Abstract
Adaptation finance describes new and additional funding for all climate adaptation efforts, including the development of adaptive capacity and expenditure on adaptation costs by public and private actors. Adaptive capacity includes the enhancement of general and specified resilience, which are attributes which may reduce efficiency or profitability. Adaptation finance faces a dual requirement to address both vulnerability and profitability. This complicates the design of financial instruments, giving rise to a need to compare the costs and benefits of resilience. The absence of a metric of adaptation performance beyond monetary investment implies that the gain in adaptive capacity cannot easily be compared with the loss in efficiency. This entry outlines a unified framework that integrates efficiency and vulnerability to determine the categories of financial instruments that can be utilized to direct capital toward the enhancement of adaptive capacity and resilience in specific situations. Instruments analyzed include insurance products, pay-for-success contracts, green and climate resilience bonds, asset-backed securities, biodiversity offset markets, and debt-for-nature swaps.
This is a preview of subscription content, log in via an institution.
References
AFME. (2019). Principles for developing a green securitisation market in Europe. Retrieved from https://www.afme.eu/Portals/0/globalassets/downloads/briefing-notes/2017/110919%20AFME%20Green%20Securitisation%20Position%20Paper.pdf?ver=2019-09-11-144252-467
Asiedu-Akrofi, D. (1991). Debt-for-nature swaps: Extending the frontiers of innovative financing in support of the global environment. International Lawyer, 25, 557–586.
Averchenkova, A., Bhattacharya, A., Calland, R., Gonzalez, L., Martinez-Diaz, L., & van Rooij, J. (2020). Delivering on the $100 billion climate finance commitment and transforming climate finance. Retrieved from https://www.un.org/sites/un2.un.org/files/100_billion_climate_finance_report.pdf
Ayers, J., Schipper, E. L., Huq, S., Reid, H., & Rahman, A. (Eds.). (2014). Community-based adaptation to climate change: Scaling it up. Oxford, UK: Routledge.
Balboa, C. M. (2016). Accountability of environmental impact bonds: the future of global environmental governance?. Global Environmental Politics, 16(2), 33–41.
Berrang-Ford, L., Biesbroek, R., Ford, J. D., Lesnikowski, A., Tanabe, A., Wang, F. M., … Jody, H. S. (2019). Tracking global climate change adaptation among governments. Nature Climate Change, 9(6), 440–449. https://doi.org/10.1038/s41558-019-0490-0.
Bose, S., Guo, D., & Simpson, A. (2019). The financial ecosystem the role of finance in achieving sustainability. Cham. Switzerland: Palgrave Macmillan.
Bougen, P. D. (2003). Catastrophe risk. Economy and Society, 32(2), 253–274. https://doi.org/10.1080/0308514032000073428.
Buchner, B., Clark, A., Falconer, A., Macquarie, R., Meattle, V., Tolentino, R., & Wetherbee, C. (2019). Global Landscape of Climate Finance 2019. Retrieved from https://www.climatepolicyinitiative.org/wp-content/uploads/2019/11/2019-Global-Landscape-of-Climate-Finance.pdf
Calvet-Mir, L., Corbera, E., Martin, A., Fisher, J., & Gross-Camp, N. (2015). Payments for ecosystem services in the tropics: A closer look at effectiveness and equity. Current Opinion in Environmental Sustainability, 14, 150–162. https://doi.org/10.1016/j.cosust.2015.06.001.
CARE. (2021). Climate adaptation finance: Fact or fiction. Retrieved from https://www.care-international.org/files/files/CARE_Climate_Adaptation_Finance_Fact_or_Fiction.pdf
Carpenter, S. R., Arrow, K. J., Barrett, S., Biggs, R., Brock, W. A., Crépin, A.-S., ... Zeeuw, A. D. (2012). General resilience to cope with extreme events. Sustainability, 4(12). https://doi.org/10.3390/su4123248.
Cassimon, D., Prowse, M., & Essers, D. (2011). The pitfalls and potential of debt-for-nature swaps: A US-Indonesian case study. Global Environmental Change, 21(1), 93–102.
