The architecture of the various global climate funds is complex. I spent two days last week at the Adaptation Fund’s Readiness for Climate Finance Seminar, and the question top-of-mind now is this: How will all the funds I keep hearing about galvanize private-sector engagement in lower-income country adaptation.
First, the list of development agencies involved in climate financing astounds – in a good way, that is, if you think development funds help change the world for the better. Generally, I hold that view. And hats off to the Climate Funds Update for providing accessible information for those of us who think of this financing as a sideline.
Second, of those Funds that focus on climate resiliency (many also focus on low carbon development) – the Adaptation Fund, the Climate Investment Fund, the Global Environmental Facility, et. al. – are not looking at increasing private investment as a primary or secondary objective of their work. While the private sector certainly has helped execute some of the work funded by the millions already disbursed, no measures of the number of jobs created and other key economic and social barometers are tracked. Plus, the leaders I spoke with at this seminar couldn’t identify any names of local or multinational corporations involved in the work their institutions fund.
Third, an important element of these climate funds is that, in least developed countries, they are building government capacity to carry out resiliency projects through their thorough accreditation processes. The Adaptation Fund’s process seems particularly robust as they work doggedly with National Implementing Agencies to ensure the governments have the muscle and organization to successfully manage the work. In the development parlance, this is called the “enabling environment,” though at ND-GAIN we call it readiness.
Forth, for every person who thinks the private sector sees market growth from the $100B involved, another leader of the development community would furrow his or her brow at the notion. Their concept of private-sector engagement with that $100B holds that the private sector should invest its own funds in reducing vulnerability.
Fifth, the Green Climate Fund – the domicile of that expected annual $100B – is likely to be the private sector’s best bet, although it hasn’t enjoyed the best news of late (as even generous Sweden is holding back its funds). The Fund is selecting private-sector specialists to serve on itsPrivate Sector Advisory Group.
The Fund’s Private Sector Facility expects to “catalyze, mobilize and leverage flows of private climate finance in developing countries and make best use of the knowledge on best available technologies.” So, market experience and innovation in the private sector are recognized assets and, if its dollars are new and not simply reallocated from other development resources, the private sector may see an uptick in available resources. In any case, when the dust settles on GCF within the next few years (hope springs eternal about the pace of complex international mechanisms), more resources will be available for saving lives and improving livelihoods through low-carbon development and climate adaptation – a good thing.
So, the question remains: Is there money for the private sector in the global climate finance marketplace? From my POV, not yet. But, it will be important to stay tuned through resources such as the Climate Fund Update to try and detect the answer!