Editing IPCC:AR6/WGII/Chapter-9 (section)

==== 9.4.1.4 What Are the Barriers and Enabling Conditions for Adaptation Finance? ====

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The present situation reflects not only an insufficient level of finance being mobilised to support African adaptation needs ( [[#9.4.1|Section 9.4.1]] ) but also problems in accessing and using funding that is available. The direct-access modality introduced by the Adaptation Fund and GCF, whereby national and regional entities from developing countries can be accredited to access funds directly, is aimed at reducing transaction costs for recipient countries, increasing national ownership and agency for adaptation actions, and enhancing decision-making responsibilities by national actors, thereby contributing to strengthening local capacity for sustained and transformational adaptation ( [[#CDKN--2013|CDKN, 2013]] ; [[#Masullo--2015|Masullo et al., 2015]] ). Indeed, direct-access projects from the Adaptation Fund tend to be more community focused than indirect-access projects ( [[#Manuamorn--2020|Manuamorn and Biesbroek, 2020]] ). Country institutions in Africa, however, are struggling to be accredited for direct access because of the complicated, lengthy and bureaucratic processes of accreditation, which requires, for example, strong institutional and fiduciary standards and capacity to be in place ( [[#Brown--2013|Brown et al., 2013]] ; [[#Omari-Motsumi--2019|Omari-Motsumi et al., 2019]] ). As of December 2019, over 80% of all developing countries had no national direct access entities (DAEs) ( [[#Asfaw--2019|Asfaw et al., 2019]] ). Capacity to develop fundable projects in Africa is also inadequate. An analysis of proposals submitted to the GCF up to 2017 revealed that, while African countries were able to submit proposals to the GCF, they had the lowest percentage of approvals (39%) compared to all other regions ( [[#Fonta--2018|Fonta et al., 2018]] ). This suggests the quality of proposals and therefore the capacity to develop fundable proposals remains inadequate in the region.

Even when accredited, some countries experience significant institutional and financial challenges in programming and implementing activities to support concrete adaptation measures ( [[#Omari-Motsumi--2019|Omari-Motsumi et al., 2019]] ). Low disbursement ratios suggest inadequate capacity to implement projects once they are approved ( [[#Savvidou--2021|Savvidou et al., 2021]] ). Systemic barriers have been highlighted in relation to the multilateral climate funds, including funds not providing full-cost adaptation funding, capacity barriers in the design and implementation of adaptation actions (including the development of fundable project proposals) and barriers in recognising and enabling the involvement of sub-national actors in the delivery and implementation of adaptation action ( [[#Omari-Motsumi--2019|Omari-Motsumi et al., 2019]] ). As of 2017, most GCF disbursements to Africa (61.9%) were directed to support national stakeholders’ engagement with regards to readiness activities, with only 11% directed to support DAEs in implementation of concrete projects/pipeline development ( [[#Fonta--2018|Fonta et al., 2018]] ). While supporting readiness activities is important for strengthening country ownership and institutional development, research suggests adaptation finance needs to shift towards implementation of concrete projects and more pipeline development if the goal of transformative and sustained adaptation in Africa is to be realised ( [[#Fonta--2018|Fonta et al., 2018]] ; [[#Omari-Motsumi--2019|Omari-Motsumi et al., 2019]] ). The source of these problems needs to be better understood so that the prospects for future climate-related investments can be improved and institutional strengthening and targeted project preparation can be supported ( [[#Omari-Motsumi--2019|Omari-Motsumi et al., 2019]] ; [[#Doshi--2020|Doshi and Garschagen, 2020]] ; [[#Savvidou--2021|Savvidou et al., 2021]] ).

Some progress has been made in supporting developing countries to enhance their adaptation actions. The process to formulate and implement NAPs was established by parties under the UNFCCC to support developing countries in identifying their vulnerabilities, and determine their medium- and long-term adaptation needs ( [[#UNFCCC%20Paris%20Agreement--2015|UNFCCC Paris Agreement, 2015]] ). NAPs provide a means of developing and implementing strategies and programmes to address those needs. In 2016, the parties agreed the GCF would fund up to USD 3 million per country for adaptation planning instruments, including NAPs. However, accessing funding through the GCF for NAP formulation is challenging ( [[#Fonta--2018|Fonta et al., 2018]] ) and, as of October 2020, 4 years after the decision to fund NAPs, only six African countries had completed their NAPs (UNFCCC NAP central). The next step is to convert adaptation planning documents into programming pipeline projects that are fundable and implementable, which presents a significant barrier to enhanced adaptation action ( [[#Omari-Motsumi--2019|Omari-Motsumi et al., 2019]] ).

Adaptation finance has not been targeted more towards more vulnerable countries ( [[#Barrett--2014|Barrett, 2014]] ; [[#Weiler--2019|Weiler and Sanubi, 2019]] ; [[#Doshi--2020|Doshi and Garschagen, 2020]] ; [[#Savvidou--2021|Savvidou et al., 2021]] ). Reasons for this include fast-growing middle-income countries offering larger gains in emission reductions, so finance has favoured mitigation in these economies, even within sub-Saharan Africa, and as more climate finance uses debt instruments, mitigation projects are further preferred because returns are perceived to be more certain ( [[#Rai--2016|Rai et al., 2016]] ; [[#Lee--2018|Lee and Hong, 2018]] ; [[#Carty--2020|Carty et al., 2020]] ; [[#Simpson--2021c|Simpson et al., 2021c]] ).

Many adaptation interventions for most vulnerable countries and communities provide no adequate financial return on investments and can therefore only be funded with concessional public finance (Cross-Chapter Box FINANCE in Chapter 17). Yet, public funds alone are insufficient to meet rapidly growing adaptation needs. Public mechanisms can help leverage private sector finance for adaptation by reducing regulatory, cost and market barriers through blended finance approaches, public–private partnerships, or innovative financial instruments and structuring in support of private sector requirements for risk and investment returns, such as green bonds (Cross-Chapter Box FINANCE in Chapter 17). Sub-national actors can be core agents to conceptualise, drive and deliver adaptation responses, and unlock domestic resources in the implementation of adaptation action ( [[#CoM%20SSA--2019|CoM SSA, 2019]] ; [[#Omari-Motsumi--2019|Omari-Motsumi et al., 2019]] ), provided they are sufficiently resourced and their participation and agency are supported.

Many African countries are at high risk of debt distress, especially due to the COVID-19 pandemic, and will need to decrease their debt levels to have the fiscal space to invest in climate resilience ( [[#Estevão--2020|Estevão, 2020]] ; [[#Dibley--2021|Dibley et al., 2021]] ). As of mid-2021, the G20’s Debt Service Suspension Initiative is providing temporary relief for repayment of bilateral credit, but this has largely not been taken up by private lenders ( [[#Dibley--2021|Dibley et al., 2021]] ; [[#World%20Bank--2021|World Bank, 2021]] ). The total external debt-servicing payments combined for 44 African countries in 2019 were USD 75 billion ( [[#World%20Bank--2019|World Bank, 2019]] ), far exceeding discussed levels of near-term climate finance. Aligning debt relief with Paris Agreement goals could provide an important channel for increased financing for climate action, for example, by allowing African countries to use their debt-servicing payments to finance climate change mitigation and adaptation ( [[#Fenton--2014|Fenton et al., 2014]] ). Governments can disclose climate risks when taking on sovereign debt, and debt-for-climate resilience swaps could be used to reduce debt burdens for low-income countries while supporting adaptation and mitigation ( [[#Dibley--2021|Dibley et al., 2021]] ).

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