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Adaptation and the $100bn Climate Finance Target, a Bonn Conference Briefing, and More
Less than one-third of 2022 climate finance from rich countries went toward adaptation
Louie Woodall
June 03, 2024
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Rich World Meets $100bn Climate Finance Target… Two Years Late
Better late than never? Rich countries finally surpassed the US$100bn climate finance goal in 2022, two years after a United Nations-backed deadline, data released by the Organisation for Economic Co-operation and Development (OECD) shows.
At the UN Climate Change Conference (COP19) in Copenhagen 15 years ago, countries agreed to provide US$100bn annually to poorer nations by 2020. Rich nations fell short of this promise, however, mobilizing around US$83.3bn in 2020. In 2021, US$89.6bn was provided. The latest OECD data shows the target was finally exceeded in 2022, when US$115.9bn in climate finance was distributed.
A year-on-year increase in finance provided by public, multilateral, and private sources pushed the 2022 total above the totemic threshold. From 2021 to 2022, climate finance attributable to private sources surged 52% to US$21.9bn. This far outstripped the 19% climb in public finance. However, private finance still makes up the second-smallest portion of overall climate finance, behind export credits.
The (late) achievement of the climate finance target, while welcome, obscures the parlous state of climate adaptation finance. Digging into the OECD data, it’s clear that adaptation remains the (much) poorer sibling to mitigation. Total adaptation finance provided in 2022 amounted to US$32.4bn. While up from just US$10.1bn in 2016, growth year-on-year was less than US$8bn, compared to over US$16bn for mitigation.
Adaptation finance provided and mobilized 2016-2022 per component (US$bn)
Furthermore, only a fraction of adaptation finance — US$3.1bn — came from private sources, and much of this was attributable to just a handful of projects.
Where did this money go? The OECD says adaptation finance was spread across sectors, but that the water supply and sanitation, and agriculture, forestry, and fishing, accounted for the largest shares.
The latest figures from the OECD will serve as the backdrop for discussions on the New Collective Quantified Goal (NCQG) on climate finance, which is primed to be a hot topic at COP29 in Azerbaijan later this year. Preliminary negotiations on the goal are scheduled for the Bonn Conference starting this week (see below).
Climate-Proofing Loan Portfolios
Here’s one that slipped past me last week: a report from the United Nations Environment Programme Initiative (UNEP FI) and Munich Re on managing physical climate-related risks in loan portfolios.
The paper offers an “in-depth analysis of physical climate risk management” and aims to provide retail banks with the knowledge and solutions required to navigate an ever more volatile lending environment.
Some of the report’s recommendations will be familiar to climate risk veterans in the banking sector: establish a clear physical climate risk appetite, ensure effective governance of physical climate risks, and identify how these risks could interact with pre-existing credit, market, liquidity, and operational risk factors.
By proactively managing physical risks, banks can lead in crafting new financial products and services tailored to help the transition to a low-carbon economy, and thereby foster climate resilience and adaptation.
What’s new, to me at least, is the proposed framework for managing these risks, which appears to draw somewhat from lessons learned by the insurance industry — no surprise given Munich Re were co-authors.
“[M]ost banks tend to react to such [climate] events in an ad-hoc way and few offer relief measures to their borrower base as part of a comprehensive and preplanned risk management strategy,” the report reads. A more structured approach is recommended, one where climate-vulnerable loans are tagged with one of the following risk management approaches:
Accept: Absorb climate-related losses from credit defaults or delinquencies in own balance sheet.
Avoid: Withdraw from certain communities or entire regions which are highly exposed to physical climate risk, either temporarily or permanently.
Adapt: Increase resilience against specific natural perils, either through community infrastructure or site-specific modifications.
Transfer: Hedge potential losses from loan defaults or delinquencies to protect the own balance sheet as well as providing financial relief services to borrowers.
Climate adaptation finance pros may feel nervous having read this. A big concern in some corners of climate world is that escalating climate physical risks will lead to an exodus of capital from developing countries most in need of adaptation finance. The ‘Avoid’ option seems to be promoting this kind of exit — though interestingly the report notes that some banks contacted about the framework said “withdrawal poses a significant reputational risk … in addition to the loss in market share.”
The ‘Transfer’ option is also worth scrutinizing. Again, let’s remember that Munich Re contributed to the report. As experts in financial risk transfer, one can imagine that they and other reinsurers are in a good position to offer these kinds of risk transfer services to nervous lenders.