Clapp, C. (2018). Investing in a green future. Nature Climate Change, 8(2), 96.
Clements, T., John, A., Nielsen, K., An, D., Tan, S., & Milner-Gulland, E. J. (2010). Payments for biodiversity conservation in the context of weak institutions: Comparison of three programs from Cambodia. Ecological Economics, 69(6), 1283–1291. http://www.sciencedirect.com/science/journal/09218009.
Climate Bonds Initiative. (2015). Roadmap for China: Using green securitisation, tax incentives and credit enhancements to scale green bonds. Retrieved from https://www.iisd.org/system/files/publications/greening-securitisation-tax-incentives-credit-enhancements-green-bonds-en.pdf
Climate Bonds Initiative. (2019). Climate resilience principles: A framework for assessing climate resilience investments. Retrieved from https://www.climatebonds.net/files/page/files/climate-resilience-principles-climate-bonds-initiative-20190917-.pdf
Climate Bonds Initiative. (2021). Tax incentives for issuers and investors. Retrieved from https://www.climatebonds.net/policy/policy-areas/tax-incentives
Climate Finance Lab. (2021). Ideas. Retrieved from https://www.climatefinancelab.org/project/?_sfm_type=Adaptation&_sfm_status=Endorsed-%2C-Fire%20Winner-%2C-In%20Development
Costanza, R., de Groot, R., Sutton, P., van der Ploeg, S., Anderson, S. J., Kubiszewski, I., … Turner, R. K. (2014). Changes in the global value of ecosystem services. Global Environmental Change-Human and Policy Dimensions, 26, 152–158. https://doi.org/10.1016/j.gloenvcha.2014.04.002.
Deaton, A., & Heston, A. (2010). Understanding PPPs and PPP-based national accounts. American Economic Journal: Macroeconomics, 2(4), 1–35.
Doshi, D., & Garschagen, M. (2020). Understanding adaptation finance allocation: Which factors enable or constrain vulnerable countries to access funding? Sustainability, 12(10), 4308. https://doi.org/10.3390/su12104308.
Druce, L., Moslener, U., Gruening, C., Pauw, W. P., & Connell, R. (2016). Demystifying adaptation finance for the private sector. Nairobi, Kenya: The United Nations Environment Programme (UNEP).
Environmental Finance. (2021). Award for innovation - bond structure (green bond): Symbiotics. London: Environmental Finance.
Environmental Protection Agency. (2017). DC water’s environmental impact bond: a first of its kind, U.S. Washington DC: EPA Water Infrastructure and Resiliency Finance Center.
Global Center on Adaptation. (2020). State and trends in adaptation report 2020: Building forward better from Covid-19: Accelerating action on climate adaptation. Retrieved from Rotterdam: https://gca.org/wp-content/uploads/2021/01/GCA-State-and-Trends-Report-2020-Online.pdf
Global Commission on Adaptation. (2019). Adapt now: A global call for leadership on climate resilience. Retrieved from Rotterdam: http://gca.org/wp-content/uploads/2019/09/GlobalCommission_Report_FINAL.pdf
Hall, N. (2017). What is adaptation to climate change? Epistemic ambiguity in the climate finance system. International Environmental Agreements: Politics, Law and Economics, 17(1), 37–53. https://doi.org/10.1007/s10784-016-9345-6.
Harrison, C. A., & Muething, L. (2021). Sustainable debt global state of the market 2020. Retrieved from https://www.climatebonds.net/files/reports/cbi_sd_sotm_2020_04d.pdf
Hazell, P., Anerson, J., Balzer, N., Clemmensen, A. H., Hess, U., & Rispoli, F. (2010). The potential for scale and sustainability in weather index insurance for agriculture and rural livelihood. Retrieved from Rome: https://www.ifad.org/documents/38714170/40239486/The+potential+for+scale+and+sustainability+in+weather+index+insurance+for+agriculture+and+rural+livelihoods.pdf/7a8247c7-d7be-4a1b-9088-37edee6717ca
Holling, C. S. (1973). Resilience and stability of ecological systems. Annual Review of Ecology and Systematics, 4, 1–23.
