The SDG Knowledge Hub of the International Institute for Sustainable Development (IISD) provides the February update on global developments in climate adaptation finance.
Climate Adaptation Finance Update: Disaster Risk Insurance Gains Momentum
6 March 2018: During the month of February, three major multilaterally-financed projects supporting smallholder climate resilience in India, Mozambique and Sudan were approved. Caribbean countries will see their hurricane recovery efforts supported by additional funds. Multilaterally-supported climate and disaster risk insurance is also gaining momentum, with new developments in Latin America and Africa.
Agriculture: Small-scale Farmers’ Resilience Boosted in Africa, South Asia
In Sudan, almost half of the population relies on agriculture and food industries for their living. A US$47.5 million financing agreement signed between the International Fund for Agricultural Development (IFAD) and the Sudanese Government will seek to improve household incomes and climate resilience. The six-year project, which includes a US$26 million grant from IFAD, will focus on climate change-affected areas and will target small producers, including rural women and youth, in 129 villages reliant on traditional agriculture and forest-based activities.
Mozambique and the African Development Bank (AfDB) signed agreements in the agricultural sector totaling US$29 million, which include supporting the uptake of small-scale irrigation equipment that will boost climate resilience among small-scale farmers in southern parts of the country. The funding is part of AfDB’s support to Mozambique’s broader efforts to diversify its economy.
India, where in recent months both the World Bank and IFAD have announced rural climate resilience projects, will receive further support from the World Bank in the form of a US$420 million loan aimed at increasing climate resilience and ensuring viable livelihoods among small and marginal farmers in the state of Maharashtra. The project is expected to benefit more than 25 million people in 5,142 villages affected by climate variability. It will promote agricultural technologies and farming practices that help improve soil health, water use efficiency and crop productivity.
Natural Disasters: New Risk Insurance Instruments; Caribbean Recovery Continues
In the largest sovereign risk insurance transaction in history, the World Bank issued two to three-year “sustainable development bonds” to Chile, Colombia, Mexico and Peru, providing these countries a total protection against earthquakes of US$1.36 billion. While the link between climate change and earthquakes is still being studied, the instrument can serve countries in managing risk and building resilience against other types of natural disasters through leveraging capital for funding emergency costs. In total, the World Bank has so far facilitated close to US$4 billion in catastrophe bond transactions.
In Myanmar, a World Bank-funded disaster preparedness project, approved in 2017, held its launch workshop. Natural disasters cost the country US$184 million or more each year. The project is supporting Myanmar Government’s disaster response measures and efforts to build resilience against earthquakes and flooding, including through improved drainage systems, with benefits to close to half a million people.
The Caribbean Development Bank (CDB) announced it is making available US$700-800 million to its borrowing member countries over the next five years towards recovery from the 2017 Atlantic Hurricane Season.
In February, the Pacific island state of Tonga was hit by the tropical cyclone Gita, estimated to have been the most powerful cyclone to pass near the islands in 60 years. According to estimates, 1,100 houses were damaged and 120 destroyed. The Asian Development Bank (ADB) Pacific Disaster Resilience Program provided Tonga with US$7 million towards early recovery activities, including restoring critical services like electricity. The programme provides quick financing for early response, recovery and reconstruction activities.
Water: Transboundary Cooperation and Infrastructure Resilience Developments
In the Greater Mekong Subregion (GMS), environment ministers of six countries endorsed a five-year agenda focused on promoting “green” investments worth US$540 million and fostering environmental cooperation. The agenda represents the third phase of an ADB-administered strategic framework programme. The investments will target, inter alia, climate proofing of rural infrastructure. The programme also includes a project preparation facility and a green technology platform, the latter of which will connect technology providers and adopters in the areas of waste management, renewable energy, fuel efficiency, climate resilience and disaster risk management (DRM).
Also in February, the ADB and the Government of Kyrgyzstan held a workshop on a proposed US$25 million project on climate change disaster risk reduction (DRR) in the water sector. The proposed project is included in ADB’s country plan for Kyrgyzstan for 2017-2019. Natural disasters are estimated to cost the country 1-1.5% of its gross domestic product (GDP) annually. The Kyrgyz Government has identified water management as a priority area for interventions, which would include modernizing water resources infrastructure and using resilient agricultural techniques. Technical assistance for the workshop was financed by the Japan Fund for Poverty Reduction (JFPR) and administered by ADB.
February Project Lessons
In project lesson stories, the World Bank reported on a project, funded by the EU and Australia, that is delivering the first terrestrial park in the Maldives. Titled ‘Climate Change Adaptation Project (CCAP),’ it aims to preserve the country’s wetlands, which act as a natural defense against floods and rising sea levels, and to create new sources of income for the country which earns 28% of its GDP from nature-based tourism. Overall, the project is estimated to benefit 4,800 households.
In Tanzania, the World Bank and the Global Facility for Disaster Reduction and Recovery (GFDRR) are working with university students to improve drainage, health care and social service delivery through identifying flood risks. The programme is training 300 urban planning and surveying students to document drains and flood-affected houses across the city of Dar es Salaam.
An International Labour Organization (ILO) blog post shared awareness about the organization’s work in disaster risk insurance for vulnerable communities. The Index-Based Livestock Insurance (IBLI) provides coverage against droughts and other climate change-related risks for low-income households and small businesses in Kenya and Ethiopia. The post is linked to ILO’s 2017 annual report on ‘Social Finance and Impact Insurance,’ which also highlights the organization’s work on climate risk insurance. This has included projects in India (farmers), Kenya (tea estates), the Caribbean (vulnerable individuals and lending institutions) and Ethiopia (digital payment platforms).