Editing IPCC:AR6/WGII/Chapter-15 (section)

=== 15.6.3 Adaptation Finance and Risk Transfer Mechanisms ===

<div id="h2-16-siblings" class="h2-siblings"></div>

In the majority of SIDS there is a high dependence on international financing to support adaptation to slow- and rapid-onset events ( [[#Robinson--2017|Robinson and Dornan, 2017]] ; [[#Petzold--2019|Petzold and Magnan, 2019]] ). However, funds tend to be geared towards supporting sectoral-level adaptation initiatives for vulnerable natural resource sectors such as water, biodiversity and coastal zones ( [[#Kuruppu--2015|Kuruppu and Willie, 2015]] ). Considering low-income small islands such as Comoros, Haiti, and São Tomé and Príncipe, international modalities do little to address the root causes of vulnerability or to support system-wide transformations ( [[#Kuruppu--2015|Kuruppu and Willie, 2015]] ). Although countries like Trinidad and Tobago have amassed oil wealth, the profits are not invested in a way that benefits environmental goals ( [[#Middelbeek--2014|Middelbeek et al., 2014]] ). In Mauritius, a lack of financial resources for climate change adaptation has been recognised as a specific impediment at the district council level ( [[#Williams--2020|Williams et al., 2020]] ).

Although small island jurisdictions have seen increased flows of adaptation finance through mostly top-town arrangements, they face large implementation difficulties ( ''medium evidence, high agreement'' ) ( [[#Weir--2017|Weir and Pittock, 2017]] ; Magnan and [[#Duvat--2018|Duvat, 2018]] ). There are growing concerns among policy- and decision-makers in small islands about the current levels and forms of adaptation finance, and about countries’ experience with accessing it ( [[#Robinson--2017|Robinson and Dornan, 2017]] ). In the Caribbean, 38% of flows were concessional loans and 62% were grants ( [[#Atteridge--2017|Atteridge et al., 2017]] ); the situation in the Atlantic and Indian oceans is starkly different—nearly 75% of the flows were in the form of concessional loans and grants accounted for the remaining 25% ( [[#Canales--2017|Canales et al., 2017]] ). This raises questions about fairness and justice for small islands having to finance adaptation to climate impacts to which they have made a negligible contribution. In the Pacific, 86% of aid was delivered as project-based support ( [[#Atteridge--2017|Atteridge and Canales, 2017]] ), which can undermine the long-term sustainability of adaptation interventions ( [[#Conway--2014|Conway and Mustelin, 2014]] ; [[#Remling--2016|Remling and Veitayaki, 2016]] ; [[#Atteridge--2017|Atteridge and Canales, 2017]] ). Direct budget support was rare ( [[#Atteridge--2017|Atteridge and Canales, 2017]] ), signalling the importance of works such as [[#Rambarran--2018|Rambarran (2018)]] that support cross-regional lesson-learning by, for example, showcasing the experience of Seychelles with successfully devising innovative financing mechanisms for supporting adaptation and conservation goals, and reducing its public debt. Regional catastrophe risk insurance schemes, however, such as Pacific Catastrophe Risk Insurance Company under the World Bank’s Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI) Program are trying to enable a regional effort in increasing accessibility to insurance ( [[#PCRAFI--2017|PCRAFI, 2017]] ) as does the Caribbean Catastrophe Risk Insurance Facility, although these funds are still rather small compared to the needs across the countries ( [[#Handmer--2019|Handmer and Nalau, 2019]] ).

Microfinance is increasingly viewed as a positive mechanism to improve access to climate adaptation funding ( [[#Di%20Falco--2018|Di Falco and Sharma, 2018]] ). In the Caribbean, a significant barrier in accessing climate finance relates to bureaucratic structures, which means that money intended for communities does not reach them ( [[#Mycoo--2018a|Mycoo, 2018a]] ). Many adaptation projects even at the community level have upfront costs that need to be supported, especially in communities where there is little hard cash in use ( [[#Remling--2016|Remling and Veitayaki, 2016]] ). Despite such challenges, communities in the Pacific region have used ‘cashless adaptation’ for a long time, which involves trading of services and items as a form of indigenous microfinance ( [[#Nunn--2019b|Nunn and Kumar, 2019b]] ). Social networks also function as a source of informal microfinance where extended family members send back remittances from overseas to their families and communities especially after disasters. In Samoa, indigenous tourism operators receive remittances from overseas family members ( [[#Crichton--2018|Crichton and Esteban, 2018]] ; [[#Parsons--2018|Parsons et al., 2018]] ), with similar processes observed among atoll communities in the Solomon Islands ( [[#Birk--2014|Birk and Rasmussen, 2014]] ), Vanuatu ( [[#Handmer--2019|Handmer and Nalau, 2019]] ) and Jamaica ( [[#Carby--2017|Carby, 2017]] ). However, the role of migration and remittances is still poorly understood; it is difficult to quantify the informal flows and understand the extent to which they support effective adaptation ( ''limited evidence, high agreement)'' ( [[#Campbell--2014a|Campbell, 2014a]] ; [[#Parsons--2018|Parsons et al., 2018]] ; [[#Handmer--2019|Handmer and Nalau, 2019]] ) ''.''

