g. in SIDS.
ASAP funds are provided in the form of grants which are joined with IFAD baseline investments. Their programming follows the IFAD project design cycle and is fully aligned with regular IFAD procedures and safeguards. As the funds are integrated into regular IFAD investments, e.g. as designed through the regular “Results-Based Country Strategic Opportunities Programmes”, there are no specific application procedures to access ASAP funds. Whether or not a regular investment will benefit from additional ASAP funds depends on a range of qualitative (e.g. additionality, level of support from beneficiary government) and quantitative (e.g. number of poor smallholders whose climate resilience is expected to increase) ex-ante criteria.
While in the past ASAP interventions have been implemented mainly through national governments, ASAP+ will also be able to be implemented by non-governmental organizations.
The Local Climate Adaptive Living Facility
The LoCAL was established by the UN Capital Development Fund in 2011 and is a mechanism dedicated to supporting local governments in LDCs and other developing countries in addressing climate change adaptation. It supports activities that increase awareness of and response to climate change at the local level; integrate climate change adaptation into local government’s planning and budgeting systems; and increase the amount of finance available to local governments for climate change adaptation. It thus assists in implementing national climate change strategies, such as NAPs, and also supports countries in obtaining direct access to international finance such as from the GCF and Adaptation Fund.
LoCAL started off in two countries and has since expanded to become a global mechanism. It is now active in 29 countries (25 LDCs) across Africa, Asia, the Pacific and Caribbean and has mobilized over USD 125 million to date.
Governments interested in implementing LoCAL express their interest to the UN Capital Development Fund. Once endorsed, LoCAL will be implemented within three phases: starting off with piloting LoCAL in 2 to 4 local governments over 1-2 cycles of investments, then expanding to at least 5–10 local governments and finally conducting a national roll-out, gradually becoming the national system for channelling domestic and international adaptation finance to the local level.
LoCAL provides performance-based climate resilience grants, which serve as a financial top-up to cover the additional costs of making local investments climate resilient, and combines these with technical and capacity-building support.
Delivering performance-based climate resilience grants typically involves a series of steps including climate, vulnerability and needs assessments, the development and implementation of local adaptation plans and measures, and finally performance appraisals and audits to inform subsequent grant allocations.
While LoCAL is flexible in that it is tailored to national circumstances and local contexts, it is standardized in its design, quality assurance, monitoring and reporting. Its biggest asset is that it uses existing national systems to channel finance to the local level instead of using a project or programme approach. To this end, its implementing partners are national and local governments as well as other in-country development partners that assist in building the capacity of local government authorities required for mainstreaming adaptation in the long-term.