I’m interested in hearing from fellow adaptation-heads about this framework in advance of a more thorough write-up of this report later in the month. If you have an option, do get in touch.
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The Bonn Brief
All eyes are on Bonn, Germany this week for the start of 10 days of talks that will prepare the ground for the UN Climate Change Conference (COP29) taking place in Baku, Azerbaijan later this year.
It’s at the Bonn Conference (SB 60, for those in the know) where the mandates handed down from last year’s COP28 in Dubai will be fleshed out and efforts made to set the table for this year’s summit. On the agenda: increasing climate finance, driving progress on the next set of country-level climate action plans, and a major push advancing adaptation and resilience goals.
Let’s recap the status of adaptation efforts post-Dubai. At COP28, parties adopted the UAE Framework for Global Climate Resilience, a blueprint for achieving the global goal on adaptation (GGA) — a Paris Climate Agreement-era pledge “to enhance adaptative capacity, strengthen resilience and reduce vulnerability to climate change.”
The Framework specifically calls on countries to pursue a set of adaptation targets, related to: water, food systems, health impacts, ecosystems and biodiversity, infrastructure and human settlements, poverty, and cultural heritage. Furthermore, it says that by 2030 countries should have comprehensive national adaptation plans in place, informed by up-to-date climate hazard, vulnerability, and exposure assessments. A system for monitoring, evaluation, and learning national adaptation efforts is also promised under the Framework.
Lots was left out of the COP28 decision, though — not least what resources should be made available to implement the Framework. Last year’s agreement only went so far as to recognize that “finance, technology transfer and capacity-building” would be “crucial” to the Framework’s success and urged countries to “mobilize support” accordingly.
In addition, COP28 established a two-year UAE-Belém work programme to feed into the Framework, tasked with developing indicators for measuring progress toward the adaptation targets. This is of critical importance, since without appropriate gauges, it is challenging to track, evaluate, and learn from countries’ progress on adaptation. How this work programme was to be implemented was left unaddressed, however.
This is all to say there’s lots for the Bonn delegates to sort out over the next 10 days. The International Institute for Sustainable Development (IISD) says SB 60 should see countries agree on “modalities” for the UAE-Belém work programme, meaning the organization of work, timelines, inputs, outputs and the involvement of stakeholders.
Here in Bonn, I urge you to move from zero-draft to real options for a new collective quantified goal on climate finance. We cannot afford to reach Baku with too much work still to do. So, please, make every hour here count. We need more climate finance while we negotiate a future goal. Progress on one, enables the other
Looming over the conference as a whole is the question of what the New Collective Quantified Goal (NCQG) for climate finance will look like. There are plenty of details to iron out, including who should contribute and the respective role of private and public sector entities in delivering the agreed-on amount. It is also yet to be decided what indicators or objectives the NCQG should be tied to, and whether or not it should include thematic sub-goals — one of which could be tied to adaptation and resilience.
You can stay up-to-date on the latest developments out of Bonn by following the Climate Proof LinkedIn feed. I also recommend keeping an eye on Climate Proofer Sabrina Nagel’s profile — she’s on the ground at Bonn this week and is sure to be in the thick of things.
SIDS Summit Outcomes
Last week, we covered the launch of the fourth International Conference on Small Island Developing States (SIDS4), a summit of 57 countries on the frontlines of climate change.
The summit wrapped up last Thursday, with a list of commitments aimed at enhancing the SIDS climate resilience. These included a raft of financing pledges from developed countries and public finance institutions, though not all were brand new. Among the announcements was the establishment of a US$135mn Blue and Green Islands Integrated Program (BGI-IP) by the United Nations Development Programme (UNDP) and Global Environment Facility, which aims to foster nature-based solutions and ecosystem restoration. Fifteen SIDS, including Belize, Cuba,, Mauritius, and Trinidad & Tobago, stand to benefit.
Speakers at the conference put developed countries on blast for not providing more climate finance to struggling island nations: “A mere US$3 billion of the US$100 billion goal has been mobilized annually for the small island developing states and you compare that to the US$36 billion in profit that Exxon Mobil made last year. It represents a tenth of the climate finance that SIDS are attracting and mobilizing,” said Selwin Hart, UN Special Adviser to the Secretary-General and Assistant Secretary-General of the Climate Action Team.
Countries also took steps to operationalize elements of the Antigua and Barbuda Agenda for SIDS (ABAS), which was adopted unanimously by the SIDS4 participants. Antigua and Barbuda itself formally established the Center of Excellence for SIDS and Debt Sustainability Support Service, which will promote a “layered approach” to address island states’ existing debt and “create the much-needed fiscal space for investment in resilience building.”
