2022 promises to be a critical year for adaptation finance. Egypt will host the first COP in Africa in six years and is likely to use its political leverage to advance the priorities of vulnerable countries. Work is slated to begin on a new long-term finance goal, as well as the global goal on adaptation.
Despite its growing importance on the international agenda, global financial support for adaptation continues to lag far behind that for mitigation. At the recent COP26 in Glasgow, the international community recognized that it needs to do more to close this “adaptation gap“.
As part of the “Glasgow Climate Pact”, wealthy countries pledged to double financial support for adaptation by 2024 from 2019 levels. If met, this pledge would amount to at least $40 billion annually. In a show of good faith, many countries also announced record commitments to the UN Adaptation Fund, totalling $350 million.
A recent systematic assessment of adaptation published in Nature Climate Change reinforces the need for wealthy countries to dramatically bolster their support in the coming years. It also points to the need to reconsider how this funding is delivered. Accelerating a shift to more nimble, decentralized models of finance will help funding reach vulnerable communities and support adaptation where it is already well under way.
Adaptation is widespread, but fragmented, local, and incremental
A global network of more than 120 adaptation experts reviewed >48,000 articles for evidence of adaptation. We first used machine learning to identify 1,682 peer reviewed studies that documented adaptation from 2013–2019. We then examined these studies in-depth to determine where, how and how effectively adaptation is occurring.
Only 3.4% of the studies empirically linked adaptation to a reduction in risk. A higher number of documented responses are likely to also have reduced risk, but did not measure it.
The findings show that though adaptation is widespread, it is mostly fragmented, local, and incremental. A total of 82% of documented responses occurred at local levels.
The assessment found only limited evidence that current adaptation is effective. Only 3.4% of the studies empirically linked adaptation to a reduction in risk. However, it is important to distinguish between evidence of risk reduction and actual risk reduction. It is likely that a higher number of documented responses reduced risk, but did not measure it.
On the one hand, these findings are discouraging. We conclude that humanity is likely not adapting at the speed and scale necessary to match the climate risks we face.
On the other hand, a more encouraging perspective emerged. We found that a significant proportion of adaptation is occurring autonomously, in the absence of external support. Adaptation is already underway in all types of communities, from large cities to agrarian villages to informal settlements.
Communities, households and individuals are responding and self-organizing in the face of climate hazards. These initiatives are often led by local government and civil society and community groups, especially in the Global South, where financial and institutional support is the most limited.
These findings indicate that the international community must not only increase financial support, but also do more to recognize and enable these forms of small-scale locally driven adaptations.
The limits of top-down adaptation
Concerns are growing that dominant models of international finance are failing to meet adaptation needs.
Most international funding for adaptation is delivered through top-down frameworks. International organizations – such as the World Bank, regional development banks and UN agencies – plan most projects. National governments provide varying levels of input and help to implement. Local communities are consulted, but often only superficially.
Many have criticized the top-down model for imposing objectives on communities and ignoring contextual differences that shape adaptation.
The global assessment points to a mismatch between this model and the scale of adaptive action. Most documented adaptation is local, often led by small local government and civil society organizations. However, most international financing is provided by large projects and grants, usually in the millions of dollars.
The scale and complexity of project management requirements inhibit local level organizations from accessing funding. High transaction costs disincentivize multilateral organizations from engaging with small organizations. Currently, less than 10% of funding reaches local levels.
There is also a mismatch in speed. Climate hazards are evolving quickly. Most projects are implemented on a five-year timeline. Projects often stretch for seven to eight years, including conceptualization, application, and review stages before the project begins, and evaluations after it ends. Such long project cycles may not enable communities to respond rapidly to evolving risks.
Finally, a growing body of evidence indicates that funding is not reaching the most vulnerable communities. This is at least partially because the distribution of funding relies on international actors, who are often unfamiliar with local dynamics, and national actors, who are prone to politically motivated decision-making.
These dynamics make it more difficult to direct adaptation funding to politically marginalized groups or to those who operate outside national political structures, like many indigenous groups.
Funding in large projects also tends to be concentrated, encouraging low-risk interventions. This risk adversity decreases the likelihood that projects will be funded in communities in unstable and conflict-prone regions even though they are among the most vulnerable in the world.
Emerging models of decentralized finance
Recognizing these limitations, multilateral climate funds like the Green Climate Fund (GCF) and the Adaptation Fund are experimenting with new approaches to adaptation finance.
They have sought to make funding more “country-driven.” Their models of “direct access” allow national level institutions to manage funding without an international intermediary.
The GCF is also experimenting with an “enhanced direct access” (EDA) model. In this approach, national institutions are empowered to sub-grant funding to local organizations.
Two EDA pilot projects are currently underway. A $10 million pilot in Namibia promotes community based natural resource management as an adaptation strategy. A national organization, the Environmental Integrity Fund, has issued 31 sub-grants to local civil society groups.
A second $22 million pilot to enhance hurricane preparedness recently began in the Caribbean nations of Antigua and Barbuda, Dominica and Grenada.
A more contextual and inclusive form of adaptation finance
In contrast to the dominant top-down model, these new approaches have the potential to enable more inclusive “bottom up” adaptation.
By empowering national level institutions, the “direct access” model brings decision-making closer to the local level. The EDA model takes this one step further, bringing decision-making directly to impacted communities.
By channeling funding to local organizations through sub-grants, EDA can enable the development of adaptation strategies that are guided by local objectives and grounded in local context. Because it engages a broader range of actors, the approach also has the potential to be more democratic.
EDA can also help to address the mismatch of scale. Local organizations can recognize and support small-scale, autonomous forms of adaptation that are already underway. They can help to institutionalize self-organized and collective action.
EDA can also help multilateral organizations to be more responsive in the face of rapidly evolving climate threats. Smaller sub-grants with faster timelines could enable communities to act more quickly and learn which strategies are effective.
Multilateral organizations can also learn from and scale-up effective strategies. This is especially the case if empirical evaluation of risk reduction is built into sub-granting cycles. EDA provides global organizations an opportunity to become nimbler and more responsive.
Finally, EDA has the potential to improve the reach and inclusion adaptation finance. The model encourages a broader geographic dispersion of funding. Under the pilot program in Namibia, sub-grants have reached 12 of the country’s 14 regions.
Lower barriers to access also increase the likelihood that organizations in highly vulnerable and politically marginalized communities will benefit from funding. Smaller sub-grants could also reduce the risks associated with funding adaptation activities in unstable and conflict-prone areas.
Accelerating the shift to decentralized finance
Models of decentralized adaptation finance are relatively new and untested. Only a small proportion of international funding is channeled through “direct access” and EDA channels. Despite efforts to make funding more “country-driven,” international organizations continue to design and implement most projects.
The GCF has accredited an increasing number of national institutions for “direct access”, while the GCF Board has approved in principle $200 million in funding for eight additional EDA pilot projects.
Bottom-up adaptation cannot solve all problems
Decentralized funding will not be a panacea for all the challenges posed by adaptation. Global inequalities will continue to determine the sufficiency of funding. Inequalities within communities will continue to shape who has access to resources, including international funding. Wealthy countries are wary of ceding control to sub-national levels, fearing that funding will be misused.
There is a particular risk that local short-term solutions could prove maladaptive in the long-term. Top-down planned interventions will likely continue to be appropriate in situations that require coordination across large geographic areas or levels of government.
Nevertheless, decentralized models offer a pathway to support the sort of locally driven adaptation the global assessment demonstrated is already widespread. In balance with planned interventions, they have the potential to facilitate the rapid and inclusive adaptation needed to match speed and scale of climate hazards.