© 2012 Deutsches Institut für Entwicklungspolitik (DIE)
Private finance for adaptation:
Do private realities meet public ambitions?
Pieter Pauw, 09.07.15, OCFCC
Deutsches Institut für Entwicklungspolitik/ German Development Institute (DIE)
Research in cooperation with Richard Klein, Pier Vellinga & Frank Biermann
© 2012 Deutsches Institut für Entwicklungspolitik (DIE)
Content of presentation
Private finance for adaptation:
Do private realities meet public ambitions?
1. Background
2. Existing private contributions towards adaptation
3. UNFCCC’s Private Sector Initiative
4. Conclusion & Discussion
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© 2012 Deutsches Institut für Entwicklungspolitik (DIE)
Background (I)
UNFCCC negotiations are country-based , yet
increasing emphasis on private actors:
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Private sector as source of finance in Copenhagen USD
100 billion climate finance pledge
Literature is still about conceptualizing private climate
finance
Increasing need to demystify concept of ‘adaptation’
‘Changes in corporate behaviour, and in the way private
investment is directed, will prove at least as significant in
winning the climate battle as direct Government action’
(Kofi Annan, SG UN, at COP12 in 2006)
© 2012 Deutsches Institut für Entwicklungspolitik (DIE)
1. Background (II)
Public funding alone is likely to be insufficient to address
climate change (AGF, 2010)
‘unique expertise, a ‘capacity to innovate and produce
new technologies for adaptation’ (UNFCCC, PSI text)
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86%
14%
Overall global investments (UNFCCC, 2007)
Private
Public90%
10%
Dependent on private sector for income in DCs (SER, 2011)
Private
Public
© 2012 Deutsches Institut für Entwicklungspolitik (DIE)
1. Background (III)
Public sector - cost narrative: secondary response to CC;
public good; address incremental impacts or reduce
vulnerability of economy, society and ecosystems
Private sector - revenue narrative: reasonable, relatively
quick and predictable returns, at acceptable risks
adaptation and mitigation mostly side-benefits
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Climate risk m’ment
Adapt operations to stay
in business or to maintain
profit levels under
changing climatic
conditions
•Direct risks
•Indirect risks
PRIVATE
MOTIVATION
TO ADAPT
Business opportunities
•Market for new and
innovative products
•Increased amount of
public support for
implementation of
adaptation projects
© 2012 Deutsches Institut für Entwicklungspolitik (DIE)
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Direct and indirect climate risks for business
Impact on markets
Extreme weather
Financial risk
Political risk
Regulatory and legal risk
Rising insurance policies
Impacts on local communities/workforce
Disruption of supply chains
Water scarcity
Sea-level rise
Temperature change
Local exposure Distant exposure
Increased competition for resources
Reputational risk
Direct risks
Indirect risks
Legend
Adapted from Pauw (2014) based on e.g. PwC (2010), UN Global Compact et al (2011) and Naidoo et al. (2012)
e.g. new land use or
zoning regulations;
water use efficiency
standards
damage to physical assets
(e.g. infrastructure) and
agricultural production (e.g.
soil salination)
decreasing reliability of
supplies (e.g. electricity,
agricultural commodities
© 2012 Deutsches Institut für Entwicklungspolitik (DIE)
Existing private adaptation contributions
Literature:
– Atteridge, (2011); Biagini & Miller (2013); Christiansen
et al, (2012); Intellecap (2010), Kato et al (2014);
Naidoo, Vaz & Byaba (2012); Oxfam America (2009);
Pauw (2014); PwC (2010); Stenek et al., (2013);
Surminski (2013); UN Global Compact and UNEP
(2012); UN Global Compact, UNEP, Oxfam and WRI
(2011); etc. etc. etc.
Private Sector Initiative (PSI) of the UNFCCC
Nairobi work programme on impacts, vulnerability
and adaptation to climate change
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© 2012 Deutsches Institut für Entwicklungspolitik (DIE)
Existing private adaptation contributions: PSI
Paper on PSI database (Pauw et al., in review):
– Private adaptation projects: all over the world, in all sectors
– Multinationals, but also medium-sized enterprises
– At all levels: from local (61%) to regional (17%)
Do such PSI projects meet 10 ‘climate finance criteria’?
1. Distilled from Copenhagen Accord & Cancun Agreements:
adequate; predictable; sustainable; scaled up; new and
additional; improved access; balanced allocation between
CCA & CCM; prioritised to most vulnerable DCs; mobilized by
developed countries; transparency
2. Interpret and ‘translate‘ criteria in private sector realities
3. Matched criteria with PSI case studies
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© 2012 Deutsches Institut für Entwicklungspolitik (DIE)
Private Sector Initiative - registry
Case studies 2-6 pages long, self-written, unverified
but high diversity, quantity (N=101), comparability
(same format) and accessibility (UNFCCC website)
Representative?