What’s next for the SIDS? The UN says the Summit of the Future taking place in New York this September is the next milestone, where countries are expected to thrash out how they can cooperate better to deliver on shared goals around the Paris Climate Agreement, Sustainable Development Goals, and more.
WHO Makes Climate Health Impacts a Priority
Climate risks threaten to destabilize health systems around the world and amplify the spread of certain diseases. The World Health Organization (WHO) now has a plan to fight back.
Last Tuesday at the World Health Assembly, the WHO adopted a new four-year, US$1.1bn work programme that lists “climate change and health” as one of its six objectives. One of the programmes’ goals is to promote the development of more climate-resilient health systems.
“Climate change undermines the determinants of health, exacerbates weaknesses and vulnerabilities in health systems (e.g. by directly damaging facilities and interrupting service delivery), aggravates other threats to health services, and increases the burden of vector-borne and other climate-sensitive diseases and widens health inequities, with disadvantaged groups and vulnerable countries suffering disproportionately from both its direct and indirect effects,” the programme document reads.
Also last week, the Assembly passed a resolution recognizing climate change as an “imminent threat to global health”, one that demands an urgent mobilization of expertise and investment by countries. The resolution calls on WHO member states to conduct climate change and health vulnerability and adaptation assessments, integrate climate data into existing monitoring, early warning, surveillance, and data collection systems, and invest in climate adaptation measures.
Vermont Climate Superfund Becomes Law
A quick update for you on Vermont’s first-in-the-nation Climate Superfund Act.
Last Thursday, the Act officially became law — though without the governor’s blessing. In a short note to the Vermont State Senate, Governor Phil Scott said the Act would go into effect absent his signature.
His missive suggests Scott is far from happy with the law: “I’m deeply concerned about both short- and long-term costs and outcomes,” he wrote, including the possibility that Vermont will be buried in legal challenges from the fossil fuel industry.
“Taking on “Big Oil” should not be taken lightly. And with just $600,000 appropriated by the Legislature to complete an analysis that will need to withstand intense legal scrutiny from a well-funded defense, we are not positioning ourselves for success,” he added.
The Climate Superfund Act would force fossil fuel companies to pay for “climate change adaptive or resilience infrastructure projects.” The American Petroleum Institute has argued that the legislation is “bad public policy and may be unconstitutional”, setting the stage for a legal fight.
Other Stuff
How Painted Pavements Cooled a LA Neighborhood
This is cool — in more ways than one. Planetizen has a report on a “cool pavement” pilot in Los Angeles, which reveals the technology led to significant reductions in surface and ambient air temperatures. The findings suggest cool pavements could make a meaningful contribution to city-level efforts to combat extreme heat.
Don’t go thinking a cool pavement is one where the asphalt is replaced by ice. It’s actually all about paint. For this project, special reflective paint was applied to near 60,000 square meters (646,000 square feet) of pavement in the Pacoima neighborhood in LA. The paint reflects more solar radiation back into the atmosphere, meaning less heat is retained by the pavement.
GAF, a roofing and waterproofing manufacturer, sponsored the project as part of a public-private initiative with community and nonprofit partners. In March 2022, the initiative gathered data from Pacoima to identify baseline heat levels and surface reflectiveness. Then in July 2022, GAF applied reflective coatings to a designated test area within the community. A network of sensors and weather stations relayed information on the effectiveness of the coatings over a 12-month period.
The findings, which were posted in Environmental Research Communications earlier this year, suggest the cooling effect was substantial. This showed ambient air temperatures were up to 1.9°C lower during a September 2022 heat wave, and that on hot summer days air temperatures came in −1.4°C or −2.8°C lower, depending on the measurement system used, and surface temperatures −9.2°C or −12.2°C lower.
Other measures of pedestrian thermal comfort also evidenced a cooling effect, meaning community members felt less hot outside with the cool pavements than without them.
Yes, it’s true that the study was small in scale, and covered only one year’s worth of data. The authors of the study also found a wide variability in effects from the reflective pavements. However, the “dominant impacts” all trended positively — meaning the pavements provided genuine cooling without additional adverse impacts, like worse glare.
Next on the agenda: a test of GAF’s cool roofing technology in the Pacoima neighborhood.
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Thanks for reading!
Louie Woodall
Editor
