Editing IPCC:AR6/WGII/Chapter-4 (section)

=== 4.8.2 Adequate and Appropriate Financing ===

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Although AR5 did not explicitly mention finance for water-related adaptation actions, it considered urban adaptation ( [[#Revi--2014|Revi et al., 2014]] ) and risk financing ( [[#Arent--2014|Arent et al., 2014]] ). SR1.5 ( [[#de%20Coninck--2018|de Coninck et al., 2018]] ) discussed governance and finance limitations, while SRCCL discussed finance in adapting to floods and droughts ( [[#Hurlbert--2019|Hurlbert et al., 2019]] ).

Mitigation garners the significant share of committed climate finance. For example, of the total USD 15.4 billion climate finance commitments through ‘green bonds’, 79% accrued to mitigation and the rest to adaptation ( [[#World%20Bank--2017|World Bank, 2017]] ). However, within adaptation finance, water garners a significant share of adaptation funds, with 13% of the Adaptation Fund’s investments were for water management, 12% for coastal management and 10% for disaster risk reduction ( [[#Adaptation%20Fund--2018|Adaptation Fund, 2018]] ). Similarly, within the urban adaptation landscape, which got ~3–5% of total adaptation finance flows of USD 30.8 billion tracked in 2017–2018 ( [[#Richmond--2021|Richmond et al., 2021]] ), water and wastewater management projects received the largest share of urban adaptation finance (USD 761 million annually) followed by disaster risk management (USD 323 million) ( [[#Richmond--2021|Richmond et al., 2021]] ). However, more frequent tracking of public financing is required, with a greater focus on transparency and accountability ( [[#Ciplet--2018|Ciplet et al., 2018]] ; [[#Khan--2020|Khan et al., 2020]] ) and justice and social equity ( [[#Emrich--2020|Emrich et al., 2020]] ) (also see Cross-Chapter Box FINANCE in Chapter 17).

Private financing remains a minor source of adaptation financing ( [[#World%20Bank--2019|World Bank, 2019]] ). Around 39% of green bonds issued in 2017 were for water, wastewater and solid waste management ( [[#World%20Bank--2017|World Bank, 2017]] ). In 2018, USD 100.5 billion of water-themed bonds were issued, mainly in Europe (63%), the Asia Pacific (19.6%) and North America (14.9%) ( [[#Filkova--2018|Filkova et al., 2018]] ; [[#World%20Bank--2019|World Bank, 2019]] ). Such financing focuses on returns and scale ( [[#Cholibois--2020|Cholibois, 2020]] ), and as such, local needs, especially those of the poor, may not be adequately represented ( [[#Manuamorn--2020|Manuamorn et al., 2020]] ; [[#Williams--2020|Williams, 2020]] ) ( ''medium confidence).''

COVID-19 will probably affect adaptation financing in water. Countries will be fiscally stretched to finance public investments domestically and through international development aid ( [[#Barbier--2020|Barbier and Burgess, 2020]] ). However, investments in flood and drought management ( [[#Phillips--2020|Phillips et al., 2020]] ) and water and sanitation ( [[#Armitage--2020b|Armitage and Nellums, 2020b]] ; [[#Bhowmick--2020|Bhowmick et al., 2020]] ) are critical for building resilience against pandemics, and are also crucial elements of adaptation in water. Therefore, integrated approaches that achieve both goals need to be deployed ( [[#Barbier--2020|Barbier and Burgess, 2020]] ; [[#Newell--2020|Newell and Dale, 2020]] ) (Box 4.4., Cross-Chapter Box COVID in Chapter 7).

In summary, water garners a significant share of public and private adaptation funds ( ''high confidence'' ). However, current COVID-19-related cuts in adaptation financing may further impede developing countries’ ability to invest in adequate water adaptation.

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