In Old Harbour Bay, Jamaica’s largest fishing village, a high number of community members engaged in the fishing industry, particularly vendors and scalers, do not own the material assets needed to fully benefit from these livelihood activities ( [[#Baptiste--2016|Baptiste and Kinlocke, 2016]] ). Developing a broader asset portfolio by increasing access to such assets via adaptation finance investments could reduce vulnerability across the community. This could function as an effective livelihood-based adaptation strategy for the most vulnerable such as women, who are part-time employed and in peripheral roles in the fishing industry ( [[#Baptiste--2016|Baptiste and Kinlocke, 2016]] ). In Belize and the Dominican Republic, many coastal fishers, for example, use informal credit from food stores or captains to enable them to withstand financial losses that are often incurred during bad weather and extreme events ( [[#Karlsson--2020|Karlsson and McLean, 2020]] ).

In Vanuatu, discussions are ongoing on increasing insurance availability for TCs and droughts, but standardisation of housing designs to get insurance can become difficult where the costs make it prohibitive and run counter to traditional building designs and materials ( [[#Baarsch--2016|Baarsch and Kelman, 2016]] ). Empirical evidence from Belize, Grenada, Jamaica and St. Lucia indicates that there are also other factors why people do not take insurance, including ‘the cost of premiums (44%), lack of trust in insurance companies (27%), having never considered insurance (26%), a lack of need for insurance (25%) and a lack of knowledge of insurance (22%)’ ( [[#Lashley--2013|Lashley and Warner, 2013]] , p. 108). Increasing trust could be addressed by seeking out domestic banks or credit unions with whom people are already engaging with, while also using social marketing campaigns to raise awareness of weather-related insurance to address knowledge gaps and lack of awareness of these tools ( [[#Lashley--2013|Lashley and Warner, 2013]] ). In Dominica, many coastal fishers are suspicious of insurance schemes given past experiences of not being paid out on time or having to disclose catch data ( [[#Turner--2020|Turner et al., 2020]] ). Yet, insurance is not capable of addressing all kinds of losses and damages accruing from climate impacts and should be used as an adaptation strategy in combination with other strategies ( [[#Lashley--2013|Lashley and Warner, 2013]] ).

Insurance cover is a critical question in small islands. For example, in Vanuatu, some companies do not ‘cover storm damage from the sea or high tides…which is not helpful for properties damaged by a tropical cyclone’s storm surge’ ( [[#Baarsch--2016|Baarsch and Kelman, 2016]] , p. 6). There is also limited access to insurance schemes due to lower demand in small markets ( [[#Petzold--2019|Petzold and Magnan, 2019]] ) especially when many people do not have high cash-based incomes and likely cannot pay insurance premiums ( [[#Baarsch--2016|Baarsch and Kelman, 2016]] ). In St. Lucia and Grenada (via the Caribbean Oceans and Aquaculture Sustainability Facility), discussions are ongoing with regard to national-level parametric insurance, underpinned by financing from the US State Department, to help fishing communities recover more quickly following the passage of TCs in the future ( [[#Sainsbury--2019|Sainsbury et al., 2019]] ; [[#Turner--2020|Turner et al., 2020]] ). Likewise, [[#Reguero--2020|Reguero et al. (2020)]] have suggested a resilience insurance mechanism that could in theory reduce climate-related losses and damages through investments in nature-based adaptation projects (e.g., coral reef restoration and potentially mangrove restoration).

<div id="15.6.4" class="h2-container"></div>

<span id="education-and-awareness-raising"></span>