HMG and NGO meeting on the Climate Investment Funds: Adaptation

18 February 2008

  1. DFID (Melanie Speight, Ellen Kelly, Kate Binns), DEFRA (Adrian Butt) and NGOs (Lies Craeynest WWF-UK, John Ensor Practical Action, Kate Raworth Oxfam, Gillian LEAD, Richard Ewbank Christian Aid, Benito Muhler, Oxford Climate Group) met on 18 February to discuss climate change adaptation.
  1. The meeting focused on three main issues – discussion of the nature and aims of adaptation, mechanisms to deliver this before the post-2012 deal, and the financing mix needed to do this. There was consensus between HMG and NGOs on the aims and NGOs expressed strong preferences for working through the Adaptation Fund and providing grant finance.

Analysis of adaptation aims

  1. HMG is working towards two timescales – firstly a slow and steady process of helping countries to build climate resilience over the next ten years, and secondly the moment of opportunity offered by Copenhagen in 2009 when much of the future financing and support for adaptation will be agreed.
  1. DFID see adaptation and climate resilience as graduated approach – from good development, building resilience to uncertainty, reducing vulnerability to existing climate variability and adapting to the known impacts. We need to cover the range and countries need to integrate climate resilience into their core development planning. There are parallels with the initial focus on HIV treatment rather than improving health centres and we need to ensure support is given across the board. DFID is working towards a high-level compact where if there’s a good enough climate resilient strategy in place then money will be available, in line with the Paris Declaration.
  1. There was consensus that this was the right approach from the NGOs, particularly the importance of building resilience and reducing vulnerability. Previous support for adaptation had focused too much on showing the incremental cost of climate change which had pushed funding towards infrastructure. NGOs noted that there were several challenges that needed further consideration, including getting civil society voice into adaptation plans, thinking at a regional as well as national level, ecosystems, the danger of maladaptation, and delivering adaptation in fragile states.

Delivery mechanism for adaptation finance in the short-term

  1. DFID wants to move towards additional finance provided in a programmatic way. DFID is committed to this outcome, but open to discussion on how to best go about this. Currently the UN special funds are neither additional nor programmatic. Donors are starting to mainstream climate resilience, which is sometimes programmatic but is not additional. The Adaptation Fund is additional (financed by levy on CDM) but currently project-based.

The below figure illustrates where DFID aims to go:

  1. DFID’s suggested approach is to pilot a programmatic approach in countries that are poor, vulnerable to climate change and interested in integrating climate resilience into their plans. This would be a combination of technical assistance to help countries to integrate climate change into their national plans and financial assistance to implement these plans provided through normal aid mechanisms eg budget support. This would be a time-limited multilateral approach (through the Strategic Climate Fund in the World Bank), with the lessons feeding into the Copenhagen negotiations. By doing this DFID aims to transform not just countries, but also the Adaptation fund itself.
  1. NGOs emphasised the importance of working through the Adaptation Fund and felt there was possible space for a programmatic, policy adaptation support through a pilot sub-initiative in the Adaptation Fund. The UK could offer the Adaptation Board to earmark support for this. The offer may be rejected, but as it is impractical for Adaptation Fund Board to approve every project it may move towards a programmatic approach. It was felt by NGOs that providing resources through the World Bank would be counter-productive, particularly given governance structures. We are currently at a crossroads, and current moves on adaptation will be either productive or counterproductive. NGOs felt that therefore the first action should be to offer support to the Adaptation Fund – now is the right time to propose this to AF as a lot of work is taking place now.
    AF board could then also decide which countries should be prioritised – this could be within criteria proposed by DFID (i.e. vulnerable, willing to look into programmatic approach)
  1. NGOs also noted the importance of squaring this support with NAPAs (DFID agreed it was important to build on NAPAs, but avoid their project focus), integrating civil society into the process, and ensuring the accountability of developing countries to their people rather than a fund.

Financing mix

  1. NGOs expressed concern at the loans/grants mix provided through the ETF. They felt that this would encourage others to provide loans for adaptation, and set an unhelpful precedent. DFID explained that because the resources in the ETF have been provided as capital and ODA the best option available is to put these as capital loans through the World Bank, which would generate about 10% in grant element (ie about £80m of the £800m provided through the ETF). £50m of this grant money has already been committed to the Congo Basin Initiative. DFID suggested that they will lobby governments to put grants in the fund. However, NGOs emphasised the importance to them of providing grants rather than loans for adaptation, and asked why other donor countries would be willing to provide grants if the UK cannot do this.
  1. NGOs said that even if only 30 million GBP is left from the grant content, it is still more than what is currently paid into the LCDF. NGOs suggested DFID should drop the idea of providing loans for adaptation altogether.

NGO preferred options

  1. The meeting concluded with the NGOs ranking their preferred options for support to adaptation in the next two years:

A Use ETF money to support the Adaptation Fund and get the AF to widen its mandate to include programmatic support

B Push for a sub-fund within the Adaptation Fund which we support with grant finance

C ditto but supporting with a mix of grants/loans

D Provide grant finance to a structure outside of the Adaptation Fund (eg the SCF) but ensuring it has a similar governance structure to the Adaptation Fund

E ditto but supporting with a mix of grants/loans

  1. It was agreed to hold quarterly adaptation meetings. Ellen Kelly will organise these.