Huwyler, F., Käppeli, J., Serafimova, K., Swanson, E., & Tobin, J. (2014). Conservation finance: Moving beyond donor funding toward an investor-driven approach. Zurich: Credit Suisse, WWF, McKinsey Company.
ICMA. (2018). Green bond principles: Voluntary process guidelines for issuing green bonds. Retrieved from Paris: https://www.icmagroup.org/assets/documents/Regulatory/Green-Bonds/Green-Bonds-Principles-June-2018-270520.pdf
IMF Fiscal Affairs Department. (2021). Database of fiscal policy responses to COVID-19. Retrieved from: https://www.imf.org/en/Topics/imf-and-covid19/Fiscal-Policies-Database-in-Response-to-COVID-19
IPCC. (2012). Glossary of terms. In C. B. Field, Q. Dahe, T. F. Stocker, & V. Barros (Eds.), Managing the risks of extreme events and disasters to advance climate change adaptation: Special report of the intergovernmental panel on climate change (pp. 555–564). Cambridge: Cambridge University Press.
IPCC. (2014). AR5 climate change 2014 impacts, adaptation, and vulnerability. Fifth assessment report. Retrieved from https://archive.ipcc.ch/pdf/assessment-report/ar5/wg2/WGIIAR5-AnnexII_FINAL.pdf
Keenan, J. M., & Gumber, A. (2019). California climate adaptation trust fund: Exploring the leveraging of cap-and-trade proceeds. Environment Systems and Decisions, 39(4), 454–465. https://doi.org/10.1007/s10669-019-09740-4.
Kuhlmann, W., van der Mark, M., & Baffoni, S. (2019). Industrial tree plantations and green bonds: Investor briefing. Retrieved from https://environmentalpaper.org/wp-content/uploads/2019/05/EPN-2019-Industrial-tree-plantations-and-green-bonds.pdf
Lindenmayer, D. B., Hulvey, K. B., Hobbs, R. J., Colyvan, M., Felton, A., Possingham, H., ... Gibbons, P. (2012). Avoiding bio-perversity from carbon sequestration solutions. Conservation Letters, 5(1), 28–36. https://doi.org/10.1111/j.1755-263X.2011.00213.x.
Linnerooth-Bayer, J., & Hochrainer-Stigler, S. (2015). Financial instruments for disaster risk management and climate change adaptation. Climatic Change, 133(1), 85–100. https://doi.org/10.1007/s10584-013-1035-6.
Mandle, L., Ouyang, Z., Salzman, J., & Daily, G. C. (Eds.). (2019). Green growth that works: Natural capital policy and finance mechanisms from around the world. Washington, DC: Island Press.
Maynard, T. (2008). Climate change: Impacts on insurers and how they can help with adaptation and mitigation. Geneva Papers on Risk and Insurance: Issues and Practice, 33(1), 140–146. https://link.springer.com/journal/volumesAndIssues/41288.
Miteva, D. A., Pattanayak, S. K., & Ferraro, P. J. (2012). Evaluation of biodiversity policy instruments: What works and what doesn’t? Oxford Review of Economic Policy, 28(1), 69–92. http://oxrep.oxfordjournals.org/content/by/year.
Nicol, M., Cochran, I., & Shishlov, I. (2018). Green Bonds: Improving their contribution to the low-carbon and climate resilient transition. Retrieved from Paris: https://www.i4ce.org/download/green-bonds-improving-their-contribution/
Ostrom, E. (2010). Beyond markets and states: Polycentric governance of complex economic systems. American Economic Review, 100(3), 641–672. http://www.aeaweb.org/aer/.
Oxfam. (2020). Climate finance shadow report 2020: Assessing progress towards the $100 billion commitment. Retrieved from https://oxfam.app.box.com/s/djxmq18v80tkuec8xjwrpoch7bf7prjs/file/729355846954
Parker, C., Cranford, M., Oakes, N., & Leggett, M. (2012). The little biodiversity finance book. Oxford, UK: Global Canopy Programme.