85 case studies analysed
E.g. water resources (52% of cases) overrepresented; tourism
(7%) underrepresented
Front runners but closest to UNFCCC
Adaptation finance implicit part
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© 2012 Deutsches Institut für Entwicklungspolitik (DIE)
Results (I)
Deliberate adaptation?
– 55% of the case studies describe climate change impacts
– Not single case study defines concept of adaptation
– 5 case studies do not mention climate change
1. Amount of finance (criteria: adequate, predictable,
sustainable, scaled-up)
– Private investments in all sectors, including in DCs
– Amount and predictability unclear
– Limited commitment to up-scaling and sustainability; lack
of detail
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© 2012 Deutsches Institut für Entwicklungspolitik (DIE)
Results (II)
2. Recipients of investments (criteria: improved
access, prioritization)
– 33% in MVDCs (representing 94 countries)
– Win-win situations: 78% projects ‘reach out’; 59%
‘inclusive’ (N=80)
3. Overarching (criteria: transparency, mobilization,
new and additional)
– Limited evidence of ‘mobilizing’ policies (8); some PPPs
– Investments ‘new and additional’ to ODA
– Lack of ‘transparency’ on generation, governance,
delivery and use of finance
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© 2012 Deutsches Institut für Entwicklungspolitik (DIE)
Conclusion
Private realities do not meet UNFCCC ambitions
– UNFCCC ‘climate finance criteria’ useful to analyse
potential climate finance flows
– Although case studies contribute to adaptation, they
do not meet ten ‘climate finance criteria’, e.g.:
• Lack of transparency
• Unclear predictability and sustainability
• Limited prioritization to MVDCs,
• Hardly mobilized by developed countries
Close gap in realistic way?
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© 2012 Deutsches Institut für Entwicklungspolitik (DIE)
Discussion
1. UNFCCC alter criteria/definitions. Not realistic:
– Negotiations: even current criteria lack clear definitions
– Adaptation agenda already burdened by conceptual issues
2. Private sector effort to better understand UNFCCC
– Does not happen naturally. Lack of benefits/incentives?
Commercial confidentiality?
– Private adaptation ≠ public adaptation
– Alter PSI format (mandate!)
3. MRV on principally planned private adaptation finance
– Limits private adaptation finance to philanthropy + explicitly
publicly mobilised private finance
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© 2012 Deutsches Institut für Entwicklungspolitik (DIE) 14
Thank you for your attention
Pieter Pauw
German Development Institute
Tulpenfeld 6 / 53113 Bonn
Tel: +49 (0)228-949 27-204
Email: [email protected]
Twitter: @WP_Pauw
Website: www.die-gdi.de / www.pieterpauw.eu
© 2012 Deutsches Institut für Entwicklungspolitik (DIE)
References
AGF (2010). Report of the Secretary-General’s High-level Advisory Group on Climate Change Financing.
United Nations, New York.
Kato, T., Ellis, J., Pauw, P. & Caruso, R. (2014). Scaling up and replicating effective climate finance
interventions. Climate Change Expert Group Paper No 2014(1). OECD and IEA, Paris.
Naidoo, T., Vaz, K. and Byaba, L., 2012. Background Paper on adaptation. An introduction to adaptation in
view of developing a private financing approach for adaptation related projects using the CTI PFAN model.
CTI PFAN.
Pauw, W.P., Klein, R.J.T., Biermann, F. & Vellinga, P. (revised version submitted). Private finance for
adaptation: do private realities meet public ambitions?
Pauw, W. P. (2014) Not a panacea: private-sector engagement in adaptation and adaptation finance in
developing countries. Climate Policy (ahead-of-print), 1-21.
Pauw, W.P. & Pegels, A. (2013). Private sector engagement in climate change adaptation in the Least
Developed Countries: an exploration. Climate and Development 5(4), p. 257-267.
PwC (2010). Business leadership on climate change adaptation. Encouraging engagement and action.
London: Author.
SER (2011). Advies Ontwikkeling door duurzaam ondernemen. Sociaal Economische Raad, Den Haag
UNFCCC (2014). Adaptation Private sector Initiative (PSI).
http://unfccc.int/adaptation/workstreams/nairobi_work_programme/items/4623.php
UNFCCC (2010). Report of the Conference of the Parties on its fifteenth session, held in Copenhagen from 7
to 19 December 2009. http://unfccc.int/bodies/body/6383/php/view/reports.php (08.07.2014).
UN Global Compact, UNEP, Oxfam and WRI (2011). Adapting for a green economy: companies, communities
and climate change. A Caring for Climate Report
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© 2012 Deutsches Institut für Entwicklungspolitik (DIE)
UNFCCC‘s Private Sector Initiative
Some examples from the PSI database:
– Ericsson, in cooperation with MetOffice, MTN,
Gov’t of Uganda: providing SMS weather
forecasts to fishermen
– Cafédirect and GTZ: supporting small-scale
farmers in DCs to make their production more
climate-resilient
– Scotch Whisky Association and Scotch Whisky
Research Institute: scoping study to assess risks
and adaptation options; raise awareness
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