Guidebook: Mobilising private sector finance for climate change adaptation
The manifestation of climate change i.e. a climate shock or stress, may lead to adverse effects that have direct and indirect impact on human beings and surrounding ecosystems. Climate change adaptation interventions lead to adjustment in natural or human systems which help in responding to such manifestations or their effects.
This guidebook has been drafted to resemble the typical three-stage approach which any adaptation project development process would follow. The flowchart given below provides the flow of activities from the project design to the implementation stage:
Each chapter of the guidebook details out the procedure proposed for project proponents to adopt while conceptualising and/or developing adaptation projects. At relevant sections, the guidebook consists of anecdotal references and best practices observed both in India and globally.
1. Designing a climate change adaptation project
The genesis of any climate change adaptation project will be from a problem perception.
This perception needs to be elaborated by means of a problem tree and validated by means of a climate risk assessment (figure 4).
Once the core problem, issues and the effect have been identified, a solution tree needs to be developed to identify the solutions.
Pertinent to the adaptation context, these solutions can be clustered in to structural or non-structural projects.
While structural projects involve development of physical infrastructure, non-structural projects involve use of knowledge, practice or agreement (like policies, laws, training, institutional strengthening, and technical assistance) to address a particular adaptation issue.
Figure 4. An example of a ‘problem tree’ for the core problem of decreased food availability (page 28 of the guidebook).
2. Securing project funding
In order to secure funds for the project, the guidebook prescribes the selection of an appropriate funding source as well as a funding mechanism.
There is a diverse range of sources available for financing a bankable adaptation project, wherein the guidebook provides key information required to understand the requirements and limitations of these sources.
Examples of such sources range from crowdfunding, central/state government funds/ schemes, capital market instruments, nonprofit organisations/funds, private sector and financial institutions (FIs) and bilateral/multilateral funding agencies.
Apart from the case of self-financing, most of the aforementioned funding sources have seen to be reluctant to fund projects alone, even though feasibility has been established.
This necessitates securing of funds from multiple sources and adopting anappropriate structuring of the funds to ensure risk normalisation.
The guidebook provides guidance to the project proponents in the appropriate mechanism by which risk is normalised either by sharing the risk or increasing risk coverage viz. blended finance, partial risk sharing facilities (PRSF), insurance products.
3. Project implementation
The guidebook provides a concise step-by-step process outlining the procurement and implementation stages of project development (page 74), as highlighted by figure 6:
Figure 6. Step-by-step guide to project procurement and implementation (page 74 of the report).