Private finance has emerged as a key issue in climate finance discussions, particularly in the context of international negotiations. This is partly because the volume of finance needed goes beyond what many expect public finance to be able to contribute. However, empirical analysis on the contribution of private finance to adaptation outcomes is limited.
The literature does not allow for a proper definition of the private sector’s contribution to the financing of, and expenditure on, adaptation-related outcomes. In light of this, the goal of this chapter is to outline key issues when considering the prospects of private sector financing for adaptation in developing countries.
The chapter begins by acknowledging sensitivities that frame any discussion of the contribution of private-sector finance to adaptation, including that while neoliberal political economies promote private adaptation finance, this goal may not be shared by all. Effective delivery is also crucial; it matters how finance connects with the priorities and needs of recipient countries and communities, and how lasting the outcomes are.
At present, the debate about private financing for adaptation focuses on climate-proofing in the infrastructure, water and agriculture sectors. Such focus on responding to impacts is arguably too narrow, and neglects key pre-conditions for adaptation, notably those related to human health and ecosystem resilience. For this reason, further consideration of the private sector’s potential to facilitate investment at scale in such public goods is warranted.
The first half of the chapter summarizes available information on private-sector adaptation finance, with a focus on climate bonds, remittances and domestic private investment. The second half outlines other financial and non-financial tools that could be used to mobilize private-sector adaptation finance.
Read the chapter and the full report (external link to UNEP)