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The Oxfam-ADB Spat, Blended Finance Bounces Back, Urban Adaptation in Europe, and More
Influential nonprofit claims Asian Development Bank is over-reporting adaptation flows
Louie Woodall
May 06, 2024
AI-generated via DALL-E
Oxfam accuses the Asian Development Bank of overstating its climate adaptation financing, blended finance had a good 2023, the European Environment Agency reports on urban adaptation, three philanthropies stump up US$300mn for climate-related health impacts, and Europe’s “Digital Twins” are the Innovation of the Week
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The ADB Under Siege
The Asian Development Bank (ADB) “hugely overstates” the financing it provides for climate adaptation, according to a new analysis by the influential nonprofit Oxfam.
The study, released last week, claims that the ADB is over-reporting financing of adaptation projects by 44% on average. The nonprofit looked at 15 specific projects from 2021-2022 that had been categorized by the ADB as contributing to adaptation goals, and concluded that the actual amount of adaptation finance for these came to US$0.9bn, far lower than the US$1.7bn the bank reported.
A spokesperson for the ADB says the bank stands by its reported numbers.
Reported ADB total climate finance by financial instrument (2019 to 2023, Oxfam Calculations)
Oxfam argues that the ADB’s process for tallying up adaptation finance is subjective, leading to over-reporting and inconsistencies. The nonprofit recommends the bank shake up its methodology for counting and reporting adaptation finance so that there’s “clear documentation” of the reasoning behind particular categorizations and the valuations of the adaptation components of specific projects.
The ADB has pledged to deliver US$100bn in climate finance from 2019 to 2030, of which US$34bn has been earmarked for adaptation. Oxfam says to meet this goal, the bank has to scale its annual climate finance from an average of US$6.2bn to US$11.5bn, and the adaptation component of this from US$2.1bn to US$3.9bn.
In an interview with CNBC last week, ADB climate envoy Warren Evans reaffirmed the bank’s investment commitment to both climate mitigation and adaptation. “We have to deal with the realities of today. And the realities of today are that flooding, drought, heat waves, storms, storm surge, are increasing across our regions … so we have to deal with that reality: that’s adaptation.”
He added that a key focus of the ADB is increasing the amount of private sector capital going into climate finance, a particular challenge when it comes to adaptation: “On the mitigation side it's fairly easy to identify revenue streams from investments in renewable energy for example. So that's relatively easier to get private capital into those investments. Much more difficult is the adaptation side.”
One bright spot are nature-based solutions, which Evans called “win-win-win-win” investments that the ADB is working on scaling up. “When we look at those kinds of investments the opportunities for revenue streams for the private sector are emerging in a very major way,” he said.
Blended Finance: Let it Rip
Public-private “blended finance” deals are often touted as a way to shovel money into climate adaptation and other high-risk impact investments.
Blended finance instruments typically take some risk off the table for private investors by forcing public institutions to swallow any initial losses if an investment goes south. The argument is the subsidy is worth it, as otherwise private capital wouldn’t go near the investments in the first place.
New data from Convergence, a global network for blended finance, shows the market for these instruments is on the up, having rebounded to a five-year high in 2023.
Last year, blended finance totaled US$15bn, up from $9bn in 2022. Climate financing flows recovered especially strongly, increasing 107% year-on-year (from US$5.6bn to US$11.6bn). Many of these were big ticket deals too, with 48% exceeding US$100mn in size.
Convergence doesn’t break down climate blended finance into mitigation and adaptation categories, but certain deals have clear climate-proofing benefits. For instance, 40% of blended finance deals in the agriculture sector went toward climate resilience and/or sustainability.
Still, building momentum for climate resilience in this sector is hard. As Convergence writes, in agriculture “adaptation transactions can present additional risks due to their long-term focus, their complexity and specialized nature, and a general lack of understanding around the meaning and application of adaptation.”
Breakdown of agriculture deals by sub-sector, 2021-2023
Climate resilient infrastructure funds are also in vogue, Convergence finds. These include the Urban Resilience Fund (a partnership between The Rockefeller Foundation, UN Capital Development Fund, and Meridiam) Climate Investor 2 (co-funded by the European Commission, Dutch Fund for Climate and Development, among others), and Emerging Markets Climate Action Fund (from Allianz Global Investors and the European Investment Bank).
European Cities Wrestle with Adaptation Challenges
Cities are amplifiers of climate risks. Thanks to their density and structure, they are more susceptible to flooding after heavy rains and experience high temperatures more severely because of the “urban heat island” effect. Coastal cities face escalating storm surges, while those in dryer regions are likely to struggle with water scarcity faster than smaller conurbations.
Europe’s cities are waking up to these risks. A new report out of the European Environment Agency (EEA) explores the threats facing the bloc’s metropolises and provides ideas for climate-proofing them, in the hopes that policymakers will apply the learnings across the continent.