Pauw, W. P. (2015). Not a panacea: Private-sector engagement in adaptation and adaptation finance in developing countries. Climate Policy, 15(5), 583–603. https://doi.org/10.1080/14693062.2014.953906.
Persson, A., & Remling, E. (2014). Equity and efficiency in adaptation finance: Initial experiences of the adaptation fund. Climate Policy, 14(4), 488–506. https://doi.org/10.1080/14693062.2013.879514.
Pirard, R. (2012). Market-based instruments for biodiversity and ecosystem services: A lexicon. Environmental Science & Policy, 19–20, 59–68. https://doi.org/10.1016/j.envsci.2012.02.001.
Rambarran, J. (2018). Debt for climate swaps: Lessons for Caribbean SIDS from the Seychelles’ experience. Social and Economic Studies, 67, 261.
Scherer, N. (2020). Insuring against climate change: the emergence of regional catastrophe risk pools. Routledge: Oxford.
Simmons, B. A., Ray, R., Yang, H., & Gallagher, K. P. (2021). China can help solve the debt and environmental crises. Science, 371(6528), 468. https://doi.org/10.1126/science.abf4049.
Stadelmann, M., Roberts, J. T., & Michaelowa, A. (2011). New and additional to what? Assessing options for baselines to assess climate finance pledges. Climate and Development, 3(3), 175–192. https://doi.org/10.1080/17565529.2011.599550.
Stadelmann, M., Michaelowa, A., & Roberts, J. T. (2013). Difficulties in accounting for private finance in international climate policy. Climate Policy, 13(6), 718–737. https://doi.org/10.1080/14693062.2013.791146.
Tuhkanen, H. (2020). Green bonds: A mechanism for bridging the adaptation gap? Retrieved from https://www.sei.org/wp-content/uploads/2020/02/sei-working-paper-green-bonds-tuhkanen.pdf
UN News. (2021, 25 January 2021). Scale up funding for climate adaptation programmes, Guterres urges. UN News. Retrieved from https://news.un.org/en/story/2021/01/1082842
UNEP. (2021). Adaptation Gap Report 2020. Nairobi. Accessed at https://www.unep.org/resources/adaptation-gap-report-2020
UNFCCC Standing Committee on Finance. (2018). 2018 Biennial assessment and overview of climate finance flows technical report. Retrieved from https://unfccc.int/sites/default/files/resource/2018%20BA%20Technical%20Report%20Final%20Feb%202019.pdf
United Nations Economic Commission for Africa. (2020). Economic report on Africa 2020: Innovative finance for private sector development in Africa. Retrieved from Addis Ababa: https://www.uneca.org/sites/default/files/fullpublicationfiles/ERA_2020_mobile_20201213.pdf
West, J. (2017). The long hedge: Preserving organisational value through climate change adaptation. Oxford, UK: Taylor and Francis.
Widge, V. (2021). Debt-for-climate swaps – Are they really a good idea, and what are the challenges? Retrieved from https://www.devex.com/news/opinion-debt-for-climate-swaps-are-they-really-a-good-idea-and-what-are-the-challenges-98842
World Bank Group, & Frankfurt School of Finance and Management. (2017). Results-based climate finance in practice: Delivering climate finance for low-carbon development. Retrieved from Washington, DC. https://openknowledge.worldbank.org/handle/10986/26644
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
Copyright information
© 2021 The Author(s), under exclusive licence to Springer Nature Switzerland AG
About this entry
Cite this entry
Bose, S. (2021). Adaptation Finance: A Review of Financial Instruments to Facilitate Climate Resilience. In: The Palgrave Handbook of Climate Resilient Societies. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-32811-5_15-1
Download citation
DOI: https://doi.org/10.1007/978-3-030-32811-5_15-1
Received:
Accepted:
Published:
Publisher Name: Palgrave Macmillan, Cham
Print ISBN: 978-3-030-32811-5
Online ISBN: 978-3-030-32811-5
eBook Packages: Springer Reference Earth and Environm. ScienceReference Module Physical and Materials ScienceReference Module Earth and Environmental Sciences