Policy Brief
Scaling Climate Finance for Locally-Led Adaptation: Lessons from the Global South
Aryan Bajpai, Dr Vishwas Chitale, Giriraj Amarnath, Dr Bapon Fakhruddin, Gopalika Arora
September 2024 | Climate Resilience
Bajpai, Aryan, Vishwas Chitale, Giriraj Amarnath, Bapon Fakhruddin, and Gopalika Arora. 2024. Scaling Climate Finance for Locally-Led Adaptation: Lessons from the Global South. T20 Policy Brief.
Overview
Financing Locally Led Adaptation (LLA) can play a crucial role in addressing the growing adaptation needs of developing countries. LLA addresses structural inequalities by ensuring that the decision-making authority lies with subnational and local actors and further fosters partnerships with funders, government, and multilateral agencies.
This policy brief proposes a five-pronged strategy focusing on innovative adaptation finance mechanisms, institutional strengthening, and social inclusion to empower local communities to access climate finance effectively.
Key Highlights
- Developing countries received less than 10 per cent of the required amount of USD 215-384 billion in adaptation funding in 2021, severely limiting their capacity to build resilience against escalating climate impacts.
- Low—and Middle-income countries face several challenges in scaling up LLA. The Adaptation Gap Report 2023 highlighted that only 17 per cent of the total adaptation finance (USD 16.5 billion) allocated between 2017 and 2021 was reported to climate change adaptation projects with a specific focus on local communities.
- More than 60 per cent of the financing provided by developed countries between 2017 and 2021 was in the form of loans, which further increased the debt burden of developing countries.
- Locally Led Adaptation (LLA) has been identified as a strategy to build the resilience of the frontline and vulnerable communities locally by understanding climate risks and implementing context-suited adaptation measures which directly benefit these communities.
Key Recommendations
- Innovative financial mechanisms must be adopted by both the public and private sectors. These solutions include Enhanced Direct Access, green bonds, blended finance and catalytic capital. Such solutions must be scaled locally to empower communities to lead adaptation efforts and address deeply rooted social inequalities.
- Local institutions must be strengthened through capacity building, and partnerships must be forged to enable finance at the local scale. This could involve accessing Technical Grants to develop Local Action Plans for Adaptation.
- Inclusivity and diversity must be at the core of LLA implementation. The authors propose a working model of a PPP-based LLA project that could give the community ownership of the project and resources while the government shares risk with an investor to scale finance.
- More evidence needs to be collected to advocate for LLA. Local research institutions must support communities by developing a region-specific framework for identifying co-benefits attained from implementing adaptation activities.
- Multilateral Development Banks and other international sources of climate finance require structural reforms that emphasise the role of concessional finance required by low-income economies. Moreover, procedures for accessing funds should be simplified, and special mechanisms must be established for projects that require shorter periods of time and are focused more on local-level adaptation.
"The G20 Brazilian Presidency must bring together relevant stakeholders to optimise access to multilateral and climate funds and nudge businesses and philanthropies to increase the flow of private capital for scaling climate finance for Locally-Led Adaptation"