The current state of play is mixed. The EEA says that while good practices are being piloted and shared across cities, “they are not being scaled up quickly enough to keep pace with climate change.” Only half of European cities have dedicated adaptation plans, which though well up from 26% in 2018 still means plenty of urban centers are potentially underprepared for climate shocks. Moreover, only 55% of local climate action plans in Europe have metrics that can be used to measure adaptation progress.
Good practices are being tested and shared, although they are not being scaled up quickly enough to keep pace with climate change.
When it comes to particular adaptation measures adopted by cities, there’s a clear favorite: nature-based solutions (NbS). Across all local climate action plans in Europe, 91% include NbS adaptation measures. However, these may be unable to resist increasing climate shocks on their own. The report says cities may have to combine NbS with other actions, like reinforcing physical infrastructure, to ensure a high level of adaptation.
Cities shouldn’t sleep on other, less obvious, adaptation measures either. The report says updating building codes and tightening design regulations can also be used to manage climate risks by curbing runaway expansion and ensuring new buildings are energy and water efficient. Public education campaigns can also play a role in enhancing a city’s resilience.
As for what factors can ease the implementation of adaptation measures in cities, the report says citizen engagement is among the most important: “It is critical to involve citizens in planning, implementation and maintenance of actions as they can provide important information about local impacts of climate change and the appropriateness of specific adaptation measures.” Presumably, citizen participation can also help contain political backlash to adaptation measures. After all, folk are less likely to oppose a new flood barrier, urban park, or change in building regulations if they have a hand in their development.
However, the report concludes that “it is still difficult to assess what is really working” when it comes to urban adaptation. This in part because there is scant quantitative data showing the effectiveness of specific measures. Another reason may be the focusing of adaptation responses on specific climate hazards, rather than a broader categorization that prioritizes resilience against extreme weather as well as economic and political shocks.
Philanthropies Pour US$300mn into Climate Health Impacts
Climate change could make us sicker. Three philanthropies want to find out how badly.
Today, the Bill & Melinda Gates Foundation, Novo Nordisk Foundation, and Wellcome announced US$300mn for a three-year effort to tackle the health impacts of climate change, antimicrobial resistance, and infectious diseases.
Part of the funding will go toward enhancing climate data and investing in sustainable agriculture and food systems, in pursuit of “novel solutions” that can build resilience and “protect the health of vulnerable populations around the world.”
The package also promises direct support for researchers and institutions in low- and middle-income areas, where climate impacts are often the greatest.
💡Innovation of the Week💡
“Digital Twins” are all the rage in climate risk world. These are cutting-edge ensembles of models and projections used to produce virtual replicas of Planet Earth, allowing for in-depth, high-resolution studies into how the real world’s climate system is likely to react to global heating.
The European Union is going all-in on this technology. The EU Commission’s Destination Earth initiative has been working since 2022 to produce Digital Twins that can “anticipate extreme events and test and adapt policies addressing climate-related challenges.” Their goal is to produce “a digital replica of the Earth system by 2030.”
Right now, they’re developing not one, but two digital twins to aid in climate risk analysis and inform decision-making.
The first is the Climate Change Adaptation Digital Twin (ClimateDT). This should provide up-to-date climate impact projections that reach decades into the future and resolve at the scale of a few kilometers, the sort of resolution needed to provide governments, companies, and financial institutions clarity on their exposure to extreme weather events and long-running climatic shocks.
The fine grain analysis enabled by ClimateDT is a step up from standard climate tools, like General Circulation Models (GCMs), which generally have resolutions of between 250km and 600km. Moreover, these GCMs are generally not set up to simulate processes like ocean eddies and deep atmospheric convection, making their regional-level projections patchy and inaccurate.
ClimateDT isn’t as constrained. Here’s Sebastian Milinski, senior scientist at the European Centre for Medium-Range Weather Forecasts (ECMWF, one of the partners behind ClimateDT), to explain:
The digital twin’s core purpose is to inform climate adaptation decision-making in the EU and support implementation of the European Green Deal. Policymakers can use ClimateDT kind of like a crystal ball to show how selected climate policies and scenarios could play out on the climate system as a whole over the course of decades. Because of its kilometers-level resolution, users can also pinpoint those areas that may be most in need of A&R measures under different warming scenarios.
Five years of ClimateDT-generated data is now available for beta testers to play around with until May 17.
The second digital twin under development is the Weather-Induced Extremes Digital Twin (Extremes DT). Unlike its brother, this twin is designed to look days, rather than decades, into the future to project the impact of acute physical risk events like heavy rain events and tropical cyclones – again at the kilometer scale.
The predictions generated by this twin can be accessed by policymakers and climate-sensitive economic sectors to help prepare for coming climate shocks and choose appropriate response measures. Benoît Vannière of the ECMF can tell you more: