Climate finance: Mobilizing the private sector to support adaptation
There is a growing interest in investing to protect supply chains, developing climate-friendly technologies, and opening access to innovations, products, and services that are vital to resilience. These activities include diversifying livelihoods, creating climate-resilient technologies and services, and providing enhanced access to insurance.
The resources required to address global adaptation costs are daunting and easily exceed the capacity of traditional financing sources. Mobilizing private sector actors and innovative financial instruments are crucial to address the gap in climate finance options for the developing world. To accomplish this requires renewed efforts, both to understand and address the key barriers limiting private sector involvement in adaptation financing, and to identify and leverage the potential opportunities in a changing climate.
Private sector investment in climate change adaptation has grown steadily in recent years as companies have adapted to the physical risks of climate-related impacts. However, a significant number of companies address these issues from an infrastructure standpoint without considering the full spectrum of interventions that could achieve social and economic benefits essential to building resilient societies.
IDRC’s climate finance initiative was launched to advance knowledge and understanding of the role of the private sector and adaptation finance to support climate smart development interventions by combining capacity across the research community, private sector, and public institutions. With the aim of supporting adaptation action and scaling-up efforts with tested solutions, the initiative is undertaking applied research to explore ways to improve the mobilization of private-sector funding sources using innovative financial mechanisms.
IDRC’s work in this area aims to:
- Assess the potential of the private sector to contribute to adaptation actions;
- Identify the existing barriers to private sector financing for adaptation and the risks associated with adaptation investments;
- Build the capacity of emerging leaders and scholars in advancing climate finance related actions both at national and local levels;
- Help establish private sector forums to develop and broker partnerships and scale up adaptation actions; and
- Document best practices to create an enabling environment.
IDRC is leading innovation in private sector financing for adaptation:
PFAN is now testing a new business model that aims to secure private sector financing for viable adaptation innovations in Africa in agriculture, water, forestry, and urban development.
Although many developing countries are working on appropriate mechanisms for financing adaptation to combat climate-related problems, there is a great need for research and insight to support these efforts.
At a COP21 side event, participants discussed the risks, challenges, and opportunities for private sector investment in adaptation.