Insights
Key Insights from Pre-COP and IMF/World Bank Annual Gatherings
At this year’s Pre-COP and the IMF/World Bank Annual Meetings in Washington, DC, the focus on financing adaptation and resilience took center stage. Governments and organizations are increasingly acknowledging the critical need to address climate impacts alongside mitigation efforts. For vulnerable nations, adaptation is not just a necessity but a matter of survival, impacting our shared future prosperity. Beyond being a development challenge, investing in resilience presents a significant growth opportunity. A recent report highlighted the potential to create 280 million jobs in emerging markets and developing economies by 2035 through such investments.
For numerous countries, the escalating effects of extreme weather on communities underscore the urgency of establishing a clear, time-bound strategy for adaptation financing. This is both an existential challenge and a cornerstone for a successful COP. However, with the COP26 decision to double adaptation finance expiring, clarity is needed on how these financial needs will be addressed in the Baku to Belém Roadmap amidst challenging economic and political landscapes.
These were some of the critical insights for negotiators and leaders. But what steps are necessary to meet this demand?
Enhancing Adaptation Finance: Quality and Quantity
During the Pre-COP in Brasilia, adaptation finance emerged as a political benchmark for success in Belém. Vulnerable nations emphasized the urgency and demanded assurance that funds would be forthcoming. Their message was clear: the current system is fragmented, slow, and disconnected from the realities faced by those impacted by climate change.
A viable path forward must tackle these issues, forming part of the comprehensive package from COP. The finalized Global Goal on Adaptation will be a crucial test, requiring clear, manageable indicators, particularly regarding implementation means. Vulnerable countries, during the Climate & Development Ministerial, articulated three primary requests:
- Streamline access and harmonize processes to reduce burdens and expedite delivery.
- Ensure country ownership of solutions to align funds with domestic needs.
- Allocate dedicated finance for those in special circumstances, recognizing the extreme vulnerability of Small Island Developing States (SIDS) and least developed countries (LDCs).
Reforming MDBs to Boost Adaptation Finance
Multilateral development banks (MDBs) play a pivotal role in advancing financing needs at COP, with commitments to enhance adaptation finance, particularly for SIDS and LDCs. The upcoming updates to MDB climate strategies present an opportunity to scale efforts. This could involve revising adaptation finance targets, moving beyond percentage-based goals to more tangible, impact-focused strategies and reforms.
Collaboratively, MDBs have the capacity to significantly increase financing to generate large-scale adaptation solutions. Beyond ambitious internal goals, MDBs must make tangible progress on the G20 Bigger and Better Bank agenda, demonstrating a unified approach to challenges like sustainable cooling, food price volatility, and developing effective insurance models for rapid disaster response.
At COP, MDBs can showcase improvements in delivering adaptation finance by facilitating adaptive and resilient country platforms, addressing access and disbursement issues, mobilizing private finance, and outlining strategies to address the concerns of LDCs and SIDS regarding vulnerable country allocations.
Establishing a New Adaptation Finance Goal
There is a broad consensus that, despite shrinking international aid budgets due to fiscal and political constraints in contributor countries, it is crucial to protect concessional finance for the most vulnerable. This has led to calls for a dedicated adaptation finance goal to replace the expiring COP26 decision to double adaptation finance by 2025. A new goal, supported by political will and delivery mechanisms, can drive shared ambition, action, and accountability. International public adaptation finance from developed countries rose from approximately $20 billion in 2019 to $32.4 billion in 2022, demonstrating the current goal’s success.
Debate continues on what a new goal should encompass, including scale, contributor base, timeframe, and ensuring predictable, quality finance. Developing countries and contributors must urgently collaborate to address these complex political and technical questions, fostering momentum and reassuring that multilateralism can deliver, with contributors committed to enhancing public finance provision in reaching the NCQG.
With many bilateral climate finance commitments expiring soon and aid budget cuts in contributor countries, wealthy nations must present new or renewed climate finance pledges at COP, including dedicated adaptation finance commitments.
Advancing Adaptation Finance: Fiscal Space and Private Sector Involvement
The Annual Meetings highlighted the growing role of the private sector in adaptation finance. The connection between adaptation investment and the macroeconomic landscape for developing countries is crucial: debt service often hinders domestic investment in resilience, while climate impacts reduce debt servicing capacity (the “climate-debt nexus”).
The G20 Sustainable Finance Working Group Chair’s report focused on adaptation finance, making significant progress across multiple finance reform areas, placing the topic firmly within finance ministers’ purview. Financial reforms and policy frameworks must incentivize risk management investment rather than deter investment in vulnerable regions.
Looking Ahead
A comprehensive COP package on adaptation, including finance, is beginning to take shape. However, much negotiation and compromise are needed to achieve success in adaptation this year. Key elements include enhancing access to concessional finance, reaching consensus on the Global Goal on Adaptation, leveraging the private sector, replenishing concessional funds, and establishing a realistic path to a new goal.
Beyond these priorities lies a deeper call for credibility: COP30 will be a pivotal moment for global action on adaptation finance. Success will be measured not just by pledges and announcements but by the tangible delivery of finance to the most vulnerable. Countries and institutions must seize the opportunity to turn ambition into action, creating a resilient global future and supporting economic stability and security worldwide.
