Pauw p 20150709_1730_upmc_jussieu_-_amphi_24

© 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


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

2


Background (I)

UNFCCC negotiations are country-based , yet

increasing emphasis on private actors:

3

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)


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)

4

86%

14%

Overall global investments (UNFCCC, 2007)

Private

Public90%

10%

Dependent on private sector for income in DCs (SER, 2011)

Private

Public


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

5

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


6

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


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

7


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

8


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

9


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

10


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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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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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

mailto:[email protected]



http://www.die-gdi.de/



http://www.pieterpauw.eu/


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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http://dx.doi.org/10.1080/14693062.2014.953906

http://dx.doi.org/10.1080/14693062.2014.953906

http://dx.doi.org/10.1080/14693062.2014.953906

http://dx.doi.org/10.1080/14693062.2014.953906

http://dx.doi.org/10.1080/14693062.2014.953906

http://unfccc.int/adaptation/workstreams/nairobi_work_programme/items/4623.php


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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Science

Pauw p 20150709_1730_upmc_jussieu_-_amphi_24