The private sector is already an important source of climate finance. Multilateral and bilateral development banks, for instance, issue generic bonds as a means of raising private finance from capital markets, some of which is then used to support projects that deliver climate change outcomes. However, the major focus of the private sector to date has been on supporting mitigation activities.
There is an emerging market for raising new finance from the private sector for adaptation. Recent signals from large institutional investors suggest that further capital could be raised specifically for adaptation activities, provided the right investment products are available.
There are various ways in which private finance can support adaptation. Debt, in particular, can be used as an enabling instrument for both publicly and privately initiated adaptation, including direct project lending and credit lines to local finance institutions. However, to reach the poor, finance may need to be delivered in new ways, including through microfinance products.
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